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  • Writer's pictureGaming Eminence

Expert Voices: The U.S Competitive Landscape, Regulatory Impact, and Tech Innovations Shaping Market Dynamics

Welcome to "Expert Voices," our new interview series exploring the fast-paced world of digital sports betting and gambling. In this episode, we talk to a leading industry expert about the evolving competitive landscape, the impact of regulatory changes, and the technological advancements driving growth. Discover how key players like FanDuel and DraftKings are navigating high licensing costs and varied tax environments. Learn about the profitability differences between sports betting and casino products, and the importance of user-friendly technology in maintaining customer loyalty. We also discuss industry consolidation trends and the future of casino legalisation.

About our Expert: Our featured industry expert has over five years of experience in the digital sports betting and gambling sector. They have held key roles in marketing partnerships and client marketing at leading organisations in both public and private sectors. Their extensive background includes developing strategic relationships and driving growth and innovation across the industry. With a focus on enhancing brand presence and user engagement, this expert has been instrumental in creating impactful marketing strategies. Their insights stem from a diverse career working with top-tier companies, providing a unique and valuable perspective on the industry's challenges and opportunities. *To ensure our interviewee can speak freely and provide candid insights, we remove their name and identity.

GE) Over the past few years, I've been exploring the gambling industry and would love to get your insights and an overview based on your experience. From a high-level perspective, could you describe how you see the competitive landscape today compared to the first wave of legalisation a few years ago? Also, how do you think digital sports betting will evolve going forward?

Industry Expert) Absolutely. In the initial five years of the industry, it felt like a gold rush. Numerous companies were eager to get started. Two major players, FanDuel and DraftKings, dominated thanks to their vast data and user base from their daily fantasy products. They set the standard, and many others followed, hoping to strike gold.

During those early years, everyone anticipated massive revenue margins, thinking it would be a mistake not to join in. Companies from Europe, like Flutter (FanDuel's owner) and Entain (one of BetMGM's owners), quickly entered the market. U.S.-based resort companies like Wynn and Caesars, the latter partnering with William Hill, also jumped in. Essentially, any company with ties to gambling or entertainment sought a piece of the action.

However, sustaining a profitable business in this industry has proven extremely difficult. The costs for licenses, market entries, and high tax rates, especially in places like New York, make profitability elusive. Even the leading competitors aren't profitable, and some have suffered significant revenue losses, creating tension with public shareholders.

GE) Regarding Wynn's New York license sale, was it considered a win because of the price or simply because they managed to find any buyer?

Industry Expert) I'm not fully aware of the deal details, but it seems WynnBET salvaged the situation. They likely searched hard to find a buyer rather than discarding the license, making it more of a salvage operation than a major win.

GE) Given the initial frenzy to acquire customers and licenses, have any insights emerged about customer loyalty? Have DraftKings and FanDuel's strategies proven successful, even though they're not hugely profitable yet?

Industry Expert) Yes, FanDuel and DraftKings are indeed the leaders, with FanDuel significantly ahead. FanDuel's success is largely due to having the best product—its app is clean, easy to use, and has great customer service. They offer generous user offers, making their product appealing and superior, which keeps users loyal.

GE) So, consolidation is driven by weaker companies trying to salvage what they can rather than stronger companies trying to buy out everyone before it's too late?

Industry Expert) Exactly. It's tough for operators to sell themselves these days. While some acquisitions, like PointsBet by Fanatics, happen, major players like DraftKings and FanDuel aren't aggressively acquiring competitors. Many companies will either fail or sell at lower rates, rather than be bought out by top-tier competitors.

GE) Is FanDuel's superior product mainly about having an app that people like? What features make their app stand out, and why can't others replicate it?

Industry Expert) It's not just the app's surface features. FanDuel's app is reliable, with few bugs, and they were quick to integrate a single app across all legal states, unlike others who had separate apps per state. This seamless experience, combined with great customer service, sets them apart. Investing heavily in development has been key, whereas some companies focused too much on marketing.

GE) Could you elaborate on the profitability difference between sports betting and casino products?

Industry Expert) Casino products are significantly more profitable. While sports betting can have volatile margins, casino products generally guarantee higher profits due to consistent user losses. Casino products often generate 70-80% of gross revenue for operators in a given quarter.

GE) What are the prospects for casino legalisation, and how does it compare politically to sports betting?

Industry Expert) Casino legalisation faces more stigma and will likely progress slower than sports betting. However, it's a matter of when, not if, states will legalise it. Operators are investing heavily to persuade states to legalise casino products, as they represent the true gold mine of the industry.

