Back in March, as American sports fans placed their bets on Division I basketball, bettors in the U.K. were laying odds on the name of the royal baby (was Archie even a long shot?); whether Brexit will stand; and oh yeah, their version of football (a completely different game than the one played by Tom Brady and Antonio Brown).
Americans and Brits have plenty in common, and just as many differences. We say “potato,” they say “potahto.” We drink coffee or cold beer, they sip tea or warm ale. Our football coaches have big, beefy names like Bill Belichick and Knute Rockne. One of theirs answers to Sir Alex Ferguson. And when it comes to sports betting, we’re separated by much more than an ocean.
In the developing U.S. sports betting market, tensions have arisen between U.S. and foreign sports betting suppliers. One veteran bookmaker has called his European counterparts “carpetbaggers.”
When the U.S. Supreme Court opened the door to widespread legal sports betting last year, it should have surprised no one that U.K.- and EU-based companies would flood our shores. Outside the U.S., sports betting is a mature market—the wagers have been legal in the United Kingdom since 1961, and online has been around since the late 1990s.
With illegal sports betting in the U.S. valued at $150 billion a year, international betting firms want a piece of the legal action, which could reach $6 billion by 2023, according to research firm Eilers & Krejcik. But can they do it with different sports, different modes of betting and different player expectations? Can they do it over the counter?
“What caught everybody by surprise was that Nevada was never consulted or looked at when it came to New Jersey,” says Robert Walker, director of product development and strategic planning at Las Vegas-based USBookmaking. “It’s not true of every European operator, but they didn’t vet the U.S. market—in my mind, they did the least amount possible.”
He says consultants who pointed New Jersey operators to European partners “have no idea about sports betting systems. If New Jersey wasn’t in a rush to get to market, it would have played out differently.”
Walker’s boss, Gaming Hall of Fame bookmaker Vic Salerno, says amen to that. “If Art Manteris or I were to go into books in London, we wouldn’t have any idea what they’re doing or how their odds work. They have higher margins and take more vig from the players. They book sports that aren’t quite as fast. They don’t understand U.S. sports any more than we understand cricket—we could still book it, but we wouldn’t understand why we lost or won.
“They’ve never booked baseball, and I have concerns about how customers are going to react in the U.S.,” he continues, and adds, “I like to have companies that are based there and will profit here versus going outside the country.”
Salerno suggests that U.K. suppliers bluffed their way into New Jersey by affecting an expertise they did not possess, especially when it comes to retail sports betting. “All these British companies are in iGaming, not sports wagering. They told the casinos, ‘We can interface with your casino systems, we offer all the casino games and we have sports betting too.’ I thought companies like Caesars and Golden Nugget would just extend their operations from Las Vegas and add New Jersey to their existing sports betting system.”
He says Brits don’t understand American games, and even some U.S. operators underestimate the value of on-site sports books to a property. “These bosses don’t understand the sports wagering part. It’s only 2 percent of GGR, and they don’t take into consideration all the other things it brings: the excitement, the people from March Madness filling rooms.”
The Great Race
Apparently, foreign operators have been waiting for years to pounce on the stateside market. According to a 2018 Bloomberg News report, William Hill had its eye on New Jersey as early as 2011, when state lawmakers starting challenging the Professional and Amateur Sports Protection Act. Boston-based daily fantasy sports provider FanDuel was acquired by Paddy Power Betfair in May 2018, right after the Supreme Court ruling that nullified PASPA. And on May 14, 2018, the same day the ruling came down, Kambi CEO Kristian Nylen issued a statement saying the Swedish company had been planning “since its inception” a decade before to break into the new market.
“I cannot speak for other suppliers, but we were ready, we were diligent, and we had boots on the ground in the U.S.,” says Kambi U.S. Director Max Bichsel. The global B2B sports book operator broke into New Jersey with DraftKings and Rush Street Interactive’s PlaySugarHouse sports books and is looking to go coast to coast as more markets open.
Bichsel dismisses claims that Nevada providers should have had first dibs on New Jersey. “I think there’s a very large element of protectionism there,” he says. “We’ve been doing this for the better part of 10 years in Sweden, the U.K., Germany, South America, Africa—it’s something we’re used to doing, and we have the flexibility to meet local and regional regulatory needs. Companies in Nevada can’t say who’s an expert and who’s not. The question is, who’s going to give the consumer what they need?”
The speed of growth in New Jersey “puts it on par” with Nevada, Bichsel says. “We’re seeing a lot of very sharp people coming over to the U.S. who know what they’re doing to adjust and understand the American market and can do it with relatively little trouble.”
Tom Washington, head of communications for London-based Genius Sports and BetGenius, acknowledges the competitiveness, “a sense that people are coming in and telling U.S. operators how to do things they’ve been doing for decades.
