Pour one out for Betway. And SaharaBets. And more than a dozen other names that make up the list of online sports betting brands that have thrown in the towel in the United States.
Let us also pay our respects to SuperBook Sports, which announced last week that it was shutting its digital doors in all of its markets except for Nevada.
If it wasn’t clear yet, the legal sports betting industry in the U.S. has consolidated and congealed, really, around a handful of operators. And of those survivors, DraftKings and FanDuel are the top dogs by a fairly wide margin.
We regret to inform you that SuperBook Sports will no longer be accepting bets or deposits in the following states: AZ, CO, IA, MD, NJ, OH, TN & VA.
— SuperBook Sports (@SuperBookSports) July 20, 2024
Thank you for being a loyal customer of SuperBook Sports. pic.twitter.com/5uXpbU8pEx
A report earlier this month from investment banking firm Citizens JMP Securities to its clients estimated 74 companies had joined the legal online gambling market in the U.S. since 2018. Forty-three are still in business, 18 have shut down, 10 have pulled back or plan to close, and three have been acquired.
“We do not expect exits to materially slow in the coming years with elevated cost of capital, an increase in consumer protection/regulation, and market share consolidating amongst the larger players,” JMP’s Jordan Bender wrote.
There were always going to be winners and losers, and some of that winning and losing is deserved. If a sportsbook isn’t all that good or interesting or useful, it’s already facing an uphill climb for survival.
However, not every brand that disappears does so because of its own failings. Moreover, amid all the winning and losing, there could be some unexpected losers and losses.
A hard goodbye
Some of those hurt by the exits are obvious. They include the companies that tried and failed at OSB (sometimes in a costly fashion), the people who worked for those businesses, and the bettors who are increasingly finding themselves with fewer places to legally bet online.
Fewer regulated sportsbooks may not bother your average bettor too much, because they’ll most likely have somewhere to wager no matter what, and probably as much as they want, too. That is because, unfortunately, most bettors are probably losing bettors, otherwise there wouldn’t be a sports betting industry. Losers will always have a home in this business.
Now, arguably, there could be some shuttered sportsbooks that offered certain betting markets or experiences that losing bettors miss, even as they still have places to turn to get down a same-game parlay. But it’s sharper players who will likely feel more of the pain of consolidation, as they find themselves limited to almost nothing or banned outright at the remaining shops. Some temporarily lucky players could find themselves on the receiving end of this treatment as well.
The Massachusetts Gaming Commission has begun probing the subject of bettor limiting. During an opening roundtable in May, “Captain” Jack Andrews, a professional bettor and co-founder of sports-betting education site Unabated, said he couldn't bet at any of the commonwealth's sportsbooks because of the limits they had already placed on him. He also said he’d been limited trying to bet the Super Bowl’s coin toss, a market for which there is (probably) no edge to be had.
“Not that I wanted to bet it, but that just goes to show you that the limits are pervasive across the board,” Andrews said. “And it really creates a not-so-great experience for any bettor, especially if they're limited falsely for being a winning bettor, if they just got lucky over a stretch and find themselves limited, which happens a lot.”
The MGC is still gathering information and doing its due diligence before taking any steps to address bettor limiting, and that's if it takes any steps at all. But a step that was suggested, albeit one lawmakers would have to take and not the regulator, would be to lower the cost to enter the state’s sports betting market, enabling more operators to participate and perhaps attracting high-volume, low-hold operators that could cater to sharper clients.
Massachusetts requires online sports betting operators to pay $5 million for a five-year license and then taxes them at a rate of 20% of revenue. The Bay State has seven online sportsbooks available, but it could potentially house as many as 15 under its licensing scheme. However, some operators, such as bet365, decided to pass on the market, while Betr and WynnBET have already shuttered their mobile operations in the commonwealth.
Churchill Downs reported a $1.8M bump in revenue for the quarter ended June 30 tied in part to "online sports betting market access agreements."
— Geoff Zochodne (@GeoffZochodne) July 25, 2024
The Kentucky Derby-owner exited the business of mobile sports wagering but has licenses to spare, such as in its home state. pic.twitter.com/Bvfl6utHhb
Nevertheless, while WynnBET's online operation is closed in Massachusetts, a WynnBET-branded sportsbook remains open at a Wynn casino in the state, the Encore Boston Harbor. And, like other jurisdictions, Massachusetts has "tethered" sports betting licenses that are connected to brick-and-mortar properties such as the Encore.
Part of the thinking behind tethered licenses is to ensure brick-and-mortar operators are getting something out of online sports betting, including market-access fees paid by their partners.
Churchill Downs Inc. has gotten out of the consumer-facing side of the online sports betting business, but it still has brick-and-mortar gaming properties across the U.S., such as in its home state of Kentucky. According to the results the Kentucky Derby owner reported this week, it received a $1.8-million bump in revenue that was partly due to "online sports betting market access agreements."
Price check
But the price casino operators can charge online sportsbook operators for market access is reportedly declining. Another report this week from Citizens JMP regarding the latest results of Boyd Gaming flagged “a risk on the horizon as renegotiation of skin agreements between brick-and-mortar casinos (BYD) and online gaming companies (Flutter, MGM) could result in less favorable market access agreements for BYD in the long run.”
JMP’s Bender added that “[r]ecent conversations suggest the asking price for skins are declining materially during renegotiation periods given the declining demand from operators."
That said, the firm still estimated $69 million in “skin-generated” earnings for Boyd in 2024.
Citizens JMP Securities sees "a risk on the horizon" for Boyd Gaming in renegotiating online sports betting "skin" agreements with operators. JMP says recent talks suggest a drop in demand (cough consolidation cough) is "materially" driving down the asking price for those skins. pic.twitter.com/y8Bu4KocCh
— Geoff Zochodne (@GeoffZochodne) July 26, 2024
That still sounds like a lot of earnings for letting online sportsbooks do business with your blessing. Even so, if there is less demand for market access, the brick-and-mortar casino industry some lawmakers sought to protect (and that other lawmakers may seek to protect again in the future, such as in states that have yet to launch online sports betting, like Mississippi) is holding a less-valuable asset and is less protected.
Moreover, if market access is too costly for regulated operators, it remains pretty cheap for unregulated ones that could scoop up some of the business shed by legal bookmakers that exit the market. Bettors who acquired a taste for online sports betting could utilize retail sportsbooks more often if their mobile options are limited. It’s also possible they turn to offshore or illegal options.
Lastly, consolidation may not have a big effect on today’s sports betting industry. But five or 10 years from now, will less competition mean less innovation from companies that have fewer rivals to fear? Or will the DraftKings-FanDuel duopoly be enough to keep the new products coming?
Predicting the future is a tough business, ask any bettor. What we know for now is that some bookmakers won’t be around to see that future, and we’ll eventually find out what that means for the rest of us.
