Here’s a trio of numbers for you:
Q3 2020 75.2 percent
Q3 2021 87.9 percent
Q3 2022 92.4 percent
The growing huge percentages represent the market share of FanDuel and DraftKings, the number one and two sportsbooks, and BetMGM, Caesars and Barstool, the next three.
Doesn’t leave much for the other guys. 7.6 percent to be exact.
FanDuel has 40 percent all to itself, while Caesars and Barstool have 4 percent each.
Is there room for anyone else?
For starters, it would help to figure out if the online sportsbook industry is different from other industries. Is the market concentration normal or not?
The U.S. sports betting industry has a “Herfindahl-Hirschman Index” of 0.35 percent when 0.25 percent is considered really concentrated.
“BetMGM is quite far ahead, and Caesars and PENN/Barstool are next in line. They don’t need the market share online like DraftKings and FanDuel, and online doesn’t have to be as fruitful as a result,” Ryan Sigdahl, a partner and senior research analyst at Craig-Hallum Capital Group, told Sports Handle.
That’s because they have retail casinos which are still the main source of their income.
“Beyond these five, though, it gets really challenging,” Sigdahl added.
But Brendan Bussmann, the managing partner at B Global, thinks there is life in the lower-tier companies.
“There has always been an ebb and flow in the gaming industry, and I would be surprised if you do not have the same thing occur over time with some additional [mergers and acquisitions] activity while also having other disruptors come into the marketplace because of a better product or a technology advance,” he told Sports Handle.
Bussmann points specifically to smaller operators with their own brick-and-mortar properties.
“Those with land-based ties still will be able to make a regional impact even if they are not part of the big five,” he said. “This will mirror what we see in the gaming space today.
Then there’s Fanatics Sportsbook, which hopes to debut this year, with its huge database of retail customers to solicit.
Bussmann is keeping an equally open mind.
“They have a significant sports-focused database of customers,” Bussmann said. “The question is how much do they know about those customers, converting them over either as new market entrants or from another operator? They have perfected the sports side of the holy grail with merchandise and experience. Let’s see what they can do within the sports betting sector.”
Sigdahl, however, is not so sure. It all depends on their product when the time comes.
“Fanatics, everyone is thinking about it,” he told Sports Handle. “And what we’ve seen at Caesars, at PENN, these companies that have big aspirations and unique go-to-market strategies, they can’t win without product. So we’ll see what they come to market with.
“I think they’ll be successful, their ability… to cross-promote, but I don’t think they’re as competitively disruptive as many are perceiving them to be,” Sigdahl said. “They’ll make a business out of it, but I don’t think they’ll elevate themselves into the upper echelon. In fact, I think Caesars, Barstool, and BetMGM have a better database for online gambling.”
