Monopoly money: How Florida can turbocharge Hard Rock Digital's US sports betting plans

Early in October, an analyst note penned by Jordan Bender from JMP Securities made its way onto social media. The New York-based analyst had crunched the numbers and boldly claimed that a Hard Rock Digital (HRD) monopoly in Florida could result in up to $700m in lost revenue as the market fully matures. 

The note estimated total addressable market (TAM) in the state could land between $1.3bn and $1.5bn should HRD hold its monopoly, or $2bn should the market be opened to competition. The analysis added some interesting color to the situation in Florida, which had then become wedged in the quagmire of political and legal complexity.

However, earlier this month, the US Supreme Court weighed in to partially clear the swamp and effectively guarantee Hard Rock, which is operated by the Seminole Tribe, a monopoly in Florida. As a brief summary, the Seminole Tribe had been challenged by Florida-based pari-mutuel operators West Flagler Associates and Bonita Fort Myers Corporation on a controversial 30-year tribal compact with the Florida state government, which was signed in May 2021 and effectively allowed for an online sports betting monopoly.

Those challenges had seen HRD’s online offering shuttered, but now, thanks to Chief Justice John Roberts, the way has seemingly been cleared for the Seminole Tribe to push ahead. In fact, the tribe proceeded with the relaunch of online sports betting on November 7, with plans to expand to retail sports betting in December.

The expedited relaunch plans drew the expected ire of West Flagler, with the operator filing a motion with the Florida Supreme Court to suspend HRD’s online sports betting operations, claiming the move was a “fait accompli” with legal doubts still abound. West Flagler has claimed that Floridians will be “irreparably harmed” in the interim period between the relaunch and a final legal decision, while millions of dollars in bets could be voided should the Seminole Tribe’s compact be ruled illegitimate.

That petition was later denied by the Florida Supreme Court, which is still in the process of considering the request by West Flagler for a review of the constitutionality of the Seminole compact. At the same time, the Florida drama rumbles on, the spectre of a potential petition for a review by the US Supreme Court continues to loom large, with West Flagler most recently requesting more time to prepare its petition, kicking the case into 2024.

Ultimately, legal battles will continue to rage. Former Florida senator and practising attorney in Fort Lauderdale Steve Geller tells EGR the Supreme Court is a difficult body to deal with, let alone get the result one desires. He says: “People seem to think you can appeal to the Supreme Court. You don’t get to appeal to the Supreme Court in most cases. You get to appeal to the Supreme Court if the Supreme Court or Circuit Court of Appeals says there’s a conflict of interest.

“The Supreme Court can’t have the federal law in Florida determined to be different than federal law in Oklahoma. If it’s federal, it’s a federal law and it has to be interpreted the same way,” he adds.

Monopoly money      

As the Seminole Tribe and Florida Governor and Republican Presidential candidate hopeful Ron DeSantis championed the Supreme Court’s decision, the reality of a monopoly model now comes to the fore. In his analyst note, Bender drew comparisons to the likes of Oregon, through which DraftKings is effectively the sole operator due to its partnership with the Oregon Lottery, as a potential handicap for Florida.

This is something Alun Bowden, senior consultant at boutique analyst firm Eilers & Krejcik Gaming (EKG), refutes. Asked if Bender’s comparison was viable, he replies: “Quite frankly, no. It’s a very different scenario and is a bit of an apples to oranges comparison.” With Florida’s population topping 21 million, compared to Oregan’s four million and Rhode Island’s little more than one million (another state Bender pointed to as “underperforming” due to minimal competition), Florida should ultimately be a different beast.

And that beast could be somewhat satiated. HRD counts some serious industry talent in its top team in the shape of former The Stars Group EVP Marlon Goldstein as CEO, and executive MD and fellow Stars alumni and ex-Fox Bet head Matt Primeaux as president and executive MD. Add in a sprinkling of European talent in the shape of political betting guru Matthew Shaddick and ex-Entain head Stewart Gee, and you have the brains to build. There is also the strategic partnership with Playtech, penned in March, which saw the London-listed firm take a 5% stake in the business for $85m, which has also bolstered its offering.

Bowden continues: “The current Hard Rock Bet is a competitive product and not too far off the top-tier operators and it’s run by experienced smart operators that understand market dynamics and what customers want.”

However, as with any monopoly, a restriction on choice can lead to malaise. Chris Grove, co-founding partner of Acies Investments, notes that while Florida will be a “massive market by any measure”, a lack of competition for HRD could ultimately become a thorn in its side. He explains: “The absence of competition intuitively suggests a smaller overall market than we would see otherwise. While the Hard Rock brand is certainly a juggernaut in Florida, no brand is elastic enough to appeal to all consumers. And a market without competition may decrease overall ad outlays, promotions, and other spending that typically stimulates consumer demand.”

Sunshine springboard

While there may be some apathy from Floridians should the HRD monopoly ensue, for the operator a lack of competition could also add some rocket fuel to its other US ventures.

The brand is currently live in Arizona, Indiana, New Jersey, Ohio, Tennessee, and Virginia, with the firm launching its proprietary Hard Rock Bet platform in New Jersey in August which aims to integrate igaming, sports betting, and rewards into “one easy-to-use, frictionless experience”.

Additionally, innovations such as Flex Parlay, which was announced in July, allows customers to choose a minimum number of bets for a parlay to win, eg two out of three, have piqued interest among industry heads.

While there is a long way to go before challenging the duopoly of FanDuel and DraftKings at the top of the pyramid, coupled with strong market entrants in the shape of Fanatics and ESPN Bet, HRD finds itself in a positive position. Those revenue dollars from Florida could feasibly be redeployed elsewhere, especially when considering the impact a monopoly has on marketing and the subsequent reduction in spend.

Grove comments: “A Florida monopoly would provide rocket fuel for Hard Rock regardless of whether the market is operating at 70%, 80%, or 110% of the state’s theoretical potential.”

For Bowden, HRD is on the radar, but any further growth could well be caveated on the monopoly factor. He explains: “We definitely have them as one to watch. An increasingly strong product, good leadership, and they are attempting to do something a bit different in the market. That said, you struggle to see them getting more than single-digit market share without the boost that Florida would provide.”

Hard Rock International chair Jim Allen said being able to relaunch in the state would turn Florida into one of the “world’s greatest gaming destinations” after the Supreme Court’s decision. Those tax dollars will be welcomed, as will the 1,000 extra jobs planned, but for HRD, the real story may lie beyond the borders of the Sunshine State.