Phase one of US sports betting is over without ESPN deeply involved.
Earnings calls no longer focus on growth-at-all-costs and market share. Instead, execs talk of cutting marketing spend and the path to profitability.
In other words, the initial land grab is subsiding. But what does that mean for those who never participated in it?
Industry investor David VanEgmond asked on social media.”Has ESPN missed the party?” Indeed, ESPN did not cash in massively as a media outlet or as an operator.
The company may have inked advertising deals with DraftKings and Caesars Sportsbook but it did not secure the “big exclusive ad deal” like NBC or CBS, VanEgmond said.
The company did try. It was looking for “at least $3 billion over several years” to license the ESPN brand to a sportsbook partner, according to a WSJ report last year.
ESPN missed the boat?
Partners balked at that price tag. And now market leaders have established their brand and share.
As VanEgmond put it:
“FanDuel, DraftKings, BetMGM and Caesars own ~80% national market share and don’t need to do a deal with ESPN at all costs for brand awareness. Plus DKNG and CZR did small deals with ESPN already. Why break the bank now?
“It feels like the big payday was missed even if the market is still early days,” VanEgmond added.
Parent company Disney held its Q2 earnings call on Wednesday, and for the first time in several quarters there was no talk of sports betting.
One door closes, another opens for ESPN
The marketing opportunity is perhaps gone, given now-falling ad spend from the industry. But that closing door opens up another, specifically the chance to run a sportsbook under the ESPN brand.
ESPN has said multiple times it is willing to go down that road, as long as it has a partner with industry expertise. From that perspective, ESPN might have benefited from waiting rather than missing out.
US sports betting 2.0
For one, the competitive environment is now much less intense. Some operators have dropped out of the sector entirely. WynnBet and Caesars cut marketing dramatically, while other companies are turning their focus to profitability rather than growth at all costs.
“This is an opportunity,” said industry consultant Alun Bowden. “The space is less crowded. People made mistakes but you don’t have to repeat their mistakes.”
The only constant is change
It is also shortsighted to assume the US sports betting market is settled in perpetuity with FanDuel and DraftKings atop the pile.
As Bowden put it in his recent newsletter:
“The way things are is just the way things are. It is no more a guide to the future than the run out of red and black on the roulette table. “
Staying on top is hard
The growth of BetMGM over the last year is just one example of how quickly things can change. Further afield, Sky Bet rose to prominence in the UK well after the market matured.
“Sky Bet didn’t really become a serious player until something like 2010,” said FanDuel founder Nigel Eccles. “And ESPN is much more dominant than Sky Sports was in the UK.”
The Sky Bet model
The comparison is helpful because ESPN has many of the attributes that made Sky Bet a success, starting with a massive customer acquisition funnel via TV and digital assets.
“An ESPN Super 6-style game would be very successful, I’m sure,” Bowden said.
Some 5.5 million people have played the free-to-play game at Fox Sports for instance.
Perhaps the bigger question then is ESPN’s partner. Who is going to bring the technology and operational expertise to pair with the ESPN brand and customer base?
Bet365 is one tantalizing option, given the quality of the product and relative lack of brand awareness in the US.
“That’s the only one that makes sense to me,” Eccles said. “They would need to figure out market access but I suspect that gets easier as a lot of the tier-two operators start to bail sooner or later.”
Other options for ESPN
PointsBet is another interesting potential technology partner, with the company’s betting app ranking third in Eilers & Krecjick’s recent app review, behind only FanDuel and DraftKings.
Alternatively, Bowden suggests one of the current market leaders could opt for a dual-brand strategy with ‘ESPNBet’ alongside BetMGM, for example.
A matter of time?
The exact details remain to be seen, but the opportunity is clear. ESPN is still evaluating various options in the space, LSR understands.
As for missing the boat? Well, as Bowden put it: “The boat has barely left the dock.”