Igaming Focus: Consolidation and late entries of (potential) major players

January 12, 2023 8:00 AM

Igaming Focus: Consolidation and late entries of (potential) major players

  • Jake Pollard, CDC Gaming Reports
January 12, 2023 8:00 AM
  • Jake Pollard, CDC Gaming Reports

Online sports betting in the U.S. will continue to consolidate via M&A or operators shutting down while the market waits for the arrivals of BetFanatics and Bet365. Let’s look ahead to sports betting in the U.S. in 2023. 

Will 2023 turn out to be a crunch year for the online sports betting industry in the U.S., and if so, how? To be asking such a question is understandable following all the events that have surrounded the vertical in recent years, but it is also risky to build up potential future events too much. 

The way an industry changes, especially in its earliest years, is very much part of its development and the consolidated form it will eventually take. However, a number of factors have already come into view with regard to online sports betting (OSB); and these have already altered the landscape and created the first real wave of consolidation in the sector. 

The fact that online sports betting in the U.S. is a highly costly, low margin and at times volatile environment in which to operate has already led a number of operators, small and bigger ones, to either fold or significantly pare back their scope. 

For example, FuboTV pulled the plug on its OSB plans in October, announcing that the integrated sports betting and streaming product it was envisioning, as a product that would combine premium sports content with highly relevant and targeted betting products, would not be happening after all.

Not the first
FuboTV was not the first to try to make a go of online sports betting, and, in its case, industry observers nodded their heads wisely in acknowledgement at how difficult it is to leverage the power of broadcasting and combine it with sports betting, as also shown by FOXBet.

Much bigger U.S. firms have also called an end to their OSB ambitions, among them Churchill Downs, which recently sold its market access agreement to Bet365 for Pennsylvania, and Wynn Bet. Meanwhile, Bally Bet’s future is shrouded in doubt and its wagering numbers remain unknown, likely because they are very low. In addition, its broadcast partnership with the Sinclair Broadcasting Group’s regional sports networks seems particularly challenging.      

Other brands that either called it a day or reduced their scope include lifestyle-brand-meets-sportsbook MaximBet, Kindred and its Unibet brand, and 888 and the Sports Illustrated-branded book it operates. 

MaximBet recently shut down, while both Kindred and 888, like Rush Street Interactive with its BetRivers brand, said they would focus most of their efforts on the six states where online casino is regulated. However, the fact that all these groups are having the same idea when it comes to targeting iCasino states also shows the limitations of the new strategy.  

Market sizing
As the analysts at Deutsche Bank explained in a note published at the end of December, should the relevant legislative projects come to fruition, the total addressable market (TAM) for online and retail sports betting would reach around 60% of the U.S. adult population by year-end 2023, or roughly 144 million adults in legalized jurisdictions. In terms of market value, Deutsche Bank said the TAM for online sports betting would reach $11.1bn by 2027. 

But for all the growth in the number of U.S. citizens able to access regulated online sports betting, California and Texas, with all the wealth and scale they would bring, will not be part of any regulatory project this year. 

And while there are hopes that Florida will regulate in the long term, mobile wagering legalization remains uncertain and likely to be bogged down in legal challenges in the Sunshine State. This regulatory scenario leads to the conclusion that for all the growth in user numbers, the states that would shift the dial in terms of volume and scale — while also adding significant marketing costs to their P&Ls — will not be available to the sportsbooks for some time yet. 

Fanatical about…
In terms of new OSB entrants, the long-awaited arrival of Bet Fanatics into the market is hotly anticipated. This is understandable, as CEO Michael Rubin recently raised $700m that it plans to use in a betting and gaming M&A drive. The group can also reach millions of sports fans through its sports apparel business, and, in comments to the Washington Post, Rubin put forward a vision of Fanatics as the “greatest cross-loyalty program in sports” by giving away merchandise. 

He said bettors “might get a percentage of every bet returned to them, win or lose, to buy merchandise” and they could “open a [betting] account and we’ll give you this order for free”. While he was shooting the breeze with those hypothetical comments, his remarks about costs were more revelatory of his mindset: “Market access has been too expensive. I want to be patient. We don’t want to be in a business we can’t make a billion dollars in,” he told the Washington Post. Still, for all the talk, Bet Fanatics is yet to answer some major questions, notably when it will be ready to go live.         

On point
The Australian bookmaker Pointsbet is in talks to potentially sell its Australian-facing business to the consortium that operates the Australian Betr betting brand (not to be confused with the Jake Paul-fronted U.S. version). Should it succeed Down Under, it could pave the way for it to merge its U.S. operations with another midsize group, but the talks also shine a light on the cost of its operations stateside. As Earnings +More reports, sales and marketing costs represent 80% of its revenue and cost of sales is 59% of revenue. As is the case with other second tier operators, Pointsbet is under time pressure to make a deal in the U.S.  

Late entry
Will 2023 be the year when Bet365 makes its U.S. move? As mentioned earlier, it will have a presence in Pennsylvania and has said it will launch in Ohio. Its low profile has enabled it to assess the market up close, but whether its app can provide a top user experience and attract enough players to make its mark will be the key.