Big Debate: With Eilers & Krejcik Gaming estimating DraftKings was the US online gambling GGR leader in Q3, is a long-term shakeup of power on the cards? 

Yes

Lloyd Danzig, Managing partner of Sharp Alpha Advisors

It’s not so much that a long-term shake-up is inherently baked into the cards, it’s that the distribution of market share was never etched in stone in the first place – a point Amy Howe and Jason Robins have made repeated reference to. The majority of consolidation has occurred organically through reallocation of wallet share and smaller operators closing down operations. Relatively little market consolidation has come from M&A, though that doesn’t mean this trend will continue. M&A in online real-money gaming is driven by a combination of three motivations: access to markets, customers and technology.     

A turbulent economic backdrop, coupled with the ascent of ESPN Bet, Fanatics and bet365, may or may not provide a catalyst toward further market share redistribution. MGM and Caesars maintain largely unconverted legacy userbases that some industry stakeholders think will ultimately provide a significant GGR boost once properly activated. With some of the most populous US states yet to legalise online sports betting, significant market share may be up for grabs when places like Texas and California go online. DraftKings and FanDuel will certainly be hard at work protecting the share of wallet and mind they have earned.

Macroeconomic factors will also play a role in market share trends. Economic turbulence acts as a filter, challenging companies to adapt and evolve. Those that can respond effectively to the changing environment are poised to gain market share, while those that cannot may see their positions erode. Companies with fortified balance sheets, fiscal discipline, adaptive management teams and strong reputations tend to be well positioned to exhibit anti-fragility during periods of consumer recession and tight capital markets. Rising costs of capital and minimised exit opportunities can result in disproportionate challenges for the smallest operators.

In any case, the market still favours economies of scale and points toward relatively few major operators in its long-term state of equilibrium.

No

Callum Broxton, Head of US operations of Checkd Group

DraftKings is certainly doing interesting things. It has made smart partnerships with big players in new media spaces and seems the most likely of the major operators to expand into exciting new verticals.          

However, for me, product is still the single most important factor in the battle for the top spot, and FanDuel remains streets ahead of the competition. On top of that it is the most visible operator across traditional and new media formats with its own TV network, high-profile content partnerships and dominance on social media communities – thanks to its unbelievably shareable bet slips.

That said, FanDuel’s sportsbook product is as good as, if not better than, most European operators, and that does lead me to question where they can go with it next. By no means am I saying FanDuel’s product can’t be improved or that new innovations aren’t around the corner, but it does already have the best same-game parlay product, top-drawer free-to-play offering, the most of markets both pre-match and in-play, as well as the overall top user experience and user interface.

As the low-hanging fruit dwindles, I can see a world where DraftKings, bet365 and possibly a couple of others may start catching up faster than FanDuel can bring out more market-changing developments like the operator has done in the past.

For me, the next big opportunity for these two companies to expand into and dominate is pick’em-style DFS. It’s where the next generation of sports bettors are and it’s still young in relative terms, so the ceiling for innovation remains high.

It will be very interesting to see whether they onboard an existing operation or set up shop on their own. The simple more/less nature of the product also lends itself far more to the mass-market appeal compared to online sports betting, which is comparatively overwhelming with the sheer volume of markets available.

As a result, there’s hardly any barrier to entry, lower acquisition costs and a stickier product.