Distinct opinions surrounding the next phase of US online gambling growth and market make-up were voiced during the morning session of day two of the SBC Summit Barcelona last week.
While expressing conflicting opinions and insights, the panel comprising current US stakeholders agreed on one underlying principle… “there is no go-to-market strategy” for North American incumbents.
“I think it’s pretty clear by now how hard the US market is,” said Daniel Graetzer, CEO of Carousel Group, replying to the question of whether a sensible market entry could be applied.
Currently preparing the launch of the Maxim Sportsbook in its second licensed state of Indiana, Graetzer added: “You have to be prepared to navigate a slippery landscape as every state is different.
“Every new entrant wants to win market access deals, believing that they can easily secure an addressable market size to grow their business.
“But they are not addressing the principal challenges of a market, where every state is different. This requires you to really understand how your business model will stand up to different taxes, compliance rules, licensing costs, and partnerships that are required.”
Graetzer balanced out his frank assessment, adding: “We accept that it’s a challenging landscape. But that is also why the riches at the end of the rainbow are enormous for those who succeed.”
Four years following the federal repeal of PASPA, Jason Trost, CEO and Founder of Smarkets and SBK, revealed his personal frustrations at US gambling’s state of play.
Despite market progress, he noted that “the gatekeepers are still land-based casinos and operators”.
“The reality is that any small or midsize business must pay millions of dollars just to play for table stakes; by that, I mean the right to secure market access.
“You then have to layer on all the different compliance requirements for different states, and this soon becomes an expensive endeavour.”
With no federal market oversight, Trost questioned how the US wagering sector could progress in terms of developing a better marketplace for the consumer, who will be faced with limited choices.
“It’s a point that keeps on getting missed,” he said. “The ultimate loser will be the consumer as we have a market that is not focused on building quality sportsbooks with great odds.
The less the consumer wins, the higher the barriers to entry become and less start-ups can enter the space. Ultimately you have a marketplace dominated by a small group of operators offering little to no choice.”
Providing an investor perspective, David Van Egmond, Managing Partner of Bettor Capital, shared Trost’s concerns on the costs of market access, saying: “We don’t want to see it become a market that gets bamboozled into becoming a monopoly!”
Van Egmond also acknowledged that phase one of US wagering had been dominated by the power plays of its deep-pocketed incumbents MGM, FanDuel, DraftKings, and Caesars, “companies that can risk $25m to secure a licence in New York”.
“What is now important is that the cycle has now changed,” he said while acknowledging upcoming profitability challenges for established US operators.
“The market no longer demands growth at all costs, that cycle was funded by easy access to cheap capital, and that sugar rush is now over.
“However, the focus on profitability should present new opportunities for better run businesses that have so far avoided costly battles for market access.”
He added: “You have seen a pause in capital enthusiasm, as market investors have now shifted their focus to profitability. We still believe that the TAM will be huge in the next decade, but growth will be underlined by stronger business principles.”
Emphasizing FanDuel’s market-leading position, Senior Product & Operations Director Garreth Core underlined the firm’s ambitions to be the first to stamp the profitability mark on US wagering.
He said: “Last month we were the first business to announce a profitable month – which Core branded as a major operating milestone, reflecting FanDuel’s ability to integrate within the technical requirements of individual states.
“We are showing that it can be done, and we are very confident that we will hit outright profitability in 2023.
“When we look at our competitors and where they are, we are very disciplined about how we spend money. We are not getting drawn into any unnecessary wars on advertising.”