Impacts of Consolidation in the Sports Betting Industry
Author:
Zach
Published:
Sep 19, 2024
,
02:34 p.m.
ET
In recent years, the sports betting industry has experienced significant shifts, particularly in the U.S. market. Leading operators like FanDuel and DraftKings have solidified their dominant positions, while some smaller sportsbooks have exited the market or shuttered entirely. The arrival of new players like ESPN BET and Fanatics Sportsbook signals further competition, but many mid-tier operators are finding it challenging to compete. This shift highlights the recent consolidation of the industry, with market leaders increasing their hold while smaller competitors struggle to stay afloat.
The allure of market entry was strong in the early days of U.S. sports betting legalization, but as the competition has increased, customer acquisition budgets have tightened and profitability has become harder to maintain, several operators have chosen to exit.
Let’s explore the impacts of the U.S. sports betting industry, with a focus on consumers and operator-dependent businesses.
Sportsbook Consolidation News: Operator Exits, Closures
States like Colorado, Arizona and Massachusetts have seen multiple sportsbook closures, reducing the number of choices available to bettors and increasing the influence of the remaining large players.
Colorado
Colorado, once home to the largest number of regulated online sportsbooks, has seen a dramatic reduction in operators. Heading into the 2022 NFL season, Colorado had 26 regulated online sportsbooks, including familiar names like FOX Bet, MaximBet and PointsBet. However, heading into the 2024 season, the state is down to just 13, as many operators have chosen to leave the market. Notable exits also include Betway, SuperBook and TwinSpires.
Credit: Ryan Butler - @ButlerBets
Arizona
Arizona has also experienced a similar decline. While the state’s 2021 sports betting law allowed for up to 20 mobile sportsbooks, operators like Unibet, Betway and SaharaBets have exited the market, leaving Arizona with only 14 active online operators.
Massachusetts
Young market Massachusetts has already seen departures as well, with WynnBet and Betr pulling out, reducing competition in a state that had initially attracted significant sportsbook interest.
These closures highlight the increasing difficulty for smaller operators to compete in an industry dominated by a few key players. The high cost of maintaining operations and acquiring customers, plus low margins and stiff competition from giants like FanDuel and DraftKings, has led many to shut down rather than continue fighting for market share.
What does fewer sportsbooks mean for bettors?
The consolidation of the sports betting industry has direct implications for bettors. One of the most immediate effects is the reduction in competition, which often leads to less attractive promotions and fewer incentives for new customers. With fewer sportsbooks vying for attention, operators are under less pressure to offer generous sign-up bonuses, bonus bets or deposit matches.
With fewer competitors, sportsbooks have less of a need to offer competitive odds to lure and retain customers. For example, while sportsbooks might typically offer -110 odds on both sides of a bet, they might now offer -115 or -120 odds, increasing their "hold" or profit margin. Over time, these small differences add up, making it more expensive for bettors and reducing their already-low chances of potential profitability.
For savvy bettors who are used to “line shopping” – comparing odds across multiple sportsbooks to find the best option – this consolidation makes it harder to find value. With fewer operators to choose from, bettors may have to accept less favorable odds or spend more time searching for competitive lines. This shift underscores the importance of price sensitivity in sports betting.
Price Sensitivity: Critical practice, but often overlooked
One of the key factors in long-term betting success (or at least losing less) is price sensitivity, which involves looking around for the best odds. However, many bettors overlook this crucial practice, focusing instead on the convenience of placing a bet with their preferred sportsbook. While betting at -114 odds may seem insignificant compared to the standard -110, these small differences can have a significant impact over time, especially for frequent bettors.
For example, a bettor wagering $100 at -110 odds would need to risk $110 to win $100. At -120 odds, the same bettor would need to risk $120 to win the same $100. Over the course of many bets, the extra cost of betting at less favorable odds can significantly reduce a bettor’s profitability. This makes price sensitivity and line shopping critical aspects of smart betting, as it encourages bettors to maximize their returns by finding the best available odds.
Bettors should take the time to use odds comparison tools, like those offered by OddsJam, or manually check multiple sportsbooks to ensure they are getting the best value for their wagers. While this may require extra effort, the long-term benefits of betting smartly far outweigh the convenience of sticking with a single operator.
Affiliates Impacted: Companies dependent on sportsbooks for revenue by referring customers
As sportsbooks consolidate and exit the market, affiliates – companies that generate revenue by referring customers to sportsbooks – are also feeling the impact. Affiliate marketing has long been a key driver of customer acquisition for sportsbooks, with affiliates earning commissions or cost-per-acquisition (CPA) fees for each referred customer. However, as the number of sportsbooks decreases, so too does the need for operators to compete for new customers by offering high CPA rates.
Some sportsbooks, like BetRivers, have gone as far as shutting down their affiliate programs altogether. Others have reduced the CPA fees they offer affiliates, reflecting the decreased competition for new customers. With fewer sportsbooks in the market, there’s less need for operators to pay top dollar to affiliates to drive traffic and new users to their platforms.
This shift has left many affiliates scrambling to adapt. While larger affiliate companies with diversified revenue streams may be able to weather the storm, smaller affiliates that rely heavily on a few key partnerships may find it increasingly difficult to generate revenue in a consolidating market.
Legal views of sports betting affiliates
The legal landscape surrounding sports betting affiliates is also evolving, particularly in states like Massachusetts and New York. These states have implemented stricter regulations on affiliate marketing, making it more challenging for affiliates to operate. In Massachusetts, for example, sports betting affiliates must adhere to strict advertising guidelines, and the state’s Gaming Commission has imposed rules aimed at curbing irresponsible marketing practices.
New York has also taken a cautious approach to affiliate marketing, with regulators keeping a close eye on how affiliates promote sports betting to ensure compliance with state laws. These legal hurdles add an extra layer of complexity for affiliates, who must navigate a shifting regulatory environment while trying to maintain their revenue streams in an increasingly consolidated market.
As the sports betting industry continues to evolve, affiliates will need to adapt to these legal changes and sportsbook consolidation by finding new ways to generate revenue. This could mean diversifying their offerings, adding paid subscription offerings, focusing on other verticals, or exploring new partnerships. Regardless of the approach, the consolidation of the industry and the tightening of regulations present significant challenges for sports betting affiliates moving forward.
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