“I remember going to conferences five, six years ago and hearing stories of European companies going in and selling to U.S. casinos in the wrong way—it was probably overconfidence, a bit of arrogance, like, ‘Here’s how we do it over in the U.K. and Europe; we’re sure you’re going to do the same and we’ll show you how to do it.’ It didn’t go over very well, clearly. What’s a no-brainer for companies like ours is to hire local expertise on the ground, which is what we’ve done.” The group now has more than 100 U.S.-based staffers.
“You can say a company that’s never worked in the U.S. doesn’t understand the U.S. sports punter as well as local suppliers and bookmakers,” Washington continues (well, for one thing, we don’t call them punters), “but there’s no argument that companies like ours know sports betting operationally, how to run risk and trading and pricing, in a way that’s proven to drive profits for bookmakers around the world. I don’t think it’s fair or commercially astute for incumbent companies to take the view that because we haven’t worked in the U.S. market we cannot add tremendous value.”
Salerno contends that newcomers to the U.S. are upending the domestic sports book model, possibly to the detriment of the sector. “They’re giving rebates if customers lose a bad beat, which isn’t good for the industry in the long run. We’re in a market that has very narrow margins of profit, and these things come at a cost to the bookmaker out of his net, which is really not large.” He also believes that international operators—who generate up to 90 percent of gross revenues on mobile—don’t really care about sustaining the retail sports book.
Others are confident mobile sports betting will not have a negative impact on retail, but will bolster it. “Similar arguments were made that live betting would take away from pre-game betting, but actually it does the opposite,” according to Washington. “If I come into a casino and my pre-bet’s dead in the water early on in the tie, I’m still going to watch the game and may place an in-game bet. And if that bet comes in, I’m likely to recycle some of the winnings and continue to play.”
Keith O’Loughlin, senior vice president of SG Digital, a division of Scientific Games, agrees that retail sports books will survive, and then some, as part of an omni-channel experience. “All you have to do is walk into any sports betting area or sports book in a casino and you feel the entertainment. What we’ve seen with our customers is that mobile doesn’t have a cannibalization effect,” but enables operators to continuously engage with players, both on- and off-property.
Asked what U.S. operators can learn from their peers overseas, O’Loughlin says immediacy and choice. International sports betting systems “are very good at what’s happening today, this morning, this afternoon and this evening—whatever’s going to be most interesting for the next couple of hours—merchandising it and giving customers really relevant betting options and great value.”
He has no quibble with the sheer number of live events on offer in the EU-style online sports book: some 35,000 a month. “Customers won’t pull down a fraction of those, but they do want to see that you have a full offering. The operators that succeed will really focus on how to acquire customers, work with their partners to make sure the customer experience is amazing and monetize that rather than having to build technology-type businesses.”
Salerno concurs, up to a point. “I don’t know how you can get action on all those events—nothing against Bolivian sports or betting on a minor-league soccer game; they have the ability to do that well, and I’ve always said if you’re going for ice cream with the kids you have to go to 31 flavors. It’s important we have a complete menu, so to speak, but here we focus on major events in the major markets.”
A quick look at Betfair’s online sports book shows matches in Kuala Lumpur and Nigeria as well as NFL games, the Rome Open and the Turkish Cup, the NBA playoffs and the PGA championship. For an American audience, that may only be confusing.
“You have to make the app that a consumer can take and modify to his choice,” says Salerno. “If he just wants to bet baseball, he has to get there in two clicks. If he wants to bet baseball totals, three clicks. He can’t go through 15 different things trying to find what he’s going to bet on. Here’s where the user interface becomes very important.”
According to Kambi’s Bichsel, it’s less important for suppliers to compete against each other than to join forces against illegal sports books, which are taking millions or billions of dollars in wagers underground or offshore, providing no benefit for the states and no protections for the players. While it’s hard to know if local bookies and offshore ops are benign service providers, criminal enterprises or a little of each, governments are rightly concerned about the free flow of illicit funds to potential bad actors.
“For us, the competition is in trying to make sure we can defeat the offshore and the black markets,” Bichsel says. “Otherwise, it’s irrelevant.”
Washington, meanwhile, calls for a truce. “People are always going to be protective about their business. The traditional bookmakers and others are extremely good at what they do, but this market is going to evolve a lot, and they’ll need to harness expertise in other areas with specialists like us. I think we’ll gradually shift to a point where stakeholders from both sides of the pond find a way to work together and get the best of both worlds.”
The market could get even more crowded, according to an April report on MarketWatch.com, which said social media giants such as Facebook, Twitter and Google “will be clamoring to enter the sports betting business because they could easily take advantage of their massive user bases and infrastructure.”
In Salerno’s view, only the strong will survive. “The landscape is going to be completely different a year from now. I’ve said from the start that a lot of people are getting into the market who really don’t know what they’re doing, and they are going to fail. Then there’s going to be a second wave that’s going to correct all these things and be very successful.
“It’s going to be a huge market and it’s going to spread exponentially.”