Igaming Focus: Last is the new first

January 26, 2023 8:00 AM
Photo: Shutterstock
  • Jake Pollard, CDC Gaming Reports
January 26, 2023 8:00 AM
  • Jake Pollard, CDC Gaming Reports

BetFanatics is by far the strongest contender to launch a U.S. sports betting offering, but the recent news that it is looking to acquire BetPARX is also not surprising.  

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Two weeks ago, this column partly covered the imminent arrival of BetFanatics onto the U.S. online sports betting scene, and the past fortnight has provided further insight into the sports merchandising giant’s sports betting plans. 

The latest news surrounding Fanatics is that it is in talks to acquire the online sportsbook and iCasino operator BetPARX for $100-$150m. BetPARX is a joint venture between the Greenwood Gaming group, which operates PARX Casinos in Pennsylvania, and platform supplier Playtech, with Kambi providing the sports betting solution.  

PARX Casino recorded $598.7m in gross gaming revenues (GGR) in 2022, but for online sports betting and iCasino it held just 2.9% market share in Pennsylvania, while Eilers & Krejcik estimates that its market share across all iCasino states is 1.5%.

The fact that the groups are discussing a potential sale, however, is not surprising. As part of its latest investment round, Fanatics raised $700m, which it said would be used to carry out betting and gaming M&A. But it also shows that even very well-funded companies need all the help they can get in the unforgiving world that is U.S. online sports betting.

The rationale behind the potential deal is that it would provide BetFanatics with a platform that is ready and (to some extent) battle-hardened and has an active customer database. With regard to BetFanatics generating margins and revenues, PARX’s history as a casino and its presence in the iCasino-regulated states of New Jersey, Pennsylvania and Michigan should also not be discounted.   

The great disruptor
Looking ahead to BetFanatics’ rollout plans, CEO Matt King told a recent hearing in Massachusetts that the group will be a “disruptor” and “innovator” in a space where the product is hugely commodified and bettors have so far been provided with suboptimal offerings. 

In King’s view, players have gone along with this state of affairs because they have never known any different, and when they discover the BetFanatics app they will realize how much has been missing from their betting experience.  

“Innovation is incredibly important and new entrants are incredibly important to driving that innovation,” added King. “We believe we are an innovator with a strong chance of being successful in the category.”

Echoing the words of Fanatics CEO Michael Rubin, King said Bet Fanatics will develop its betting offering with a “particular focus on loyalty” thanks to its 94 million-strong Fanatics database; with customers able to bet on sports, buy their favorite teams’ sports merchandise or send gift vouchers to friends and family.

Doing a Sky Bet
King’s references to Sky Bet during the hearing were also revealing. BetFanatics has recruited Andy Wright as its head of trading, who previously held the same role at Sky Bet, and King commented that the group will seek to emulate what Sky Bet accomplished in the UK. He told the hearing that Sky Bet’s experience was “very analogous” to Fanatics, “they did in the UK what we will do in the U.S., which is really be a second mover in the category”.  

It’s true that being a second mover in the space has provided BetFanatics with valuable  perspective on the sector. No doubt it will also avoid some of the mistakes the first movers have made in recent years. In addition, the costs of market access agreements and marketing inventory on the whole have reduced significantly in the past three to four years.    

But for all the success Sky Bet has enjoyed in the UK, it benefited massively from significant factors. First and most obvious were its ties with the Sky broadcasting corporation and, through Sky Sports, its association with the English Premier League and soccer, which gave it a huge platform and strengthened its brand awareness levels. It also sponsored the English Football League, which comprises the four leagues just below the Premier League, while Sky’s reach  gave access to millions of sports fans.          

It’s all in the timing
In addition, arguably the biggest contributing factor to its success may well have been timing. 

Sky Bet’s rise coincided with the explosion in smartphones and with the iPhone launching in 2007; within three to five years many of the sportsbooks that would go on to dominate the UK betting space had been focusing on mobile. 

These strategic steps turned out to be decisive and propelled Sky Bet, along with the likes of Bet365 and Paddy Power, into the lead for many years. 

Real competition wanted
The desire to see real competitors that are able to go toe-to-toe with FanDuel is understandable. After all, a market that develops into a two- or three-horse race with a leader that is so far ahead of the chasing pack is not what anyone had in mind when the potential of U.S. online sports betting was being discussed in the past few years. 

It also casts an unforgiving light on FanDuel’s closest rivals in BetMGM and DraftKings. The latter’s travails have been well documented, but it’s a fact that it is having to watch its cash levels just to stay in the race and might have to go to the markets to raise more funds before the end of the year just to keep going.

BetMGM, meanwhile, may be standing on more secure footing, but as shown by the most recent data from Pennsylvania, it is spending vast amounts on promotions to gain market share. The latest PA data showed that while sports betting promotional spend in 2022 had moderated compared with previous years at 33% of total GGR, the group by far handed out the most promotions and free bets as a percentage of its GGR. 

Throughout 2022, BetMGM’s promotional spend equated to 81% of its GGR or $46.6m for an annual market share of 10%, while FanDuel’s promotional spend percentage was 27% or $76.1m and DraftKings’ was 31% of GGR or $34.7m. 

Last is the new first
As mentioned, the desire for meaningful competition in the space is understandable, and that is why the arrival of BetFanatics as well as Bet365 are highly anticipated. The latter in particular has a strong track record, but again caution is advisable. Its forays into Italy and Australia were not nailed on successes, and in Italy it has taken it a long time to establish itself. 

It’s also worth noting that rarely have so many words been written about an operator that is yet to launch. But that is also because, finally some might say, Fanatics has the financial resources to compete with the likes of FanDuel and potentially upset the apple cart at the top of the U.S. online sports betting tree. 

In any case, the talking will soon be over and it will soon be time for BetFanatics to show what it really can do.