A sign hangs on the wall in the reception area of Fanduel Inc.’s offices in Edinburgh, United Kingdom, on Tuesday, February 7, 2017.
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In the five years since the U.S. Supreme Court paved the way for legalizing sports betting in the states, more than $220 billion has been wagered at legal gambling operators, according to the American Gaming Association, a number that continues to rise as More and more states are legalizing betting. According to the AGA, legal sports betting currently exists in 35 states and Washington, DC.
The continued growth has been a boon for industry leaders FanDuel and Draftkings, which together hold more than 80% of the U.S. sports betting market, while other big players like Caesars and BetMGM have tried to carve out their own niche.
But while the sports betting market is already crowded, other big companies already in sports are also trying to get a piece of it. In August, Disney’s ESPN launched a sports betting operator called ESPN Bet in partnership with Penn Entertainment. Fanatics, the sporting goods company founded by Michael Rubin, acquired PointsBet’s U.S. operations after trying to enter the sports betting market for several years.
FanDuel CEO Amy Howe, speaking to CNBC’s Contessa Brewer at the CNBC Global Evolve virtual summit on Thursday, said that while the sports betting industry is still in its infancy, she expects to see more “well-capitalized, very strong competitors on the field.” There are reasons why other big players haven’t managed to get involved.
“What we know is that you have to have a best-in-class product experience, right? At the end of the day, if your product doesn’t work, it doesn’t matter how great your brand is, you have to have a really good experience.” “A phenomenal experience,” said Howe, who joined FanDuel from Ticketmaster in 2021. “But at the same time, not unlike many e-commerce industries, we see that you have to have scale.”
FanDuel, a subsidiary of Flutter Entertainment, is present in all 50 states and has partnerships with leagues such as the NFL, NBA, MLB and NHL, as well as teams, broadcasters and Google, which acquired the rights to Sunday Ticket last year.
“Because we, like any e-commerce company, are in our infancy, there is a race for attention and a race to ensure that we can responsibly bring the best consumers to our platform,” Howe said. “These are partnerships that we have been building for years, long before online sports betting was legal in the states.”
Howe said she expects the company to become profitable on a full-year EBITDA basis, which would make it the first U.S. operator to reach this milestone and help it further differentiate itself from other companies competing in the market .
“In a world like online sports betting, the barriers to entry are high. …You have to be licensed; you have to navigate a very complex regulatory environment. There’s a significant cost to creating a great product and technology platform. “And by the way, you spend a lot of money to make sure you can bring consumers to your platform responsibly,” Howe said.
“This is certainly not for the faint of heart. And if you’re sitting there with a low single-digit share and you don’t have that advantage of scale over time, it’s just going to make it harder to reinvest in what consumers want,” she said.
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