The month in US sports betting: Gains in Iowa and movement in Texas

Eilers & Krejcik Gaming considers a possible acquisition opportunity for DraftKings and tracks post-IPR growth in Iowa

So far, very little is known about New York Governor Andrew Cuomo’s newfound interest in and plans for online sports betting expansion.Below, however, we provide a few key takeaways about what we know so far – and what we don’t:

Cuomo’s endgame remains an open question: In recent conversations with channel checks, Governor Cuomo has re- peatedly been described as a Machiavel- lian political operator. And his penchant for playing three-dimensional political chess raises an interesting threshold question: Can we take Cuomo’s open- ing move – which appears to be a New Hampshire-style policy model with an online sports betting agent(s) sharing around half of their revenue with the state of New York – at face value? Or is Cuomo playing a different political game altogether – a game within a game?
The path to market access runs through four casinos: Cuomo’s recent PR and budget bill, while scant on detail, have been clear-ish on one point, at least. The four upstate commercial casinos and their skin partners would appear to be the only entities eligible to partic- ipate in Cuomo’s proposed RFP process for online sports betting. That’s good news of a sort for the shortlist of casinos and their skin partners, which includes DraftKings, FanDuel, Rush Street Inter- active, bet365, and PointsBet. That’s not so good news for just about every other online sports betting brand with top-tier US ambitions.
Leagues, teams, and stadia a possible X Factor: New York is home to politically influential sports interests, ranging from the NFL to Madison Square Garden. We believe that these interests will be carefully considering the economics of Cuomo’s proposed online sports bet- ting framework versus the economics of pending legislation that would allow up to 14 online sports betting brands to operate in New York. And we wonder whether the loss of advertising and spon- sorship revenue that would likely occur under a very narrow version of Cuomo’s proposal will compel these sports interests to lobby instead for the legislature’s 14-brand plan.

DraftKings looking to Score in Canada?Rumor has it that DraftKings is mulling whether to acquire hybrid media-betting operator theScore, an operator about which for-sale rumors have been swirling since last year. DraftKings is evidently considering the move as a way to better position itself ahead of potential sports betting expansion in Canada, generally, and in that country’s most populous province – Ontario – specifically.Per media reports and channel checks, Canada is seemingly on track to legalize single-game sports betting in 2021 (the market is currently limited to parlay bet- ting). And so theScore – which is Ontario-based and, per ComScore data, is significantly outperforming rival Canadian sports media properties in terms of app downloads – appears well positioned to fetch a premium.Is Texas about to mess with online sports betting?In populous Texas, we hear some big names are lining up behind draft legislation that would legalize online sports betting. Here’s what we know:

Online sports betting has some weighty backers in Austin: Those apparently include the Dallas Cowboys, Dallas Mavericks, and Houston Rockets. They also include DraftKings, FanDuel, and Penn National.
Those backers are coordinating on draft legislation: That legislation, a copy of which we obtained, would allow horse tracks, greyhound tracks, and sports teams to operate online sports betting via a single skin, among other things. We estimate that there would be a total of 16 available skins.
Passing legislation will be tough: Texas Governor Greg Abbott opposes gambling expansion. Legislative approval thresholds are high. Las Vegas Sands is lobbying for land-based casino authorization, an effort that could deprive online sports betting of political oxygen. The list of obstacles goes on.
We’re currently lean-negative on Texas: However, the names backing the online sports betting draft legislation have us wondering whether the Lone Star State could be a potentially major source of upside surprise in 2021.

What’s next for Simplebet?We understand New York-based bet- ting startup Simplebet has been pound- ing the streets in recent weeks, looking to parlay its recent product momentum into a new funding round or even a full buyout of the company.Its pitch is based on the success of Play Action, its free-to-play micro-prediction game integrated with FanDuel. CEO Chris Bevilacqua told Yahoo Finance the game had users “betting” 78 times on average for a Sunday slate of NFL games on things like “Will this drive result in a TD?”.There may be some challenges pivoting that level of betting to real money, but it’s an interesting starting point in a sector where in-play product will be a key battleground. We understand the company has spoken to both B2B and B2C potential partners.As IPR ends in Iowa, player acquisition going good gunsA new year means a new start for Iowa’s online sports betting market, with the state’s in-person registration (IPR) requirement for online sports betting having expired on January 1.On the back of that expiration, and amid the busy sports calendar (the NFL and NBA are currently active, and the NHL is scheduled to start at the end of January), we expect to see online operators ramp up their advertising and pro- motional spending. The early word from our checks in Iowa is that player acquisition and CPAs since January 1 are trending very positively.Significantly, meanwhile, Iowa will offer some valuable insight regarding how well DraftKings and FanDuel per- form without access to historical DFS player databases (DFS was long prohibited in Iowa, and the DraftKings-FanDuel tandem only recently launched their product there). Will we see the two – whose combined share is currently trending around 38%, or well below their combined share in other markets like New Jersey and Indiana – begin to ramp up and displace cur- rent market leader William Hill (which is trending around 49% share)?Eilers & Krejcik Gaming LLC is an independent research and consulting firm with branches located in Orange County, California, and Las Vegas, Nevada.The firm’s focus is on product, market, as well as policy analysis related to the global regulated gambling market. Clients include operators, suppliers, private equity and venture capital firms, institutional investors, as well as state governments.To learn more about the firm, visit http:// www.ekgamingllc.com

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The month in US sports betting: Gains in Iowa and movement in Texas

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