What are the challenges for companies looking to get into the sports betting space in the US?
Richard Thorp, business development director at FSB, talks about the barriers to entry post-PASPA repeal, and what will it take for any company to overcome these challenges and seize their moment in the land of opportunity. FSB is a sportsbook supplier for digital innovation and differentiation across web, mobile and retail.
What are the specific challenges legislatively for a sports betting startup in a US state?
Firstly, we’d have to define “startup.” If you mean a completely new venture, then I think they’d struggle to even get off the ground in any credible way, such is the post-PASPA climate and the marked propensity of legislators to afford the brick-and-mortar establishments, like existing casinos, the first shot at rolling out sportsbooks stateside.
FSB’s sportsbook platform already has a relationship, for example, with Resorts Digital Gaming for whom we created the underlying sportsbook structure to drive FastPick, an easy-access take on daily fantasy sports. This made Resorts Atlantic City the first US casino to formally offer a fantasy sports-style game.
However, this was only the beginning. Indeed, the challenge for any casino, as an inherently retail product, is to adapt this retail mindset to online. Conversely, any online startups might have to look to develop a retail presence, should state-by-state licensing decree. More crudely but no less importantly, tax rates in any given state will either open the door or slam it shut. For, just as Delaware and New Jersey can kick on for custom (casinos will pay tax of 8.5 percent of revenue from land-based bets, and 13 percent on bets placed online), Pennsylvania’s proposed taxes of up to 36 percent on gross gaming revenue could simply prove an unworkable roadblock.
Accordingly, varying state rates and their respective tax tiers will set the bar for allowing sportsbooks to become operational and competitive. Based on the understanding of our 15 to 20 percent UK model, anything above 18 percent could spell functional prohibition.
Other than tax, what barriers are there?
Elsewhere, comprehending how to cross-sell into sportsbook by exporting retail customers will sort the wheat from the chaff, alongside targeting the right kind of customer – and educating them.
Paddy Power Betfair has acquired FanDuel as its new American face, together with its huge client base. However, their assumption that casual DFS customers will effortlessly transform into loyal repeat bettors on sports betting is not a given. Especially as both FanDuel and DraftKings have struggled mightily to convert their enormous acquisitions into anything remotely resembling a profit.
With this in mind, the perennial challenges for operators to acquire and retain endure. US casinos can either choose to learn these skills over time, or recruit a proven expert from Europe with the requisite skill set.
When it comes to migrating a sophisticated casino clientele over to sports betting, FSB is well-practiced, having already launched a first electronic point of sale system for Manila’s flagship Okada Casino Resort, featuring self-service betting terminals and hand-held devices.
How best can operators seize the opportunities?
It naturally depends on the individual casino operator, their platform-provider, and the scale of their combined imaginations.
Prosaically, we could simply see tired, samey platforms rolled out across the US with only the respective skin of the operator enough to tell the difference. Alternatively, casinos can reject the cookie-cutter mould and sit down with a supplier to brand the delivery to their existing clients in a way that is truly organic to the interface experience.
This very much represents the FSB way, since we have staked our reputation on providing the most flexible back-end engine to drive any front-end requirement. This flexibility is premised on state-of-the-art tech and smart APIs that tailor the platform to the brand in frictionless fashion, instead of clumsily bolting on a token shell. The contrast is plain to see.
As we’ve witnessed when rolling out sports betting platforms across Africa (whose state-by-state variations could in many ways mirror America’s own patchwork-quilt) defining the user experience is key. Especially for an American public without a defined user experience until now – illegal Costa Rican outfits aside.
Identifying broad consumer betting patterns will also be pivotal. Small stakes and large jackpots may speak to customers in, say, Kenya, but the received wisdom is that accommodating larger stakes at shorter odds could be the way the US tide is running.
Engineering the user journey to meet the rising demands of mobile and in-play betting, as well as aggregating the industry’s best data-feeds for core US sports, will be central to any player remaining positively demarcated from the field.
Will the opportunity for new entrants depend on how the legislation is written in each state?
Of course, every opportunity will be contingent on state-by-state legislation, each potentially with its own specifics and quirks.
However, sensible trailblazers like New Jersey will doubtless prove good guinea pigs for setting the tone and coalescing consistent industry wisdom which can be exported to other states. Aforementioned issues surrounding tax tiers on turnover, revenue and business rates will help every contender stick a pin in the map for the most fertile and workable territories, but essentially the US remains a greenfield land of opportunity where everyone will have to make it up as they go along in some meaningful manner.
Other state-specific variables which need to be taken into account, though, include the political or religious persuasions which inform general attitudes towards gambling. Christian / Republican imperatives, for instance, have to be contested in the most evangelical states if sports betting is to be embraced by their mainstream communities.
