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Path to Profitability: Free-to-play sports come to the fore

| By iGB Editorial Team | Reading Time: 5 minutes
As sports betting rapidly spreads across the US, operators have to move quickly and spend heavily in the fight for customers. According to Daniel Kustelski of Chalkline Sports, getting ‘boots on the ground’ with a free-to-play offering can provide operators a vital head-start on the competition.
American Football

This forms part of the ICE 365 US sports betting series’ Path to Profitability, a deep dive into marketing, product and new revenue streams across the US. Read the full range of analysis from the iGB team here.

By Cole Rush

In the US, sports betting can aptly be described as a mad dash. New states regulate at a rapid clip, and operators put forth every effort to be one of the very first to go live in legal markets. 

Once a market goes live, another state crops up. The country is a massive game of whack-a-mole, and sportsbooks with the biggest mallets and quickest reflexes tend to enjoy the most success.

The path to launch in any state for most operators comprises a few steps: tailoring the technology to meet regulations, securing a market access partner and licence according to state law, and then actually pressing the big red button on launch day. Rinse and repeat when a new state comes along. It isn’t one size fits all, but as the market grows it allows for economies of scale, that in turn can help an operator generate returns – provided it has industry expertise and significant backing. 

But the moving pieces and intense competition can make it difficult to flourish in any sports betting market. The space is still new to rookie bettors, and operators need to factor that educational component into their plans for any given market launch. Or, in existing markets, sportsbooks need to do the legwork to educate casual sports fans about the vocabulary, the odds, and the myriad intricacies that encompass sports betting. 

That’s where free-to-play (F2P) comes in. There are a number of businesses jostling for position in this space, offering predictions and pick’em titles, and Bally’s showed its intent to muscle in by snapping up one of the leading names in F2P, SportCaller, for $40m. 

Chalkline, a business that straddles the US and South Africa, continues to go it alone. Like SportCaller, Chalkline operates on a software as a service (SaaS) model, providing sportsbook operators with F2P sports content. 

Dan Kustelski, Chalkline’s chief executive, says: “The genesis of Chalkline was simply a question: how do we help operators and media companies wrap their arms around the sports fan who will eventually become a full-fledged sports bettor? 

“There’s a huge group of people that don’t know much or anything at all about sports betting, so there’s a need for an educational component.”

Barriers to entry

The barriers of entry for a newcomer to sports betting, Kustelski says, are surmountable, as long as operators and media companies are willing to walk users through the process. 

“As a new sports bettor, you need to sign up, deposit, money, then actually place a wager,” he explains. “It sounds simple on paper or when you say it out loud, but it’s actually a long process. At Chalkline, we’ve built a platform that creates free-to-play sports betting games, and we license that out to sportsbooks and media outlets.”

Daniel Kustelski, Chalkline Sports

Players who experience these free-to-play games quickly get up to speed with elements such as terminology and how odds work. This is built into Chalkline’s approach. “Every time a player participates in one of our games, we tell them ‘here’s what you would’ve won if you have wagered a dollar on this event.’” 

“It’s a form of sampling,” Kustelski continues. “For instance, when you go to a casino, if you want to learn craps, the property might have a scheduled lesson, and they’ll say ‘meet us at this table at 4PM, we’ll teach you everything you need to know.’ Same goes for roulette, blackjack, any game, really.

“Sports betting is no different. There’s a lot of intimidation in sports betting that can keep players from trying it.”

Those intimidating factors can prevent sports bettors from placing an otherwise straightforward wager. 

“The first hurdle is obviously picking an operator,” Kustelski says. “But in the bettor’s head, the train of thought is usually something like ‘I’m a Bears fan, and I want to bet on them. How can I do that?’ People are passionate about their teams, and that’s typically the first wager they’ll look to make. The Super Bowl is another good example. This year, rookie bettors often wanted to make a simple bet on Tom Brady or Patrick Mahomes.” 

For new bettors, this first bet acts as a gateway to the larger sports betting world. And newcomers have to learn quickly. “If a player comes to a sportsbook to bet on the Bulls to win, for example, they have to very quickly figure out what a moneyline is, how point spreads work, all the stuff that seasoned bettors already know.”

National exposure

The educational aspect is predictably a huge driver for Chalkline’s services. But there’s another benefit to the free-to-play model that can catapult operators to real-money success: databases. 

“We work with a few nationwide media companies,” says Kustelski, “so breaking down our users by state is really important. It helps these companies build up a database of users.” That list can be a huge advantage both in nascent sports betting markets and those that expect to launch in the near future. 

As an operator, that database can make a world of difference as you prepare to go live in a new market. “Operators hold on tight to these databases. They protect that information intensely. And building up that data is important. If you’re a casino, just because a player is loyal to you for land-based games – [such as] slots [or] craps – that doesn’t necessarily mean you’re going to get that person’s sports betting business. You have to earn it. That’s a challenge many operators see when they’re gearing up for a big go-live.”

It’s no secret that sports betting is incredibly competitive. Players might even feel stretched to their limits by the massive marketing campaigns surrounding legal markets – especially new ones. According to Kustelski, Chalkline can help fuel acquisition initiatives. 

“I see a lot of value in acquiring customers in states just before regulation hits,” Kustelski says. “Customer acquisition is expensive. Today it’s at its cheapest, tomorrow it’ll be more expensive, and the next day it’ll be even more expensive. 

“As a given state approaches a full-on launch, you’re paying more just to get customers on board. In some recently launched states, say Tennessee, the ads are everywhere: billboards, TV, radio, it’s just nonstop. That all contributes to the cost of acquisition in these particular states.”

Kustelski doesn’t claim that sportsbooks should eschew these methods. Rather, he emphasises that the free-to-play model can support operators by teaching new bettors the ropes and building a marketable database. 

It’s a welcome departure from the scattershot marketing approach so frequently adopted by some of the industry’s big names. Kustelski and Chalkline have provided a viable path to building a savvy sports betting audience that can springboard businesses into the future. 

And what is that future, exactly? “Sports betting is just the beginning,” Kustelski adds. “It’s part of a larger entertainment proposition that’s going to grow across many states. 

“And it’s not just sportsbooks. We’re going to see the lines start to blur between many of these formats: online casino, online lottery, daily fantasy, and horse racing. So much will change as gaming continues to digitise. 

“On the whole, the industry will see some incredible transformation.”

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