There has been massive growth in the US gambling industry and that’s been great news for companies such as DraftKings, FanDuel and Caesars Entertainment. It’s now an industry that is very different from when tribal operators
Over 30 US states have made sports betting legal. The growth began after a 2018 US Supreme Court Judge ruled that the final say on legalization would be down to the individual state, not the Federal Government.
The gambling industry is a highly competitive one and methods are employed to attract and keep customers. The prime use is to offer welcome bonuses to customers and then a string of other offers once they have signed up with them. This can include risk-free bets and the matching of the initial deposit a new customer makes.
All of this costs a great deal of money and that’s why a growing industry isn’t seeing great results in balance sheets. In 2021 and 2022 for example, DraftKings reported losses of over $2 billion. They aren’t the only company who have found that launching in new territories is a very costly affair if they wish to achieve a strong market share.
The target is that once that market share has been achieved, the financial position will improve. To do that they need a retraction of CPA costs and to ensure they maintain or add to their market share.
Not every company achieves this though. This includes Wynn Resorts and Churchill Downs/Twinspires who failed to achieve a good market share and simply couldn’t afford to carry on.
The larger betting companies are still going strong but it’s still expensive for them to have continuing success.
Before launching in the sports betting industry, both DraftKings and FanDuel were in the daily fantasy sports business. That 2018 ruling opened the door that allowed them to expand into the world of sports betting.
They have been able to maintain a strong market share because of their ability to spend huge amounts on advertising their product. There’s still that need to be spending lots on attracting new customers.
An important element of any business that wishes to expand is brand recognition. For gambling companies this can involve forging partnerships with top NFL clubs. It’s all a bit ironic since for a long time they opposed sports betting being made legal.
Their fear was that doing so would affect the integrity of their sport. Now the NFL are only too happy to sign lucrative deals bringing more money into the sport. Even the 2024 Super Bowl is being held in Las Vegas.
Around 60% of the sports betting market is shared between DraftKings and FanDuel. Not far behind them are BetMGM and Entain followed by Caesars, Golden Nugget and Hard Rock. Land-based casinos have moved into the sports betting industry but lack the funds to attain very high market shares.
With the US online gambling industry expanding, there have been companies from outside of America who have made their presence felt, according to the list of the top US casino sites. This includes Kindred and bet365 from Europe and the Australian company PointsBet.
One way they can enter the industry is to partner with American companies. They accept the fact that the overseas companies have far more experience of the sports betting industry than they possess.
It’s important not to forget the continued presence of tribal operators. These land-based businesses have been operating for a long time. When states attempt to make sports betting legal, there are often long negotiations required to find a way forward that will please both the tribal operators and the national ones that want to launch in the state.
Before sports betting was made legal, many gamblers used the black market to place their bets. Customer protection when using unlicensed and unregulated companies is nowhere near the level with those that are.
Despite the fact that over 30 US states have made sports betting legal, the black market is still a big business. That’s not good news for state coffers who don’t receive any gambling tax revenue from the black market. Yet the fact is that little or no action has been taken by state regulators or betting companies.
.We are set for an interesting period in the US gambling industry. There are still more states that may well make sports betting legal. There’s also expansion in Canada and BetMGM recently opened up in the UK.
All of this leaves companies with the same problem of coping with the costs that are involved in launching in new areas. It may be to avoid sustaining too high initial losses, the bonuses offered may have to be lowered. Advertising the strength of your company should still be able to attract new custom and at a much cheaper rate.