Earlier in 2021, the new chief executive officer of FanDuel described the race for getting a chunk of the US sports betting market as unsustainable and projected that it is likely to result in gambling operators’ failures.
According to Amy Howe, who was officially appointed as CEO of the US sports betting and daily fantasy sports operator at the beginning of October, the sports betting market of the country would eventually settle out with a few major competitors. In an interview with The Financial Times, Ms. Howe shared that, in her opinion, there were too many companies competing to sustain the current level of spending in the market.
In the last few years after the US Supreme Court’s ruling to legalize sports betting in the country and make it possible for individual states to decide whether or not to add the new form of gambling to their legal market, the competition to attract and retain new punters has pushed gambling operators to start investing millions of dollars to promote their services via advertising campaigns, especially around major sports events, as well as providing potential customers with special bonuses and promotional offers.
All of this, according to some experts, is creating a bubble that is slowly but surely getting ready to burst, especially in states where there are many companies competing for getting a bigger part of the sports betting market. Since the US Supreme Court stroke off the federal ban on sports betting, the new form of gambling has been officially legalized in more than 20 states across the country.
Innovative Tech Solutions and Strong Customer Base Crucial to Consolidation in the Sports Betting Market
Apart from the increasing competition for a bigger share of the sports betting market, the sector on a global scale is in the middle of another massive wave of consolidation – a trend that analysts do not expect to slow down anytime soon. According to some experts, the merger and acquisition activity in the gambling sector worldwide would continue to be robust in the longer term.
The recent surge of consolidation across the sector comes at a time when the rapid expansion of the US sports betting sector had already started after years of restraint. Currently, companies that offer sports betting services are pushing their efforts harder to make their platforms reach more customers as early as possible, while the US sports betting market is still fresh and many of the technology developments are still innovative, and the risk of being left behind is relatively low.
Undoubtedly, one of the main drivers of the rapid pace of the aforementioned wave of consolidation through mergers and acquisitions is the need for gambling operators to stay ahead of the competition from a technology standpoint. Most of the recent mergers and acquisitions in the sports betting sector are being pursued so that companies get the chance to access and adopt the newest technology in their portfolio.
According to the former chair of the Nevada Gaming Control Board, Becky Harris, technology would probably be the thing that really makes a great difference in the sector as the sports betting industry moves to a whole new chapter of its existence. Companies that own their own technology solutions are considered having a significant advantage over the ones that do not.
As more US states move to legalize sports betting, companies are eagerly competing to get an increased market share, with many of them consolidating their efforts in the rivalry, with combined customer databases also giving them the advantage they need to get ahead of their competitors.
Some analysts have noted that the sports betting business may be a profitable business, but it is definitely not a high-margin business. According to certain experts, building a strong customer base is crucial to being successful in this industry because sports betting is considered a scalable business in terms of revenue generation.
FanDuel and DraftKings Remain the Two Major Competitors in the US Sports Betting Industry
As mentioned above, the biggest players in the US sports betting market have been spending heavily to popularize their services among potential customers and expand their customer base over the last few years.
For example, the US sports betting and daily fantasy sports giant FanDuel spent almost $300 million on marketing over the first six months of the year. As the company itself revealed, since it was acquired by the Irish gambling and bookmaking conglomerate Flutter Entertainment in 2018, it had benefitted from marketing investment estimated at more than $1 billion. Furthermore, Flutter Entertainment shared that it expects to see the FanDuel business profitable in 2023, with the company results being dependent on the speed at which US states legalize and regulate sports betting. The Irish gambling conglomerate also revealed that it expects the market for its brands to surpass $20 billion in revenues by 2025.
One of the major rivals of FanDuel – DraftKings – revealed that its sales and marketing expenditures in 2020 amounted to almost half a billion dollars.
For the time being, reports show that FanDuel tends to lead the market in the majority of states which have already legalized sports betting, while DraftKings remains second, but the gap between the two of them being quite a narrow one. The joint venture of the US casino giant MGM Resorts and the UK gambling operator Entain – BetMGM – is another major rival that increasingly competes for the second place in terms of sports betting market share.
As Ms. Howe revealed in an interview for The Financial Times, FanDuel had approximately 1.5 million active users over the past quarter at the time of the interview, with the company clearly benefitting from the expertise and assets of its owner, Flutter Entertainment. The recently appointed CEO of the US sports betting and daily fantasy sports company also added that FanDuel is likely to generate revenues of between $1.8 billion and $2 billion by the end of 2021, which would make it the clear leader in the US sports betting sector.
