G2E: Sports Betting as it is Now is Unsustainable, Could Soon Be Like Uber?
One of the hot button topics at this week's Las Vegas Global Gaming Expo centered around the ability of some several dozen legal U.S. sportsbooks to coexist in a climate where only one, FanDuel, has reported a profit in a single quarter dating back to 2018.
A panel discussion dealt with companies needing to trim costs related to player acquisitions. Those taking part in this G2E panel included Adam Krejcik, Marina Bogard and Andrew Fabian.
“We’re still in the early innings of the market,” said Fabian. He cofounded Betcha Sports Inc., a sports-betting app that has since been purchased by Vivid Seats.
Krejcik, a managing partner at Eilers & Krejcik Gaming, compared legal sports betting to Uber Eats.
“Once we can order a pizza on DraftKings or FanDuel, we should be in good shape," he quipped.
Fabian discussed the Uber model just a few moments earlier.
“Uber has become obviously the top player in the ride-sharing business, but they didn’t stop there,” he said. “If you go into the app, it’s a super app. You can get food delivered. You can get alcohol delivered.”
Much of what they offer has little to do with their initial concept, ride sharing.
Jea Yu of Entrepreneur referred to the Uber business model as "bait and switch".
The nation's largest rideshare network continues to lose money despite seeing its sales rebound sharply, she writes, and it all sounds mighty familiar.
She adds:
From a fundamental view, Uber has been a mind-boggling money pit that has blown through billions of investor dollars. However, it's also become a part of the English slang as a verb describing an ever on-demand culture where products and services can be quickly and conveniently ordered wherever and whenever desired at the tap of a smartphone.
Fabian drew attention to Fanatics as a company with diversified offerings now getting into sports betting, and they are profitable. Fanatics has primarily operated as an apparels company while developing a massive database of sports fans over the years.
Last year, the company announced plans to enter into a global digital sports platform through expansion into new verticals. These included NFTs, trading cards, gambling and gaming, ticketing, media and more.
It remains to be seen as to whether investors can stomach the likes of FanDuel and DraftKings breaking into new markets.
The pressing concern at the moment is the extremely high customer acquisition costs at the moment. It is estimated to be between $200 and $400. Companies have had to slash their ad spends as a result, though you'd hardly know it watching any Saturday college football or Sunday NFL game. FanDuel and DraftKings seem to air a commercial during every break.
“At some point, you need to start making money,” Bogard said. She is Betsson’s North American managing director. “Investors and shareholders are going to be looking for profit. We know it’s unsustainable. Now the question is how we get to that area of profitability.”
Fabian suggested that the sports gambling sector could do what Fanatics is doing, but move in the opposite direction.
“You need to find more ways to monetize. Fanatics, they’re moving into this space, but they’re a profitable business in merchandise and apparel. I think there’s an opportunity for gaming businesses to do something similar — moving into adjacencies like ticketing, to super-serve the fan.”
- Gilbert Horowitz, Gambling911.com
