The Handle: Rush Street Interactive Profile

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Background on Rush Street Interactive

Rush Street Interactive, Inc. ($RSI) is an online gaming and entertainment company with a United States presence, including the BetRivers and SugarHouse brands. RSI also has a foothold in Latin America, with RushBet in Colombia and expansion to Mexico expected in 2Q22. In December 2020, Rush Street Interactive completed a SPAC merger with dMY Technology Group. At the time the agreement was announced in July ‘20, the deal valued Chicago-based RSI at $1.78B. $RSI is currently sitting around $10/share on the NYSE with a market cap of 2.25B.

Zooming in on RSI’s U.S. operations, things are a bit murky. Over the past few years, online sports betting has been trending toward making up 90% of handle in markets where it’s available. RSI has been focused on and more successful in their retail endeavors, and are the retail “market leader” in Pennsylvania, Illinois and New York, according to the company. This statement about New York needs context, as the lack of downstate retail casinos in New York minimize the importance of this metric and RSI is not quite keeping up with the launch of mobile.

Luckily, Pennsylvania publishes handle and revenue by operator on a monthly basis. We decided to dig a little bit to figure out what retail market leader really means for an online dominated industry. We found that in March 2021, Sugarhouse and BetRivers combined to take in ~$55 million in handle which amounted to about 10% of market share. By comparison, Fanduel and Draftkings were at 36% and 21% respectively. We also looked at November 2021 to see if football season had led to changes in the Pennsylvania market. Sugarhouse and BetRivers accounted for ~$64 million in handle for a market share of slightly more than 8%. Again, Fanduel and Draftkings were both around 30% in this month. The good news for RSI is that they grew their total handle, the bad news is that their handle did not grow as fast as the market did. On the other hand, things look better for RSI’s financials. As Q3 2021 came to a close, RSI gained some serious momentum according to Wagers’ Earnings + More Newsletter.

On top of these metrics, Eilers & Krejcik Gaming publishes an analysis of the best-performing online sports betting apps and BetRivers finished 4Q21 4th, behind online PointsBet, FanDuel, and DraftKings. BetRivers has been in the top 5 of this study for 3 consecutive quarters.

According to E + M, RSI committed to significantly increasing their 4Q21 marketing spend as well. One tidbit we found interesting was the mention that a casino player is worth 5x a sports-only player in terms of revenue and value in their 3Q21 earnings call.

RSI has been floated around in recent months as a potential acquisition target for a new entrant into the space looking to vertically integrate, such as a Fanatics or Disney. They have an existing customer base and product, but haven’t quite generated the same buzz that other competitors with similar product offerings haven.

Recent News

• On January 8th 2022, Rush Street launched their online sportsbook in New York with their BetRivers brand. Their numbers for launch were miniscule in comparison to Caesars, FanDuel, and DraftKings (h/t Ryan Butler of Wagers). This high level of competition will impact RSI’s ability to profit when considering New York State’s high tax rate.

• On January 3rd 2022, RSI announced that co-founder of Rush Street Gaming and RSI’s executive chairman Greg Carlin left the company the day before New Years Eve. Carlin co-founded Rush Street in 2013 and acted as CEO for 9 years.
• BetRivers launched their online sports betting presence in Louisiana at the end of January.
• In December, Rush Street announced a deal to bring sports betting to the Hall of Fame Village in Canton. Read more here.
• In October, SugarHouse launched their online sports betting presence in Connecticut along with DraftKings and FanDuel. RSI also launched their first CT retail sportsbook at Sports Haven in New Haven, CT.
• In October, RSI launched its BetRivers mobile sportsbook in Arizona.

Why Does Nobody Use RSI Skins?

We’re going to be a bit more frank than we usually are here. The RSI layout is pretty good, at least in the same league as its larger, more known competitors. The total number of available markets is pretty much a wash. We actually prefer the RSI same game parlay set up to the Draftkings SGP set up. There’s less of the annoying push to migrate to the iCasino on RSI (though if you are an RSI investor that might be a bad thing). All in all, it’s a very good product that should not be as far behind the market leaders as it is.

So why does it feel like nobody uses it?

We’ll venture a few guesses. First, it’s basically impossible to find RSI skins through googling “How do I place a sports bet in XXX”. Googling “How do I place a sports bet in CT” yields  three ad results including Fanduel, Draftkings, and a PPH site! There are only three legal skins in Connecticut, so this is a poor showing on the part of RSI. Second, RSI is far removed from the lavish spending on television advertisements that FanDuel and DraftKings have. They just aren’t the first book that comes to mind when a new user goes to open an account for the first time. And if they aren’t showing up on novice gamblers’ Google searches, they have no chance of attaining those customers. Moreover, they aren’t making the big time media pushes that other operators are by hosting well funded podcasts or other media personalities.

On a more positive note, SugarHouse is offering some of the more generous deposit incentives we’ve seen. We encourage our friends to take advantage of the $250 deposit match being offered. This deposit only has 1x play through prior to withdrawal, which is obscenely low compared to the 10x or higher play through requirement frequently seen offshore for deposit bonuses (a playthrough requirement means that the bonus money must be wagered a certain number of times before being withdrawn). RSI has been running this program for a long time and still has it going, despite the risk of customers simply depositing, winning a few bets and withdrawing. This tells us one of two things. Either customers are taking advantage of the deposit match but staying with RSI long enough to justify the costs of the promotion, or there is no regard for the losses required to sustain this promotion. Considering I took advantage of it in November 2021 in Connecticut and it’s still being offered, we find it unlikely that the promotion is quickly followed by customer turnover. This means that when bettors are going to RSI skins, they are sticking with them as loyal customers. Sticky customers track with our perception of the betting experience being competitive for users.

In all of the bright lights and advertising dollars, RSI is struggling to get that critical first deposit from novice gamblers required to be a market leader in any and every state it enters. Of course this makes sense considering their lower spend, but we think they need to step it up on sustainable customer acquisition. Granted, sustainable customer acquisition is the holy grail of the gambling market right now. The deposit match is working for getting customers who can find RSI to stick around. It’s just about getting more customers to take advantage of that deposit match. With RSI’s quality of product, we see a lot of upside in the future as the advertising spend by large competitors starts to level off.