In the five years since the U.S. Supreme Court paved the way for states to legalize sports betting, more than $220 billion has been wagered at legal gambling outlets, according to the American Gaming Association, a figure that continues to rise as more states legalize betting. Currently, 35 states and Washington, D.C., have legal sports betting, according to the AGA.
The continued growth has been a boon for industry leaders FanDuel and Draftkings, which combine to hold more than 80% of the U.S. sports betting market, while other major players like Caesars and BetMM have looked to carve out their own niche.
But while the sports betting market is already crowded, other big companies already involved in sports are trying to get a piece of it as well. In August, Disney’s ESPN launched a sportsbook called ESPN Bet in partnership with Penn Entertainment . Fanatics, the Michael Rubin-founded sports merchandise company, acquired the U.S. operations of PointsBet after a several-year pursuit of an entry to the sports betting market.
FanDuel CEO Amy Howe, speaking with CNBC’s Contessa Brewer at the CNBC Global Evolve virtual summit on Thursday, said while she expects to see more “well capitalized, very strong competitors on the field” as the sports betting industry is still in its early days, there are reasons why other big players have failed to catch on.
“What we know is you’ve got to have a superior product experience, right? At the end of the day, if your product doesn’t work, it doesn’t matter how great your brand is, you got to have a really phenomenal experience,” said Howe, who joined FanDuel from Ticketmaster
in 2021. “But at the same time, one of the things that we’re seeing, which is not dissimilar to many ecommerce industries, is that you’ve got to have scale.”
FanDuel, which is a subsidiary of Flutter Entertainment, has a presence across all 50 states and partnerships with leagues including the NFL, NBA, MLB, and the NHL, as well as with teams, broadcast companies and Google
, which acquired the rights to NFL Sunday Ticket last year.
“Because we’re still in the early days, like any ecommerce business, there’s a race for eyeballs and a race to make sure that we can responsibly bring the best consumers onto our platform,” Howe said. “These are partnerships that we’ve been building up for years long before online sports betting was legal in the states.”
Competitor DraftKings reported a 57% increase in quarterly revenue on Thursday and declining losses.
Howe said she expects the company to become profitable on an EBITDA basis for the full year, which would make it the first U.S. operator to reach that milestone, which will help it further hold off the other companies competing in the market.
“In a world like online sports betting, the barriers to entry are high. ... 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,” Howe said.
“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,” she said.