The US online gambling market is still in its infancy to find out for itself. So, how many different brands will players have to choose as the industry gets involved?
New Jersey and Nevada have been online gambling for a few years now, giving us an idea of how things might go elsewhere.
We can also look to the UK for what to expect. The US online gambling market is expected to be similar in size to the UK in a few years’ time. Sports betting is also likely to account for a large portion of online gambling activity in the US, as it is on the other side of the Atlantic.
There are already 22 online casinos in New Jersey, 15 online sports books and four online poker rooms. In the United Kingdom, the top 10 brands control about 80% of the market.
Looking at these figures alone, it seems reasonable to expect much competition in the US market as it expands. However, New Jersey and Nevada are special cases due to their long history of in-game gambling. The United Kingdom also differs greatly from the US – economically, culturally and from a regulatory perspective.
As dust settles in the US, it is very likely that the market will be dominated by a relatively small number of brands. Here is why.
# 1 – Great mergers at the market opening
The recent series of business combinations is the biggest sign that competition may be limited. The market has not even started. Some potential competitors acquire or merge with each other.
The largest and most recent is the acquisition of the Stars Group (TSG) by Flutter. If this goes through as planned next year, the world’s largest gaming company with a good margin will emerge. TSG also acquired a British elite brand from Sky Betting & Gaming last year.
Flutter, for its part, was created by a merger of Paddy Power and Betfair. After the fall of the federal sports betting ban in the US in 2018, FanDuel was acquired.
This is far from the only example. Another is the takeover of bookmakers Ladbrokes and Coral by GVC in 2018. These two brands were already merged in 2015.
It would not be surprising that brands continue to consolidate into large corporations in the years to come. In fact, it would be a bit surprising if we did not do it.
Where the brands are already established, such as the UK, they continue to work semi-independently. But in new markets like the US, there is little reason to run multiple brands under the same vertical. Flutter is likely to focus on PokerStars, Fox Bet and FanDuel and GVC on Roar Digital and the party brand.
# 2 – Exclusive deals with leagues and media
It’s not just big deals between gambling companies that we see. The operators are struggling for smaller offers with media as well as with different sports leagues and teams. Some of these agreements are exclusive.
If we look at just a few of the offers for TSG / Flutter, we have:
- TSG has an exclusive sponsorship agreement with the UFC.
- TSG has also developed its Fox Bet platform in collaboration with Fox Sports.
- FanDuel has an exclusive DFS partnership with the NHL and a non-exclusive sportsbook partnership with the NBA and the MLB.
- FanDuel has an exclusive partnership with the sport-oriented TV streaming service fuboTV.
Other major gaming companies also worked on various sports and media partnerships. These will be the key to marketing in the US.
Traitors who come to market will find it hard to find such partnerships, and they may not be able to compete without them.
# 3 – More advertising dollars in the US
The amount of money that American companies spend on advertising also acts as a barrier to entry for some operators.
The total gambling advert issued in the US this year is expected to be approximately $ 735 per capita, compared to approximately $ 485 in the United Kingdom. That’s more than 50% difference.
A young market means that big and small businesses will be more active than in an established one.
In 2015, as the daily fantasy sports market in the US gained traction, FanDuel and DraftKings spent over $ 200 million on advertising between them. As the US online gambling market opens, you expect a flood of advertising dollars from people like Flutter / TSG, GVC, Caesars and so on.
This creates a huge deterrent for smaller international brands looking to the market, let alone someone trying to establish a new brand. The cost, just to be noticed in the midst of the noise, will be astronomical at first, and probably stay that way for several years.
# 4 – Lack of neighboring markets
One reason that brands spread across Europe is that they consist of a large number of similarly sized countries. Many of them eventually produce their own national brands. And when these national brands reach a certain size, they sometimes spread to adjacent markets.
Paddy Power was an Irish brand that spread throughout the UK before merging with Betfair. The Swedish company Betsson has also become a force in the United Kingdom and throughout Europe. And so on.
North America is just beginning to see cross-border brand expansion from Canada to the US.
The sports app theScore, which now has a betting product, is the only example so far. Since sports betting is only legal in a fraction of US states, the size of the Canadian and American markets is currently similar.
However, as more states legalize betting, the US market will be much larger than Canada. Cross-border branding will usually flow in the other direction at this point. It is unlikely that the US public will ever have much interest in Mexican brands.
In the long term, the most important US brands will be either in their own country or owned by large international companies.
# 5 – State monopolies and local brands
In fact, there may be many brands on the US market at some point. If that is the case, many will not be national brands.
The nature of the US market is that it is shared because online gambling is legalized on a state-owned basis. Everyone has their regulatory requirements and an individual license fee.
The geographic expansion in the US brings with it not only marketing costs, but also licensing and development costs.
The big brands like PokerStars / Fox Bet, Roar Digital, Caesars, etc. will start wherever they can. However, smaller brands may choose to focus on just one or two states to keep costs down.
In addition, some states will not allow private companies to take action at all. Some grant their state lotteries a monopoly that will keep these brands local. See, for example, B. Sportsbook Rhode Island.
Other states require online operators to have a land-based partner, such as: A casino. Big companies such as GVC and The Stars Group have shown a preference for choosing smaller partners that do not affect their branding.
However, popular casinos like Parx in Pennsylvania are looking for white label partners to make their online gaming platforms available. Parx has already spread to neighboring New Jersey because it’s almost as well-known as Pennsylvania.
It is doubtful that the Parx Online brand would fare well elsewhere, where the casino does not enjoy the same name recognition.