When New Jersey’s legislature failed to allow state voters to opt out of the sports ban imposed by the Professional and Amateur Sports Protection Act in 1992, the legal sportsbooks that were envisioned bore little resemblance to what has transpired in the past two years since PASPA was overturned by the U.S. Supreme Court.
Atlantic City casinos had wanted physical sportsbooks as found at Nevada casinos, knowing that margins were super-thin but that books would bring in other business, especially around events like the Super Bowl and March Madness. But by the time legal sports betting became a reality in 2018, it was clear that the real benefits would come online, with mobile betting and in-play wagering generating profit margins of which physical books could only dream.
New Jersey is now the model for modern sports betting, with more than 80 percent of wagers being made online. That online wagering market is every bit as competitive as Atlantic City’s land-based market ever was, with more than 20 sites vying for New
Jersey’s millions of potential bettors.
As with the land-based market, hyper-competition online produces both benefits and dangers. Each site strives to distinguish itself from its competition by presenting a user-friendly experience with a top variety of wagering options. But marketing in the player acquisition phase can be expensive, and some question the long-term sustainability of the super-high sign-up bonuses being offered in New Jersey, with equally high promotional costs to retain those new players.
“Operators rely on sign-up bonuses in order to draw new customers,” comments Richard Schwartz, president of playsugarhouse.com operator Rush Street Interactive, “especially given how extremely competitive markets like New Jersey have become, with many operators offering very generous sign-up bonuses. Ultimately, unless you already own a database, there are really no shortcuts to how you acquire players.”
Retention for the long term, he says, is another matter. “On the retention side, some operators in the market are bonusing over 50 percent, even 80 percent of of their revenues to keep those players engaged and active. I don’t think that’s a sustainable model. While some operators may be generating a large volume of handle, they may be generating extremely low net gaming revenues, since they are constantly providing aggressive bonuses to their players, with promotional credits and odds boosts that over the long term won’t be sustainable.”
“Bonuses are important in competitive environments like New Jersey,” says Scott Butera, president of interactive gaming for MGM Resorts International, which runs the betMGM sports-betting site. “Everybody’s offering them, so I’ve found that bonuses are increasingly important. But in terms of retaining customers, it’s really more about the customer experience once they’ve been acquired.
“Bonuses are very important in acquisition, but in terms of retention and getting that customer to grow, it’s about integrating them into our system, using our properties and making all of our assets available to them.”
Kevin Hennessy, director of publicity for FanDuel Group, agrees that the day-to-day offerings are what are most important.
“We definitely value offering bonuses to new customers,” he says, “but there are also many offers available to all customers—daily promotions and odds boosts that make every night more enjoyable. We are very happy with what we are seeing in terms of keeping new customers excited and engaged beyond their first week with us.”
“Sign-up offers are important for drawing users into our product, a successful tactic we have leveraged for years on our DFS platform and, more recently, our Sportsbook,” says Dan Hannigan-Daley, director of sportsbook product for DraftKings, the other daily fantasy sports giant besides FanDuel now in New Jersey’s sports betting market. “The sign-up offer is one of the seamless tenets of our overall strategy for acquiring and subsequently retaining users.”
The User Experience
Acquisition and marketing costs aside, the intense competition for the online sportsbook dollar in New Jersey is good news for the end user.
“For us, it’s really two things,” says MGM’s Butera. “It is having great technology, and having a tremendous user experience through that technology—combined with integration into our resort properties. We’re really trying to capture that customer, get them engaged in our app, and then funnel them into our property system. We then use those properties to retain those customers and reward them. Most important is the relationship between our sports betting technology and our properties.”
“The user experience is something that we focus on quite a bit,” says Rush Street’s Schwartz. “Using our own platform allows us to innovate and create differentiation that leads to the user experience being unique compared to other sites.
“We believe if you do a great job of offering the players a solution that works well, with a site that is reliable and offers unique features, we can create a better user experience for our players.”
“The DraftKings Sportsbook is an American-made product, built in-house and to scale,” says Hannigan-Daley. “The platform is extremely dynamic, easy to use, and reliable. DraftKings machine learning capabilities truly enhance the user experience in capturing preferences, helping us to engage them in the right way, at the right time.”
“Ease of use and lowering the barriers to entry for new customers,” says FanDuel’s Hennessy of the most important distinguishing factor in a competitive market. “Sports betting is very new to a large group of our customers, and we want them to feel comfortable and safe betting with us. For the more experienced customers, it’s about getting out of their way and making things as easy as possible.”
It is also about rewarding those more experienced players, often tapping the same arsenal of perks used in traditional casinos.
“We have cashback promotions that we utilize at various times for different events,” says Schwartz, “and we have a loyalty points program that’s similar to land-based in the sense that players can earn loyalty points as they wager online and redeem those for comps and other bonus items of value to them.
“We’ve developed a unique bonus store that allows our players who earn their points online to redeem those points wherever they wish for other types of online free play, through scratch cards, wheel spins and different gamification tools.”
“We believe in taking a data-driven approach to everything we do, so we’re quite measured in our promotions and/or retention marketing efforts,” says DraftKings’ Hannigan-Daley. “We offer users rewards for participation not unlike what land-based casinos do, but those rewards are largely focused on driving specific behaviors we’ve identified the user is likely to participate in, as opposed to providing a generic cash-back offer. While we do offer those too, we tailor our offers greatly to individual users.”
