Online sports betting has slowly become legal in more states and that's expected to continue in 2023. That has led to an interesting battle between Las Vegas Strip Leaders MGM Resorts International (MGM) - Get Free Report and Caesars Entertainment (CZR) - Get Free Report fighting for customers with digital native players DraftKings (DKNG) - Get Free Report and FanDuel.
Add in Penn National Gaming (PENN) - Get Free Report with its casino properties and Barstool sports brand also getting into the fray and you have a very pitched battle in this growing space. Caesars and MGM have their huge loyalty programs to leverage while Penn has some of that as well as the fierce devotion of Bartsool's fanbase.
DraftKings and FanDuel have their own strengths as they were built for the internet in a way that Caesars and MGM can't duplicate.
Playmaker President David Woodley answered some questions from TheStreet about what to expect in the sports betting space in 2023. Playmaker is a "new-age social media sports and entertainment content platform operating various channels," according to the company. Its betting vertical has built a following of nearly 500K across social media since launching in 2021, and focuses on industry trends, breaking news, memes and betting education.
TheStreet: What's the state of the online sports betting market at the end of 2022?
Woodley: Sports betting remains a growing industry with immense staying potential. Despite the overall economic downturn in the US, bettors are still engaged and giving sportsbooks plenty of action. Parlays, same game parlays and props continue to grow in popularity, which certainly works in the operators’ favor. The market is in a strong spot as we had into 2023.
TheStreet:. Do you expect any major changes in the new year?
Woodley: I think we’re bound to see more market consolidation and M&A activity than we have in previous years. In Ohio, which is coming online January 1st, we’re going to see more than 20 different operators competing for market share. For a lot of the smaller players in the market, this could be a last ditch effort to survive. The time for excuses is running out and operators are going to be under a lot of pressure to start turning profits, or get out of the space altogether.
TheStreet: All the major players -- Caesars, MGM, Penn National -- have invested big in the digital space. How do you see them competing with digital natives like FanDuel and DraftKings?
Woodley: Penn National was smart to partner with Barstool and acquire such a strong and loyal following. They’ve been able to establish a clear brand identity across the country, which is essential as they continue to fight for market share. As we head into 2023, now they’re tasked with keeping that Barstool audience happy and engaged.
Caesars and MGM are still old school in many ways, and really leaned into their land based assets for a while. Eventually, it became evident this wouldn’t translate into a brand identity on the mobile sports betting side. This is why we are now seeing an influx of celebrity endorsements from both parties. These campaigns are effective with some more than others, but certainly more efficient than relying on just the name value alone.
TheStreet: Will online betting be a profit center for these companies?
Woodley: Yes and we have already seen industry leaders, like FanDuel, turn a profit based on recent earnings reports. The long-term growth potential for US operators remains extremely high. Not only are we still waiting for California, Florida and Texas to all legalize mobile sports betting, but we also don’t yet have widespread mobile iGaming.
At the moment, there are only seven states that allow mobile iGaming. Casino games pose far less risk than sports betting and yield much higher revenues for operators. Once we see more states embrace the advantages of iGaming, profits from online betting will soar.
TheStreet: Do you see any major regulatory changes coming? Any states likely to legalize?
Woodley: We have already seen interest from some in reducing the amount of advertisements and volume of promotions available to both new and existing bettors. Those concerned with the impact of legalized gambling tend to point to these two aspects of the industry as leading contributors toward gambling addiction.
As for legalization, it’s too early to tell right now. Coming off a year where so much time and money was dedicated to getting California onboard, it will be interesting to see what states the industry targets in 2023.
TheSteet: What are the biggest headwinds facing the industry?
Woodley: There are a lot of states that have legalized sports betting, but made it inherently tough for bettors and operators alike. The tax rate in New York, for example, is a staggering 51%, making it extremely difficult for sportsbooks to profit. And on the consumer side, there are plenty of limitations and inconveniences in place, limiting betting activity. Restrictions on college sports, depositing money upfront and tedious signup processes still push some toward black and gray market operators.
TheStreet: What else do consumers and investors need to know?
Woodley: It’s important to understand that sports betting within the US remains an extremely nascent industry with immense growth potential. The rise of same game parlays and microbetting, for example, all came about within the past year or so. This kind of evolution highlights just how quickly industry leaders are willing to evolve, and underscores the degree of innovation going on within the space.
This industry is in a strong spot heading into 2023, and there's no need to overreact to some of the short-term challenges we have been seeing.