2020: The turnaround year

After the year we’ve had, recalling 2020 pre-Covid-19 comes as a struggle. Remember when Superbowl LIV hailed record betting handles in a number of states and you could freely walk into a sportsbook, watch a game, and place a bet?

In such a young market, 12 months is a long-time and as we near the end of 2020, the sector looks an entirely different beast, having adapted its offering to a digital betting audience that was largely confined to playing online during the pandemic.

Looking back at some industry predictions received by EGR North America for 2020, contributors expected responsible gaming, the continued shift from retail to mobile, and more M&A to take a front seat, and they were bang on the money. TheScore founder and CEO John Levy finally got his wish for Canada to move towards legal single event betting and Chalkline Sports chief Daniel Kustelski had his finger on the pulse when he predicted that regional sports networks would reign in 2020 as operators sought to localize their acquisition and retention efforts.

The year kicked off with some of its biggest news and the first of several seismic media tie-ups as Penn National Gaming (PNG) snapped up a 36% stake in Barstool Sports, in what industry commentators initially considered an expensive $163m deal.

The agreement signaled another deeply integrated industry media partnership as PNG doled out shares to Barstool execs and Barstool took control of the sportsbook marketing content. “Penn’s investment in Barstool was significant, but it was just that, an investment, and it was not spending marketing dollars in the more traditional sense,” notes Evan Davis, MD for betting and gaming at SeventySix Capital Sports Advisory.

“By making that investment, they were able to acquire the branding, the content, the user base, and at the same time provide additional exposure and grow that very brand in which they’re invested. To me that was a really strategic move on their part to differentiate and market their sportsbook product,” he adds.

Fast-forward to the Barstool Sportsbook launch in September and the app secured an average App Store rating of 4.9 after being downloaded 180,000 times across the US during its launch weekend. In the same month, William Hill signed an affiliate-style partnership with CBS Sports, with Hills lines to be used across the media outlet’s platforms as the operator gained access to its fantasy product.

Questions swirled over whether Hills would be able to gain enough traction with CBS Sports viewers in a loosely integrated deal, and sure enough this agreement would later be overshadowed by a bidding war over the UK bookmaker’s US assets between major private equity funds and legacy casino operator Caesars Entertainment.

Caesars went on to win the battle with a $3.9bn takeover bid, announcing it would divest the Hills UK retail business and European online arm, which includes Mr Green. It is expected that Caesars will maintain a dual-brand approach in the US as Hills has gained some recognition, but ultimately it will provide Caesars with an in-house betting platform to leverage its legacy player database.

In March, FanDuel Group was awarded the EGR US Power Rankings crown after a particularly successful year under the Flutter Entertainment umbrella. Flutter’s multi-billion-dollar acquisition of The Stars Group (TSG) was completed in May, bringing Fox Bet and PokerStars into the Flutter fold.

TSG chief exec Rafi Ashkenazi and Fox Bet CEO Robin Chhabra subsequently left the business as Flutter divided its US, UK, and international brands across three departments, with FanDuel COO Kip Levin taking charge of the newly formed US arm. As part of the deal, Flutter shareholders now own 54.6% of the new company and TSG shareholders own 45.4%, with the combination expected to deliver pre-tax cost synergies of £140m ($188m) per annum.

In May, the group raised $1bn to fund US expansion plans and the summer saw it migrate those US brands onto the proprietary Paddy Power Betfair PAM and wallet systems. Flutter went on to secure the top spot in the EGR Power 50 rankings for 2020, breaking bet365’s 10-year reign of dominance.

Joining the party

Caesars’ acquisition of Hills sent shockwaves through the industry, marking the first real effort to enter the mobile betting and gaming fray made by a legacy casino. But Wynn and Bally’s (formerly Twin River) both threw their hats into that ring by purchasing smaller betting platforms in BetBull and Bet.Works respectively.

As predicted, it was only a matter of time before the casino big boys joined the party. In the spirit of major media deals, PointsBet propelled itself to new heights via a tightly integrated partnership with NBC Sports that granted the operator access to a number of its leading regional sports networks (RSNs).

Australian firm PointsBet certainly has lofty ambitions in the US and it won’t be a surprise to see it significantly grow its revenue and market share next year. SPACs also reigned supreme this year, as DraftKings closed a hugely successful IPO early on and watched its share price spike to impressive heights by July. Rush Street Interactive and Golden Nugget Online Gaming also jumped on the SPAC bandwagon, and both are now in the final stages of going public via reverse mergers.

“The SPAC explosion is indicative of the value of marketing spend, or at least the perceived value of marketing spend to grow market share, because doing that requires cash and going public is a way to raise cash, while doing it through a SPAC is a way to receive cash more quickly,” Davis highlights.

Capital markets continue to keep a close eye on betting and gaming in the US as a high-growth industry with plenty of opportunity for public investment as firms seek to go public. Of course, 2020 wasn’t all blockbuster deals and fairytale gains. When coronavirus hit the US in March, professional sports leagues suspended all games and sport was forced into an indefinite hiatus, while retail casinos were also required to close to the public.

Operators were hit hard, with many legacy casinos furloughing staff and others being made redundant. Online operators, which are usually more nimble than their brick-and-mortar counterparts, pivoted to offer niche content to players in the US, including Russian and Ukranian table tennis tournaments and free-to-play prediction games on reality TV shows and November’s US Presidential Election.

Some operators also scaled back marketing spend during the second quarter to cut costs. Despite a lack of sports, users never stopped betting, with many shifting sights to online casino in the states where it is legal. Igaming and poker revenue skyrocketed in Pennsylvania and New Jersey during the summer, with the trend continuing well into the rest of the year.

This period served as a timely reminder to those states considering igaming just how much the vertical can positively contribute to taxes and budgets. On the return of sports in Q3, the majority of states recorded a huge uptick in betting handle as acquisition rates jumped significantly.

DraftKings, BetMGM, and 888 raised their 2020 revenue forecasts on better-than-expected Q3 revenue to prove the industry is capable of bouncing back from tough times. December began with the news that Canada’s government was backing a bill to legalize single event sports betting across the country that would give regions the power to regulate locally. It will surely look to the US and its successes and failures in launching legal sports betting to continue the growth story north of the border. Expect much more on this in 2021.