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  • May US Sports Betting Market Monitor: Fanatics has work to do following PointsBet purchase
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There is still plenty of work to be done by Fanatics if its acquisition of PointsBet is approved, according to the latest Sports Betting Market Monitor from Eilers & Krejcik Gaming (EKG).

M&A back on the menu

Of course, no discussion of US sports betting this month would be complete without some mention of Fanatics’ $150m acquisition of PointsBet’s US operations.

According to EKG’s analysis of the acquisition, Fanatics’ key priority for the purchase was securing a “competitive/very competitive OSB product”. 

The report points out that PointsBet’s app consistently ranks third in EKG’s proprietary testing of US betting products, behind only market leaders FanDuel and DraftKings.

Further, the inclusion of Banach Technology – the sports betting platform and trading company PointsBet acquired for $43m in 2021 – would certainly have helped sweeten the deal for Fanatics.

Banach was “a core driver for the proposed deal,” in EKG’s view, “thanks to its potential to provide differentiated price-driven products such as micro markets, no delay in-play wagering, and in-house SGP.”

EKG suggested Banach’s value today would be “double or triple” the $43m PointsBet originally paid for it.

Still, Fanatics’ acquisition of PointsBet will not turn the business into a market leader overnight.

While the firm will acquire some customers (PointsBet had 317,000 US paid actives in the 12 months to March 2023) and market access (the brand is currently live in 14 states), the operator boasted just a 1.7% share of the US online sports betting market by GGR in Q1 2023, according to EKG’s proprietary tracking data.

In addition, if the deal is approved, Fanatics will need to work out what to do with its Amelco-based product, which is still under development after it acquired the sportsbook supplier’s source code.

EKG suggests the company’s strategy would be to combine the best of that product with the best of PointsBet, which “would not be easy or cheap,” and could bring with it “significant cash burn and opportunity cost risk.”

Overall, EKG concluded, despite the challenges it now faces, Fanatics has a strong sports betting team which carries the added benefit of having learnt from the successes and failures of its competitors in the early stages of US online sports betting.

While scaling sports betting operations in the US is undoubtedly a major challenge, the report concludes: “We think Fanatics has compelling talent, assets, and potential, and also note that the company is entering the US OSB market at a time when that market – currently characterised by homogeneous products and a softening competitive landscape – is ripe for disruption.”

State-by-state handle growth

The report also sets out online sports betting handle growth across the US on a state-by-state basis, by comparing handle from the trailing 12 months to the previous 12 months.

As long-established markets continue to mature, the above table lays out where growth has begun to slow – or in some cases, turn to negative – in various states.

New Jersey and Nevada showed the biggest comparative losses, as handle in the two states was down by 8.9% and 7.9% respectively in the trailing 12-month period, compared to the previous 12 months.

Iowa also saw a reduction in its handle year-on-year, as the amount wagered by its residents fell by 3%.

Meanwhile West Virginia, Indiana, New York, and Pennsylvania made modest single-digit gains on handle year-on-year, with betting volumes up 1.3%, 2.6%, 4.3% and 4.9%, respectively.

One outlier on the chart was Arkansas following its launch of online sports betting in April 2022. That gave the state a year-on-year increase of 868.5% in betting handle to $201.9m for the trailing 12 months, up frm just $3.3m in the previous 12 months.

Other standout performing states included Oregon, with 49.5% growth, Louisiana, up 43.8% and Wyoming, up 43.8%.

By market share, New York, Illinois, and New Jersey far outranked other states with market shares of 18.1%, 10.9% and 10.8%, respectively.

Together, the top 10 states by market share – New York, Illinois, New Jersey, Pennsylvania, Arizona, Nevada, Colorado, Virginia, Michigan and Indiana – accounted for over 80% of sports betting handle nationally.

Digital advertising activity in major US cities

Another interesting data point included in this month’s report is the development in the number of digital advertising impressions for leading sports betting brands across major US metropolitan areas.

The data shows a huge spike in Q1 2022, driven by in excess of one billion digital sports betting ad impressions in New York City alone.

The number of impressions dropped significantly to under 400m in Q2, across all 10 major cities, while Q3 showed a seasonal uptick relating to the start of the NFL season in September.

Q4 2022 was another relatively quiet period in terms of digital ad impressions, with a little over 400m, before Q1 2023 generated another major spike related to the launches of online sports betting in Ohio and Massachusetts.

There, large spikes in Boston and Cleveland can be seen as operators in those markets rushed to secure new potential customers.

Q2 2023 to date shows another relatively sedate period for online advertising, likely the result of a less packed sporting calendar combined with the absence of any new state launches.

Ad impressions across all 10 cities total around 200m for the quarter so far.

EKG said the data is a useful indicator of overall US online sports betting advertising velocity and seasonality.

Promotional spend in newly opened markets

In less mature states, the above charts demonstrate the high investment and sharp drop-off of promotional spending in newly launched sports betting markets.

Leading operators across Ohio, Maryland and Massachusetts can be seen making large investments in the first month or two of each market’s opening before promo spend drops rapidly.

For example, FanDuel and DraftKings dropped their promotion spend in Ohio by 88% and 79% respectively, between January 2023 – when the market first opened – and February.

A similar pattern is seen in both Kansas and Maryland following their launches in September and November last year, after which FanDuel, DraftKings and BetMGM all saw their promotional spending drop precipitously.

According to the charts, Kansas was the state which attracted the smallest amount of promo spending from each brand since its launch, while Ohio has garnered the most.

EKG’s monthly report provides a digest of news and data points, including forecasts, for the emerging market for regulated sports betting in the United States. Please contact managing director Chris Krafcik for more information. 

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