Supply Crunch Soon Could Squeeze US Sports Betting

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Sports betting squeeze

News of the repeal of PASPA was swiftly accompanied by a rush of statements and newly announced US sports betting supply deals. The wave was expected given that the industry had months to prepare ahead of the final opinion of the Supreme Court.

But should operators be wary of rushing into deals before the ink is dry on the SCOTUS decision? And does the sudden rush to get hitched hint at a supply crunch later down the road as suppliers and operators struggle to meet optimistic targets for launch?

What happened first on sports betting

Out of the gate, European sports-betting operators and suppliers appear to have deals lined up with US gaming entities destined to take advantage of the US sports betting opportunity.

To European eyes, many must think this is what a gold rush feels like. The scale of the opportunity is bigger than any other previous market opening and the figures being bandied around about potential market size are suitably impressive.

Chasing gold comes with a price

Yet, if this is a gold rush, then it comes with some severe bottlenecks.

“I think there is a very strong possibility of there being a supply crunch in the months to come,” said Neale Deeley, vice president of gaming at Sportradar.

“The likelihood is that quite a few states will be opening up within months, each with their own regulations and specific market circumstances. The clock is already ticking to get up and running and this is causing some issues.”

No matter how much preparation time operators and suppliers have had – and with most of the state-by-state opportunities being discussed right now, there has been precious little – the issue with regulated markets is that getting any operator ready for launch isn’t an easy task.

Is moving first moving best?

The rush of supply deals announced immediately after the PASPA strike-down points to the degree to which both sides of the operator/supplier equation are concerned about first-mover advantage.

“Potential online operators are certainly aware, with all of them seeking a pathway toward market share, but they may be overestimating the first-come-first-served risk,” said Michael Pollock, managing director at Spectrum Gaming.

“Market share will be determined on a state-by-state basis, and there remain questions as to the number of licenses available in each emerging state, and whether the licenses will be issued to all comers, or to existing land-based operators. With that in mind, there is no need to panic, but rather to develop an effective business model and marketing pitch.”

Sportradar announced an out-of-the-box deal with US-facing but UK-listed pools betting operator Sportech. Deeley agrees that the pressure to grab headlines perhaps doesn’t reflect the work that lies ahead.

“Everybody is understandably trumpeting their various deals right now, but in each case the real work begins in preparing operators for launch,” Deeley said. “The rush to get up and running and follow in New Jersey’s wake is only going to put more pressure on the mechanics of being market-ready.”

Green means go

One indication of where the choke points will appear came from a LinkedIn posting at the end of May from Andrew Bulloss, partner at UK-based headhunter Odgers Berndtson. The post asked for “any digital sportsbook experts with a US green card who might look at a long-term interim gig in the States.”

Bulloss said this sudden need comes more from the European side.

“For the UK and European businesses that already have a presence and partnership out there like William Hill, Sportech and the like, there is a definite rush to find good quality people ideally with sportsbook product and tech knowledge to help scale,” Bulloss said.

Supply-side questions

For the putative US operators, personnel are less of an issue but questions around supply are more prevalent.

“These businesses are talking to a multitude of suppliers, primarily UK and European-based to get access to the right tech, platforms, product and customer experience/CRM technology to enable them to compete,” Bulloss said.

The trick will be in getting the right people and the right platform working together in tandem.

“Some companies will go for the bums-on-seats approach to get first-move advantage and get something out quickly,” Bulloss said. “However, if they have the wrong people and go for a part-baked product, then their business will suffer long-term with quality issues as the market gets more and more competitive and additional operators start to go live with better products and better people.”

All warn that first-mover advantage is a loaded term.

“It’s a steep learning curve for everyone,” Deeley said. “Pushing to get over the line first can exert pressures at every part of the process and particularly when it comes to suppliers. This is where capacity can become a major issue and the European experience just hasn’t prepared people for this.”

Pressure mounts in new markets

Ed Andrewes is a consultant managing the Resorts Digital Gaming operation in New Jersey, where the pressure to get up and running is most acutely felt.

“There will undoubtedly be a ‘first-to-market’ rush in all regulating states but operators need to make sure they have partnered with suppliers who really understand the US market,” Andrewes said.

Understanding is difficult, however, when in most cases we are yet to see how the regulatory regimes across the country will look.

“I think there is an expectation in Europe that compliance is just something that happens,” said David Sargeant, another UK-based consultant with iGaming Ideas. “However, the approach that different regulators take could make market entry difficult, especially when each supplier in the value chain also needs to be certified.

“Some states already look like they have onerous reporting requirements, or extremely restrictive change control. That doesn’t exist in most European markets. State-by-state this could be an influential contributor to not only who is active but also who wins each market.”

The sense that everything is to play for in the US is palpable. News items about who will be taking the first bets in New Jersey give a hint at the political, consumer, and industry appetite for getting the ball rolling. But as with all sports, keeping an eye on the long game will be vital.

“There are a lot of people doing a lot of plate-spinning right now,” Deeley said. “A lot of factors are at work – supply, compliance, integrity issues, the works – and it will be those able to handle that complexity best that will win out. As anyone who has ever bet on the greyhounds can tell you, the first dog out of the traps isn’t necessarily always the winner.”