MGM’s Butera adds that such rewards can be much more dynamic online than in a land-based casino.
“You can make adjustments more quickly, and track better,” he says. “We are using similar activities as land-based casinos, but we’re able to adjust them more frequently, so they can be a little more impactful, a little more targeted. We can be much more flexible than what you see in a land-based casino.”
Hennessy says most of FanDuel’s promotions are linked to actual events and matchups, rather than to the amount a customer wagers. “We believe that’s more exciting and promotes a more responsible way to bet than offering rebates,” he says.
As the legal sports betting industry matures, operators in New Jersey—as well as the host casinos and their licensed online casino sites—are finding it to be a mutually beneficial business.
“We do see a lot of crossover between online sports betting and online casino play in the markets where we have it, New Jersey being the best example,” says Butera. “And we’ll see what happens in Michigan, but also with our properties. We see that sports bettors do come to the property; we’ve seen lift in table play. I think some of our competitors have seen that as well, citing lift in their gaming business from sports betting.”
“We see very strong crossover from sports to casino,” says Schwartz. “Certainly, some from the casino categories such as blackjack are played pretty heavily by the sportsbook players. That’s why the industry has seen many of the larger online sportsbooks deliver very strong results on their casino product.”
He adds that Rush Street’s land-based casinos, Rivers Philadelphia and Rivers Pittsburgh, “have seen significant crossover from online. When you have a larger market share online, you have a lot of players. We have a lot of players who have never experienced a land-based property, and when they have a positive experience with us, they earn things online that may be valuable for them to redeem in the land-based property. Also, they have the ability to cash out their winnings online or withdraw the cash at a physical property.
“We’ve seen that we’re driving traffic to land-based properties of a new demographic that in the past for one reason or another haven’t been to a property before. It might be that some of these online players aren’t familiar with how to play some of the table games, and prefer to play a 5 cent blackjack game online until they learn how to play it, rather than putting a minimum bet on the land-based table and learning in a more expensive way.”
“DraftKings is in a great position having started as a DFS company,” says Hannigan-Daley. “We see considerable crossover between the two products.”
Moving forward, operators will continue to put in hard work—and make hard decisions—to compete in an increasingly crowded online sportsbook market.
“It’s really about getting the customer recognition and customer awareness,” says Butera. “Once we find a customer and introduce them to all the benefits of MGM—and in the New Jersey market, the Borgata—they
really like what they get. It’s about trying to reach that customer, distinguish yourself, and get them to engage with you, and to understand the full range of products.”
“We’ve really enjoyed the competition in New Jersey,” says FanDuel’s Hennessy. “It’s driving innovation in products, promotions and customer service.”
That competition in New Jersey’s online sports betting market continues to heat up. But is all the bonusing creating a new version of the ’90s
Atlantic City marketing wars?
“One drawback,” says Schwartz, “has been the aggressiveness of many of the operators in terms of spending on user acquisition and on bonusing existing players in an effort to create a narrative of strong performance in the New Jersey market—which may either help them as a public company or help them convince land-based operators in other states to select them as a good market access partner .
“As shared earlier, I believe the drawback has been that a lot of aggressive, unsustainable marketing and bonusing practices will create profitability challenges for operators. We are quite profitable in New Jersey, but it’s certainly been a significant challenge because of the intense competition and motivations of many of the operators that extend well beyond trying to generate profits at this time as a primary goal.”
“Atlantic City is super competitive,” says Butera. “It’s a proving ground for a lot of folks. Whether the (bonusing) is overboard or not, I just think it’s the nature of the market. Will that be the same in other markets? Probably when they first open, but my expectation is that’s not sustainable, and it will right itself over time.
“The revenues will continue to grow more stable… And I think the spend will become more rational.”
“Depending on the size of the competition in New Jersey, and how many operators will shift some of their New Jersey marketing resources to other legal markets in the future, I’m not sure about the ulimate size of the market,” says Schwartz. “But in terms of the competition, I think there will continue to be more and more operators entering the New Jersey market, all hoping they can find a way to capture significant market share. And it will take some time for a few of those operators to recognize that the ROI won’t be there for many of them, especially if the market conditions don’t change.
“At some point the number of competitors will start to decline and I expect consolidation will occur.”
“Each market comes with its own set of challenges,” says Hannigan-Daley. “With 18 sportsbooks in market, we see that players like to shop around for deals, whether that is odds, markets or promotions. We embrace that, however, as competition is what drives innovation in order to remain at the top of the leaderboard.”
“Competition will definitely continue to heat up,” says Hennessy, “and we welcome that. Customers will benefit from competition, and new states mean that more Americans can enjoy the excitement of online betting in the same way that New Jersey, Pennsylvania, West Virginia and Indiana have so far.”
“The market will continue to expand and innovate,” says Hannigan-Daley. “DraftKings encourages competition among the array of providers already live in Pennsylvania and New Jersey. We are still in the opening minutes of the first quarter of legalized online/mobile sports betting in America, so it is important for consumers to have a variety of choices when it comes to where they place their bets.”