The approximately 45 legal online sportsbooks in the U.S. range from national powerhouses, such as BetMGM and Caesars Entertainment, to Draft Kings and FanDuel, which have successfully navigated the path from daily fantasy sites to sports betting providers; smaller operators include Betly, which operates in Arkansas and West Virginia, and Wagr, available only in Tennessee.
At Wednesday’s SBC “Leader’s Panel – Wave 2.0 – U.S. Sports Betting Innovation,” participants agreed on one thing: Not every sportsbook will survive over the next few years. Moderator Cathryn Lai, OpenBet chief commercial officer, wanted to know what factors are most important for sportsbooks going forward.
The answer, simply, is differentiation. For Rush Street Interactive CEO Richard Schwartz, that means his sportsbook is not solely about acquisition, but keeping players who are “in the funnel.”
“If you don’t have the retention and mechanics built the right way, you’re going to lose a lot of those players and be very inefficient,” Schwartz said during the panel at the SBC Summit North America at the Meadowlands Exposition Center in New Jersey. “So the goal for success is to create a great user experience, earn the trust of the players, make sure they realize they play with you, and do the little things for them to make a difference, including automated audit function and some other things other operators don’t do.”
Large sums have been spent on player retention by sports-betting companies. In August 2021, Caesars Sportsbook announced it would spend $1 billion on promotions. It’s estimated that FanDuel spent $1 billion on marketing and promotions in 2021 alone.
There are indications that gaming operators are pulling back from exorbitant budgets; in February 2022, Caesars announced it would reduce its advertising spend for sports betting.
“We really have to take a look at as an industry, what’s currently happening from an acquisition standpoint,” said Marina Bogard, Bettson Group managing director for North America. “It’s just not sustainable. No one is making money, everyone is in the red, and it doesn’t over the long-term build brand loyalty.”
Instead, Bogard thinks sportsbook operators should find niche areas specific to their companies that create what she termed “stickiness.”
But in their haste to establish themselves as preeminent providers of sports betting, are companies forgetting that the sports betting margins are low, with most estimates ranging from 4.5%-5%? Sun Gaming & Hospitality CEO Bobby Soper compared online sports betting to poker at brick-and-mortar properties.
“It’s low margin,” Soper said, noting that the real online moneymaker in the U.S. will be igaming. “It takes up a lot of real estate, so it’s costly. And at the end of the day, you’re not paying the bills with poker. That’s just a fact of life. But it’s complementary and can drive incremental revenue to those bank games that do provide high margins and do pay the bills.”
BetMGM Chief Revenue Officer Matt Prevost resisted Soper’s comparison. “With all due respect, sports betting is much, much bigger than poker. I think it can absolutely be a profitable business in its own right, in a given state and very importantly, with the right tax set-up.”
But what might work best are omnichannel approaches with land-based gaming, igaming and sports betting connected to one another. Bogard said that low-margin sportsbooks can survive, depending on manageable taxation.
“But if you can incorporate an omnichannel approach, with igaming and other avenues for players to wager and create a bigger share of wallet, even if you don’t have a retail establishment, that’s where the success and margins will come in.”
