The webinar hosted by the Canadian financial services firm TMX on the prospects for regulated sports betting in the US and Ontario highlighted key differences in perspectives between B2B and B2C firms in the space.
The panelists were all optimistic about their prospects and this would not have come as a surprise, TMX is linked to the Toronto Stock Exchange, the companies are all listed on the TSX and their comments were aimed at investors and fund managers.
Jordan Gnat, CEO of sports media and betting content provider Playmaker, said the combination of sports and betting content was a potent mix in driving wagering volumes, but also all ancillary activities around sport such as merchandising and media consumption.
Joe Levy, CEO and founder of Simplebet, a specialist provider of live micro-betting markets to sportsbooks, said that prior to 2018 and the repeal of PASPA, which has led to the current wave of North American betting regulations, “the technical infrastructure for micro-betting didn’t really exist, because globally soccer was the main sport for betting, it’s as very fluid game” and doesn’t provide many opportunities to develop micro-betting options that are more suited to the stop-and-start nature of NFL or MLB games.
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Ontario quick facts
- Ontario is expected to rank among the top five North American jurisdictions for OSB.
- Eilers & Krejcik have forecast revenues of CA$572m in 2022, rising to CA$904m by 2026 and the province to account for half of Canada’s CA$1.8bn revenues by 2026.
- Go-live date for regulated sports betting: 4 April.
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Ken Hershman, CEO and founder of sports data firm Champion Gaming, said the fact that just 40% of the US population had access to regulated sports betting was another sign of the potential of the industry, although “one of the challenges is on the content side, we have to find a way to reach customers and not get lost in the generic noise,” he pointed out.
Critical Salz
However, amid all the positive talk there were also critical words from the only B2C firm taking part in the discussion. Steven Salz, CEO and founder of esports-focused online sportsbook Rivalry, was outspoken in his description of the major US books, notably DraftKings.
His key assertion was that the Boston-headquartered operator (and other major brands more generally) used promotions and bonuses to drive player acquisition, with little effort made on product and innovation.
He said product and branding commoditisation and huge marketing budgets meant that startups such as Rivalry “can’t ever win on balance sheet (size of their marketing budgets), so we deliver on product and innovation and having a standout brand”.
Salz added that “people can debate Barstool’s performance, but there is something to be said about owning your customers vs. renting them, which is what you do when you give them bonuses and free bets, they’re completely transient. You have no ownership over that customer and you’re just trying to grab a last bit of LTV before somebody else owns them.”
The Rivalry CEO pointed out that when the “massive compression on share prices happened at the end of last year, sports betting came off as one of the worst performing sectors because people realised that DraftKings is losing half a billion a year and spend more on marketing in two days than we spend in a year; and that when your balance sheet is your only competitive advantage then it’s a just a race to the bottom.”
Salz’s comments should be taken with a hefty pinch of salt (sorry). Rivalry is not licensed in the US and focuses on a very niche betting vertical which it uses to drive its players towards ‘traditional’ sports betting products such as NFL, soccer or tennis.
What they do illustrate however is that small operators like Rivalry have to account for every detail of their offering, cost and how ROI is generated on every outlay. The implication being that DraftKings doesn’t have such worries, but if it did, it might make better use of its marketing budgets.
B2C coal face
In terms of audience, Salz added that “98-99% of our customers are under 30” and his group targets them with content-heavy campaigns and products that are all developed in-house. “We are focused on great entertainment and products for younger demographics, that’s how start ups win,” he said. One assumes that Rivalry’s aim is to retain these players and increase their loyalty levels for as long as possible as the players set out on their sports betting journeys.
DraftKings would of course dispute all this and point to its data-led marketing strategies, cohort studies and in-house tech platform as key levers that it can pull to manage costs and drive revenues.
But in fairness to Salz, his assertions about DKNG numbers are not wrong and while the company does indeed have scale, its results suggest that it is not producing similar margins to those of FanDuel or BetMGM, especially on key products such as parlays, and is also spending more on promotions as a percentage of GGR to drive wagering volumes.
Still, there was a somewhat stunned silence from the other panelists after Salz made his comments, possibly because the issues he raised are widely discussed in industry circles, but seldom on the record. They also illustrate the different perspectives between B2B and consumer-facing companies in the space.
Indeed, that final point has been made explicit by groups such as Wynnbet pulling the plug on its OSB plans and Las Vegas Sands saying it will only enter the online gambling space via B2B M&A because of the “unsustainable” costs associated with acquiring US sports bettors.
