Several states in the USA have voted to legalize sports betting, and this is a good move for the gambling industry. DraftKings and FanDuel, two big sports betting operators, reported some firm results this week and all credit goes to the return of many live sports events.
For the first time this year, gamblers are able to bet on all major team sports in the third quarter as the NBA, MLB and NHL resume their games and NFL kicks off the new season.
The beauty of it all is that some major betting companies have magnificently benefited from the coronavirus chance in the sports calendar. From the moment the major sports events resumed, the shares of DraftKings popped up nearly 5% after the company mentioned sales rose better than the expected 42% for the third quarter. In addition, DraftKings also elevated its revenue outlook for the whole of 2020. At the same time, they went on and issued healthy guidance for 2021.
It is however clear that the sports betting industry at large has not yet recovered from the lower gaming income caused by the COVID-19 lockdowns of sports events earlier this year but there seems to be some regional differences. For the time being, the shares of the Ireland-based FanDuel owner Flutter Entertainment raised more than 4% for their third quarter but the UK based William Hill reported a decline in revenue by 9% during the same period. Looking at other regions, sports betting seems to be on the increase across the Middle East, especially in the GCC countries. According to a7labet, the growing sports betting industry in the Gulf states is fueled by the new political trend in the region to host international sporting events and international tournaments, including e-Sports combined with a growing generation of young Arabs interested in international sports. Both in the Arabic and Asian market, e-Sports and Fantasy sports are very popular. This may explain why sports betting operators like DraftKings, with a focus on these contests have seen an increase in revenue during the corona pandemic when traditional sports events were cancelled. The third quarter is the last chance for many betting operators to increase their revenue and compensate for the losses of the previous quarters.
Summer Time, a Sports Fans Time
Summer is the time most fans get to enjoy great sports bumper events, and it was the same story for gamblers. Many sports leagues went on and postponed their seasons due to the coronavirus but resumed late in the summer.
Therefore, bettors now have the best chance to gamble on baseball, basketball, hockey and football. This is on both the pro and college level, and they will take place in the third quarter. The one time calendar abnormality came into existence due to the NBA and NHL playoffs, and they are normally over by June.
Moreover, other sporting big events, such as the Kentucky Derby, PGA and US Open also shifted from their normal late spring or early summer into the third quarter.
“This was pretty unprecedented, and hopefully a once in a lifetime, quarter. But it sets us up well for the fourth quarter and next year,” said DraftKings CEO Jason Robins in an interview with CNN Business correspondent.
Spending More to Attract new Customers
The intensity of the competition really comes at a cost to both of the gambling giants. Both FanDuel and DraftKings have invested a lot of money to attract new players to their gambling platforms.
DraftKings highlighted a quarterly net loss close to $384 million, at the same time, FanDuel also has expectations to lose money for the most part of 2020 as well. What are the main reasons for this? Both gambling firms are following the tricks in old business books. That is you need to spend money to make money.
For instance, DraftKings spend over $203 million on sales and marketing in the quarter, compared to the total revenue of $133 million.
“It’s a golden age of online gambling. Customer sign ups and revenue growth are quite strong,” said Jason Ader, CEO of SpringOwl Asset Management during an interview with Becky’s Affiliated. “Still, having your marketing expenses exceed revenue doesn’t work forever. It’s a red flag.
Ader indicated concerns that most sports betting are making the same mistake that e-commerce companies and various dot-coms did 20 years ago. Major companies such as Silicon Valley have their own way of doing business, a smart way rather. Their model is to spend and build first and worry about the profits later.
On the other hand, the casino owner Penn National Gaming carries a minority stake in the Barstool Sports. The gaming company launched a sports betting app to enable sports bettors to bet on the go. However, the MGM Resort is also looking towards investing more in its own betting app. All in a bid to increase the number of bettors to play and win real money.
However, interestingly DraftKings CEO Robins is aware of the new rival, and he is not worried about it.
“There is new competition coming in from great companies, but that hopefully helps grow the overall market faster,” says Robin.
Above all, FanDuel came to agree that if more states legalize gambling, then there’s going to be enough business that will take place in the gambling space. In addition, that will make everything interestingly great.
“There will be a continued expansion of sports betting,” King said. “A year ago, we had sportsbooks only in three states.”