Industry predictions for 2023: Firms to trim the fat and the tricky path to profit in the US

James McKay, sportsbook director at LiveScore, Virgin Bet and Roxor Gaming 

Increased convergence 

I think 2023 will see the convergence model really take off and we may see even more players entering that space. The media and sports-only model is seeing multiple challenges and, as a result, we need to find ways to maximise revenue from their traffic. There is obviously a symbiotic relationship between sports media and sports betting which should help with some of these challenges. In the media industry, there is an over-reliance on advertising and subscriptions, while in the betting industry, there is a constant battle with ever-increasing acquisition costs. I see convergence as a solution that offers greater average revenue per user (ARPU) to a media business and lower acquisition costs for a sportsbook. It has seen strong success to date and I expect this will go onto become the industry norm over the next year or so. 

Cost efficiencies 

All companies will go into the new year very conscious of the cost-of-living crisis and increased costs across the board. It will now be more important than ever to look at where teams can become more cost efficient. Automation, although not exciting, will be the key part to business success in 2023. Obviously, we will all be hoping throughout the year that the outlook improves, but until that moment comes, we need to be looking at how we can save and where we can cut costs. 

Continued growth of bet builders

Just like with convergence, we have already seen great strides made in this area. The bet builder has become the fastest and biggest growing market across the industry, and I think we will only see this continue throughout 2023, with no signs of slowing. When we first saw the introduction of same-game acca betting a few years back it was touted as being the biggest breakthrough since in-play. This claim has rung true, and operators are even looking at promoting these on acca pages, which were widely regarded as the cash cows for sportsbooks. So, where will it go from here? I think we’ll see more markets, more stats and more entry points. We’ll also see improvements on the navigations and an improvement on the in-play experience. 

David Brohan, gaming and leisure analyst at Goodbody Stockbrokers 

Profitability in the US will become a reality for a select few

The US has been a cash burn bonanza up to now, with Q1 22 probably representing peak euphoria. However, the industry focus has shifted, with companies increasingly aware of the need to show they can be profitable. FanDuel is leading the way on this front and is on track to deliver positive EBITDA in FY23, while several other operators will either see losses significantly reduced or reach profitability at some point in the year. Alongside this, we expect to see further smaller operators wave the white flag and exit the US market, a trend that has already begun, with Maxim and Fubo recently announcing plans to leave.  

 The UK white paper will finally be released

The release of the white paper into the Gambling Act 2005 review in the UK seems to have been imminent for much of the second half of 2022 and has been delayed each time. However, it does appear that it will be released in early 2023, which will bring some much-needed clarity for UK-facing operators. Some larger operators have pre-emptively brought in new safer gambling measures ahead of its release, adversely impacting revenue, however this does leave them relatively well positioned for any proposed changes. At the time of writing, it appears slot stakes will be set somewhere between £2 and £5 and affordability checks will be enhanced, albeit in a non-invasive way and at a sensible level of spend. This would be seen as a positive outcome for the industry, although the increased regulatory burden could put pressure on some of the long tail of operators in the market, especially those who don’t yet have rigorous safer gambling tools in place. 

 M&A trend to continue in 2023

M&A remains a key focus for the industry, despite rising costs of debt. With core markets such as the UK and Australia entering more mature phases, operators will need access to faster-growing markets such as Latam and Central and Eastern Europe (CEE) to deliver growth in the coming years. The most frictionless way to do this is by acquiring local heroes, something Flutter and Entain have been actively doing in recent years, and a trend we expect to continue. 2023 could also be the year we see significant international expansion from one of the large US players. MGM acquiring Entain would seem the most logical move here, but the likes of Las Vegas Sands could be a surprise package. The other area where we expect to see ongoing M&A is with content providers. This market is more fragmented, and so offers opportunities for M&A either between B2B providers or for B2C operators looking to further in-house their product offering.