GE) Are there companies you believe consistently outperform their peers or ones that seem to underperform despite having potential?

Industry Expert) FanDuel is consistently ahead due to its superior product and strategic spending. Other companies need to be more prudent with their spending. While it's not about maximising assets more than spending wisely, the entire industry has been guilty of overspending on marketing and bonuses.

GE) Who are some key players in the race for third place, and how are they approaching this goal?

Industry Expert) BetMGM has held the third spot due to a strong internal organisation and support from parent companies in the tech and resort industries. Their casino product and rewards programs offer unique experiences. Caesars, with similar advantages, quickly rose into this tier. Fanatics and ESPN are also contenders, bringing unique assets from their respective industries.

GE) How significant is the advantage of having brick-and-mortar casinos, and will this become more or less important over time?

Industry Expert) Having properties is a huge advantage, especially for offering VIP experiences. This will become more important, as VIP players are crucial. Operators will increasingly leverage unique resort experiences to retain high-value customers.

GE) Are there places that are obvious that you would point to go to keep up with this stuff or learn more aside from reading company filings and stuff like that, industry journals, or places where people in your seat go to keep abreast of what's going on?

Industry Expert) I work in the industry, so just knowing what's happening with how companies I've worked at or currently work at operate, and what's going on from a financial standpoint. I think also gambling has now just become so large and so integrated into sports and entertainment that a lot of those traditional sports business, news outlets, and personalities, they're talking about it regularly, so following what they're saying a lot online and on Twitter.

I also think going to conferences, there's some really great gambling conferences, it's a great way to learn about new products emerging. There's panels where you can learn about the state of the industry, some of the government and regulatory things happening. That's always a great thing. You meet great people there. The industry is full of really brilliant people.

Finally, as we mentioned, the affiliate space, just trying to go to websites and content developers where you might be viewing them as just ways to learn about what side of the spread to bet on the Chiefs' Super Bowl matchup. Really, they put out some great content where you can look out for the offers that are out there, some of the sweepstakes, it's a great way to just keep in touch with what's happening.

GE) Do you foresee significant further consolidation in the industry, and what factors will drive this?

Industry Expert) Yes, more consolidation is likely. The industry's future depends on legalizing casino products and how well companies can maintain shareholder confidence. While there may be room for up to ten operators, those without deep pockets or innovative strategies will struggle to survive.

GE) Do you have a sense of for the average consumer, how many apps they use?

Industry Expert) For the regular gambler, they probably have three to five apps that they use. Some of the VIPs probably are more in the one to three range. Your regular gambler might gamble once every couple of weeks or once a month or something like that, they probably only have one or two apps.

GE) Are there any companies within this space that you think like, "Hey, they have the most sound strategy or they consistently seem to get it right in terms of being a couple of steps ahead of their peers," or is it like everyone's in the same pool? Conversely, is there anyone that seems to be, despite having maybe some decent assets, really not maximising them?

Industry Expert) Yeah. I know I can confidently say that FanDuel is doing things right and probably better than the other companies. There's a reason that they've been holding the number one spot. They're doing it right most of the time. I'm confident in saying that they're the number one in the space. In terms of who might need to maximise more, I think that's tricky.

I don't necessarily know if it's maximising assets more as it is spending more carefully. A lot of major companies, major players saw, as I mentioned earlier, some big losses in the last couple of years because they were just spending marketing dollars way too loosely on new commercials every week or huge partnerships, and it just didn't really seem to lead to a lot in return.

GE) Okay. This was most of what I had. You have a lot of experience in this industry. Are there things that you think, first of all, I didn't ask, and then if you are starting with a blank sheet of paper, looking at this industry the kind of things you would look for to identify a well-run company or things that good companies do to keep an eye out for?

Industry Expert) Yeah. Things you didn't ask. We touched on the casino legalisation, but I think in general, there's a lot of questions around "Will there be any sort of severe government crackdowns on this industry?" Right now, there's nascent industry going on, which is this daily fantasy re-boom that's happening.

Disclaimer: The views and opinions expressed in this interview are those of the individual expert and do not necessarily reflect the official policy or position of our blog or its affiliates. The information provided in this interview is for general informational purposes only and should not be construed as professional advice. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the interview or the information, products, services, or related graphics contained in the interview for any purpose. Any reliance you place on such information is therefore strictly at your own risk. We are not responsible for any errors or omissions, or for any results obtained from the use of this information. Always seek the advice of a qualified professional with any questions you may have regarding the subject matter discussed.


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