Let the games begin

Latest figures from New Jersey show DraftKings and FanDuel leading the way in sports betting revenue. But will the DFS behemoths be able to maintain top billing once the global big guns enter the fray? Joanne Christie reports

After New Jersey’s second full month of sports betting figures were released in mid-October, some commentators posited that New Jersey Division of Gaming Enforcement director David Rebuck might have overplayed things somewhat with his teaser the previous week that the figures would be “stunning”.

Yes, the market almost doubled, but the number of operators more than doubled and many would argue the market’s growth was simply in line with expectations.

But while opinion may be divided on the use of superlatives, there’s no room for debate about who’s leading the way online — the two big daily fantasy sports providers are the clear early winners. It’s likely the majority of Resorts Digital’s digital sports betting revenue of $8.5m came from the DraftKings skin, and FanDuel pulled in $2.8m as a skin of Meadowlands Racetrack.

The DFS operators eclipsed the offerings from both US land-based casinos and European skins by some distance – the next best performance was Golden Nugget’s Playsugarhouse.com with $620,000. So what’s behind their early gains, and more importantly, will they continue to lead the way?

Perfectly positioned
The success of DraftKings and FanDuel doesn’t seem to have surprised anyone, given their huge databases and prominent brand advantage in the US.

“They have the biggest brands in America — although they haven’t been sports betting before there’s not a lot of difference between sports betting and fantasy sports in a lot of consumers’ minds,” says Middle Friday’s Andy Clerkson, a consultant helping firms enter the US.

“I think they were always going to take the initial plunge and spend more than any new entrants into the market because they have already got their companies set up and ready to go.”

It’s also likely there’s something of a defensive element. “There are a huge number of DFS players who were only playing DFS as a proxy for sports betting,” adds Clerkson. “It is critical that DraftKings and FanDuel try to retain their audiences and try and grow them through sports betting.”

However, Benjie Cherniak, president at Don Best Sports, says while he also foresees some migration from fantasy to sports betting, he thinks fantasy will remain popular. “I think that fantasy is going to always have a place in the US market because it is so ingrained culturally in the US populace, it has been around for so long. I don’t think fantasy will disappear.”

DraftKings and FanDuel are undoubtedly concerned with keeping hold of their existing players if they transition to sports betting, but given daily fantasy itself only captured a relatively small portion of both sports bettors and fantasy players, the bigger goal will be to attract new players.

One industry veteran with experience on both sides of the Atlantic divides these new players into two groups: younger, completely new sports bettors; and sophisticated sports bettors who’ve been betting offshore or with a local bookie in spite of the legal position.

He predicts the DFS sites will scoop up a lot of those in the former group thanks to their brand and trust advantage, but that they will have a more difficult time pulling in the latter. 

Here comes the competition
Partly, that’s because those betting illegally will be tougher to bring into the regulated market, particularly if they do not perceive it offers the same value as the offshore market. And partly, it’s because many other operators will also be vying for these players.

While DraftKings was first off the mark in New Jersey, it has since been followed by a number of US and European operators and there are more to follow. Thus far, none have been as aggressive in their marketing as DraftKings and FanDuel but many think this will change.

“I think it is going to be a massively competitive market,” says Clerkson. “I think DraftKings and FanDuel are doing what they need to do, which is try and press their early advantage by already being established because they are going to find they are in a whole different world very soon. They’ve had the market to themselves on fantasy sports but that is not going to be the case for sports betting.

“The history of sports betting in the UK was that the biggest brands didn’t keep the top spots once the others came in. Bet365, Paddy Power and Sky Bet obviously took enormous market share from William Hill, Ladbrokes and Coral.”

However, the industry veteran says he’s not sure this analogy holds up. “In the UK Bet365 and Sky Bet were the young upstarts that came in and chewed away at the incumbents, which were slow-moving. It’s the other way around in the US. You’ve got these fast-moving, crazy tech companies that are well funded.

“DraftKings in its DNA is definitely born out of that US technology-focused, grow-at-all-costs, don’t-sit-around, get-something-to-the-customer mentality. It is definitely a technology company.”

The issue of whether European companies will be providing something suitable for US audiences or simply putting out versions of their existing offerings and hoping for the best has of course been debated at length, but it’s worth remembering that both DraftKings and FanDuel are running their sportsbooks largely off European platforms at the moment.

This reliance on platforms might turn out to be a disadvantage once Europeans with more proprietary tech move into the frame. Cherniak says European providers will certainly need to bring something to the table to counteract their lack of brand positioning in the US.

“Companies that have been very successful globally are coming into the New Jersey space. The prime example would be Bet365, which has a skin and is going to be entering the market at some point, and then you also have the Kindred Group,” he says.

“These companies have significant brand names in Europe as well as other parts of the world, but they are virtually unknown in the US so it will be interesting to see how they differentiate themselves in the US. Will it be via what some perceive to be superior product offerings or will it be via a unique marketing technique?”

Of course a couple of them have a head start, namely William Hill with its multiple land-based deals, and Paddy Power Betfair with its acquisition of FanDuel. Although DraftKings is in front for now, there are many who think the combination of Paddy Power Betfair’s expertise and FanDuel’s marketing will in time prove to be an unbeatable combination.

Whether the DFS operators can retain their lead in New Jersey remains to be seen, but it’s sure to be a closely watched market — particularly since many see it as indicative of how things will play out in other states.