Analysis: Still room for sports betting providers in the US market?


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The US sports betting market has not been kind to top tier sports betting providers lately.

In recent years, operators have increasingly found ways to bring technology in-house rather than paying for a third party.

We’ve seen:

Trend towards in-house technology

The logic for operators is simple: better margins and more control over the product.

But on the other side, Vendors paid the price. Kambi’s share price was lowered by 40% since the Penn / theScore deal.

Scientific games are sold out elsewhere OpenBet to concentrate on his core business.

Buy buy buy

Of course there is a buyer for every seller. But the fact that Scientific Games was ready to sell its exposure to US sports betting is illuminating.

As an analyst company Regulus partner Put it:

“If a company with the reach and resources of Scientific Games can’t make OpenBet too strategically important to sell to PASPA, then it can [buyer] The expedition to Endeavor could be a painful one. “

However, at least one provider is calling for a turnaround.

Playtech sees a brighter future for sports betting providers

Playtech CEO Mor Weizer said in late September that Playtech was a $ 3 billion B2B opportunity in US online gambling. In it he argued that one third of the US sports betting market are operated by third parties.

Of course, given the recent trend, analysts on Playtech’s H1 earnings call have moved that number down.

Weizer explained:

I believe the market will become more fragmented over time, as we have seen in other markets. A lot more states will regulate and a lot more casino groups and other operators will pervade the market. In addition, I believe that many existing operators that have focused on a limited number of states will expand to other states. “

In other words, Weizer is forecasting an expansion of operators in the longtail. These smaller operators will rely on third party sports betting technology rather than doing it themselves.

Of course, Playtech has since sold to Australian slot machine operators aristocrat. So did the major shareholders really believe in the US growth story?

Will US sports betting fragment?

Fragmentation is indeed a characteristic in mature gambling markets. For sports betting in the UK, e.g.Even the largest operators struggle to get well beyond a 20% Market share.

So far, things have looked different in the USA. Pennsylvania may be helpful to look at as it is a mature market with multiple regional players.

The Data suggests that the three largest sports betting providers around 75% of the market for almost a year. Much of the rest 25% comes from operators with in-house technology such as BetMGM and Caesars.

Michigan is also top heavy, with the top 3 close to 80% of the market.

Source: Michigan Gaming Control Board

Is the US different?

In fact, some experts have argued that the US will not fragment like other markets.

Former FanDuel CEO Nigel Eccles said last year that thanks to the sheer size of the market, the US would always be consolidated within a handful of operators. Current FanDuel CEO Amy Howe said something similar recently.

With this in mind, it is difficult to imagine that regional operators would ever generate a third of total revenues.

What part do you need?

That is not even to be said fifteen% or 20% the US market is not a great opportunity, especially since B2B competition is dwindling thanks to M&A.

SBTech, for example, has lost several B2B contracts since it was acquired by DraftKings.

So for sports betting providers, the cake may have shrunk, but the pieces may be bigger.

Will the trend reverse?

There is one more reason for suppliers to be optimistic.

Those who work in-house can turn around once they realize how difficult it is.

Camp CEO Kristian Nylen said last week, “What we do is highly complex and not easy to replicate. Many have tried it in Europe and have already failed. “

Rivers against the trend

This feeling was confirmed by Rush Street Interactive CEO Richard Schwartzwho said there was no point owning technology if the product was just average.

“Sports betting is under a lot of pressure to buy sports betting technology,” Schwartz told GGB Magazine. “But I don’t think that’s the right approach. I wouldn’t be surprised if this trend returns in five years. “

Schwartz proved it with BetRivers that you can build a top notch app on third party technology.

How Rivers compares to a vertically integrating operator like Penn could have a huge impact on the future of the sector.

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