- As the market for online sports betting and casino gaming grows, so does the revenue for sports betting companies like DraftKings.
- On Thursday, the daily fantasy sports company reported third-quarter revenue jumped 57% to $790 million.
- However, with The Walt Disney Company set to enter the market with the launch of ESPN Bet on November 14, the race to dominate market share is heating up.
DraftKings, a fantasy sports website
The growth of online sports betting and casino gaming in the US has led to a sharp rise in revenue for sports betting companies, but the already crowded race for consumer dollars is about to get more competitive.
DraftKings, which reported quarterly results that beat Wall Street estimates on Thursday, has emerged as the biggest player in a space where several companies are fighting for market share.
The gaming company said its revenue jumped 57% to $790 million in the third quarter ended Sept. 30 as it expands into new jurisdictions, expands its customer base and keeps existing customers spending on its platform. Its success, which sent its shares up more than 16% on Friday, came not only from sports betting but also from online versions of casino games.
It was a winning plan that others in the fast-growing industry followed suit. But a space that already boasts names like FanDuel, Caesars, MGM and Fanatics is about to get more crowded on Nov. 14 when The Walt Disney Company plans to launch ESPN BET in 17 states.
Total online sports betting revenue is projected to reach $7.6 billion by the end of 2023 in the US, largely driven by its introduction in more states over the past year, according to data from research firm Statista. Revenue is expected to grow 17.3% annually to reach a projected market volume of $14.4 billion by 2027.
The sports betting market began to take shape following a 2018 Supreme Court ruling that cleared the way for states to set their own laws on the matter. Today, online sports betting is legal in more than half of the United States
Meanwhile, despite being legal in only six states, online gaming market revenue is expected to reach $19.1 billion in 2023, according to Statista. Games are online betting on traditional casino games, such as blackjack, poker or slot machines. Online gaming revenue is expected to grow 12.9% annually and reach $31.1 billion by 2027.
DraftKings emerged from the pool as the clear leader in the sports betting and online gaming space. Wall Street is happy with what it’s seen from the company, as shares have soared nearly 200% this year.
Last month, DraftKings overtook sportsbook rival FanDuel for the first time in market share to become the U.S. leader in online sports betting and casino gaming, according to market research firm Eilers & Krejcik Gaming.
DraftKings accounted for about 31% of online sports betting and casino gaming revenue in the third quarter through Aug. 23, while FanDuel’s market share fell to 30%, according to Eilers & Krejcik.
“We’re winning,” DraftKings CEO Jason Robbins said on a conference call with analysts on Friday.
He added that the company plans to move into new markets in the coming months with launches in Maine and North Carolina, pending regulatory approval. The company has currently launched mobile sports betting in 22 states and iGaming in five states.
As more states legalize sports betting and online gaming, companies only have more potential dollars to make. But that doesn’t mean multiple competitors can thrive in the space over the long term.
“The market is not big enough to support more than maybe two or at most three platforms,” TD Cowen analyst Lance Vitanza said.
Vitanza said Wall Street has been putting pressure on sports betting companies to increase profits. Companies rely too much on marketing and promotional activity to expand their customer bases as they strive for dominant market share, he said.
“They’re all hoping that if they can capture enough market share, they’ll get to a point where everyone else stops and they can become less promotional,” Vitanza said.
Robbins told investors Friday that DraftKings is prepared for increased competition and plans to scale back promotions in 2024.
Chris Krejcik, CEO of Eilers & Krejcik, said it remains to be seen whether DraftKings can maintain its lead.
“At the end of the day, FanDuel remains a laggard, and the competitive environment — through the upcoming introduction of ESPN Bet and the growth of Fanatics — is about to get much tougher,” he said.