The chief executive officer of FanDuel sounds unconcerned about the competition the online sports betting giant is facing or will soon face from the likes of Fanatics and ESPN BET.
Asked by correspondent Contessa Brewer about their level of concern regarding ESPN BET and Fanatics, FanDuel CEO Amy Howe, speaking during the CNBC Evolve Global Summit on Thursday, said the bookmaker has already faced “very well-capitalized, very strong” competitors.
Howe added that they will continue to see more of them because the legal wagering industry is still relatively new in the United States.
“I think what we know is you've got to have a superior product experience,” the CEO said. “At the end of the day, if your product doesn't work, it doesn't matter how great your brand is, you've got to have a really phenomenal experience.”
'Significant costs'
Howe also likened the current competitive environment to the e-commerce industry, where scale is prized among companies. She said this year will be a “very important inflection point” for the industry and for FanDuel, which she expects will be the first U.S. online sports betting operator to report positive earnings before interest, taxes, depreciation, and amortization for a full year.
“You can't just pick up and decide you want to be an online sports bettor,” Howe said. “You have to be licensed, you have to navigate a very complex regulatory environment. There are significant costs to spend in creating a great product and technology platform. And oh, by the way, you're spending a lot of money making sure that, again, you can responsibly bring consumers to your platform. So it's 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 scale advantage over time, it just becomes harder to reinvest back into giving what consumers want.”
The comments from Howe came the same day that ESPN and PENN Entertainment announced plans to launch their joint project, ESPN BET, on November 14. It also comes as the online sports betting arm of merchandise giant Fanatics is already live in a handful of states in the U.S. and is planning additional launches in the future.
How ESPN BET and Fanatics fare is being closely watched in the legal gaming industry because of the non-gaming assets they bring to the table.
ESPN has a massive audience and millions of fantasy contestants it can harness, while Fanatics is tapping its extensive database of people who buy jerseys and other swag. Those assets could help the two new entrants as they try to carve out a good part of the online sports betting market for themselves in the U.S.
Wanted to throw in an extra note here because it's something we're hearing about more and more: Howe said betting activity on the WNBA at FanDuel is up more than 160% this year compared to 2022. https://t.co/PwBdtvJlv7
— Geoff Zochodne (@GeoffZochodne) November 2, 2023
There is also a good chance that any market share ESPN BET and Fanatics gain will come at the expense of existing players such as DraftKings and FanDuel, which are the two leaders in terms of market share in the U.S. While DraftKings was showing signs of pulling close or ahead earlier in the year, it appears FanDuel has regained or retained the top spot.
Investment bank JMP Securities reported earlier this week that FanDuel accounted for 37% of U.S. online sportsbook app downloads during Week 8 of NFL, up from 35% the week before and ahead of DraftKings, which clocked in with 31% of the download market. BetMGM claimed 12% of downloads during Week 8, while all other operators were in the low to mid-single-digit range.
Even though FanDuel is in the pole position, Howe said they must keep “reinventing” themselves.
“At the end of the day, competition is a great thing for consumers,” she told Brewer. “So I think you're going to continue to see even more innovation on the product front, both in terms of the assortment — live betting is really taking off — but also the user experience. I think we're all trying to figure out what is it beyond product and great promotional vehicles that will ultimately drive even more loyalty to the platform.”
Mind the regulatory gaps
FanDuel’s parent company is Dublin-based Flutter Entertainment PLC, and those European ties mean FanDuel executives are well aware of the regulatory blowback online sports betting operators have faced overseas in recent years. Brewer had asked Howe where she sees the industry in five years, and one place is hopefully not in the crosshairs of lawmakers and regulators.
“I'd also like to believe that as an industry, we will have come together and we figured out how to grow the sector in a responsible way so that we're well ahead of any sort of regulatory backlash,” Howe said. “A lot more to come, but it's been an amazing ride in a short period of time.”
