Access all areas? The US state-by-state competition

It has always been obvious that state-by-state sports-betting legislation would necessitate a patchwork of markets across the US but the economics of accessing each of those markets is little discussed, writes Scott Longley


Whatever else the Caesars Entertainment buyout of William Hill might say about the direction of the US gaming sector from this point, it also highlights how market access in the US has become a huge driver as state-by-state regulation gains momentum.

Among the many salient figures involved in the £2.9bn ($3.75bn) deal, it is the 25 states that the William Hill US sportsbook potentially has access to in the US which is perhaps the key figure.

The case for having access across multiple states in the US is neatly encapsulated in the list of seven catalysts that analysts at Macquarie put forward in their recently published bull case for DraftKings.

Of the bullet points, three are related to state-by-state access. These included the potential for new state legislation, new launches for DraftKings and the ramping of existing state operations.

The goal is national coverage even if access is partial. “As states legalize, we believe DraftKings will be able to improve customer acquisition costs through national marketing (cheaper than local) and DFS cross-sell,” analyst Chad Beynon wrote.

As he points out, as  a DFS operator DraftKings has already spent upwards of $150m on marketing since 2015.

“it’s all about the economics of access,” says Neale Deeley, vice-president of US sales and gaming at Sportradar. “In the initial flush of post-PASPA openings, it was just all about getting up and running in New Jersey and that was relatively simple. There were lots of existing licensees and lots of skins available. But that’s not the case elsewhere.”

Count the states Indeed, if access were to be the sole determinant of success in the sportsbetting and online gaming sector, then the market would already be sown up. A table produced by Jefferies showed the degree to which the bigger gaming entities in the US have a head start when it comes states where they already have a regulated presence.

Indeed, this table has been updated by us to demonstrate, perhaps, why the Caesars bid for William Hill is so attractive on paper, given the new 25-state tally it would give Caesars.

But that table doesn’t give the full competitive picture across the US. In each state, there are also local and regional players, often in partnership with local casino interests, that means the picture is far more nuanced than a simple market access tally might suggest.

“If you want to be a truly national brand, then you need to be in every state,” says Kevin Vonasek, a consultant with Vonasek Gaming. “And if you miss a key state, then it will make it much harder to position yourself.”

“But there will still be plenty of companies that will succeed in a select number of states and will reach enough consumers,” he adds.

John English, president at WeBe Gaming, agrees that “creativity comes into play.”

He adds: “The US is a big territory and there is plenty of room to play for both the big guys and the start-ups. Competition and fresh blood is good, we are not at a saturation point as of yet,” he says.

Mountain lions The list of licensees in Colorado highlights the argument. In total there are 15 online licensees and a further 10 land-based operators. Of these, many are national brands such as BetMGM, DraftKings, FanDuel and William Hill.

But there are also a number of second-line brands and more local entities such as Circa Sports Carousel Group, BetWildwood also competing in a state which, by any measure, is small. Online sports betting handle in August came in at $126.7m and translated to gross gaming revenue of just $7.3m.

It highlights how the economic calculations of access to each state can be quite brutal.

“Clearly, some states are going to be worth fighting over more than others,” says Deeley. “Everyone is in Colorado because they can be and the fact is the state is quite early to sports-betting.

I think the metrics might change as we keep progressing towards more states opening up, but definitely, Colorado highlights how it won’t just be five national brands fighting it out. Each market will be more complex than that.”

While Colorado might be the very definition of a bun fight and might make it difficult for smaller operators to catch their share of the sunlight, that won’t always be the case either state-by-state or regionally.

“If a regional sports betting brand has good demographics, fair pricing, and a convenient, customer friendly approach they stand a very good chance of being successful,” says English.

Scott Longley has been a journalist since the early 2000s, covering personal finance, sport and gambling. He has worked for a number of publications including Investment Week, Bloomberg Money, Football First, eGaming Review and Gambling Compliance. Scott now runs his own editorial consultancy, Clear Concise Media, and writes for a number of online and print titles.