Profit is Still Not Part of the Picture for US Sportsbooks

by Dave Schwab - 10/25/2021

US sportsbooks not making profit yet Paul George Los Angeles Clippers

The state of New Jersey just topped the $1 billion milestone in September for sports betting volume in a single month. By the end of this year, as many as 30 different states will offer legal betting on sports in some form. Major markets such as Florida, Georgia and Massachusetts are making plans to join that list in 2022.

The entire US sports betting industry continues to expand at an accelerated pace. Billions are being spent each month betting on the games. However, the US sportsbooks taking in all that action are still losing money.

Get free sports picks for every league and nearly every matchup on Doc’s free picks page.

Part of those losses have to do with the highly competitive nature of this industry. A bigger part of those losses is tied to the marketing, advertising and promotional dollars spent driving this amazing growth.

This industry’s growth process has been compared to the early days of tech giants Netflix, Amazon and Twitter. Given the high learning curve in making these companies a household name, upfront spending eroded profitability. In time, all three of those companies found a way to become engrained into everyday life.

In states with legal US sportsbook operators, it is hard not to notice all the ads for FanDuel, DraftKings and BetMGM as the big three of the industry. Casino gaming and entertainment giants, Caesars Entertainment and Wynn Resorts have upped their spending behind their sports betting brands.

Caesars has gone all in rebranding William Hill as Caesars Sportsbook. Wynn Interactive has made a strong marketing push behind WynnBET as its mobile sportsbook app.

Going back to early September, marketing and advertising budgets at all the US sportsbook operators was ramped up ahead of the new season of college football and the NFL at the professional level.

Along with huge marketing and advertising budgets, US sportsbooks are spending a ton of money on promotional incentives to help drive new sports bettors to their online sites and mobile betting apps.

The cost of acquiring new customers is astronomical when you add in how much money is being given away in free bets, matching deposit bonuses and other introductory promotional offers.

Certain industry analysts have referred to FanDuel and DraftKings as customer acquisition platforms operating as an online sportsbook. Companies such as MGM Resorts, Caesars Entertainment and Wynn Resorts have a built-in edge due to a large database of customers tied into their casino rewards programs.

The pot of gold at the end of this rainbow is industry potential. Those same industry analysts point to the growth estimates for the US sports betting industry. Projected revenue for the books this year is set at $3.8 billion. This could expand to $11.3 billion by the end of 2025.

However, as the industry continues to expand at this high rate, consolidation among the main players is likely to take place. At some point, US sportsbook operators are going to have to turn a profit. Especially for public companies that still need to answer to their shareholders.

When the smoke clears over the next four to five years, there is likely to be three or four players dominating the playing field. Combined, FanDuel, DraftKings and BetMGM currently control more than 80% of the market in terms of share.

For now, the battle for additional market share will continue at a price. There are still around 20 states that do not offer legal sports betting. Texas and California are part of that group. Those two markets alone would become major battle fields given the overall betting volume they could potentially generate.

Start:	November 23, 2024 @ 2:30 PM
Expert:	Tony George
Free $60 Account Sign Up

Profit is Still Not Part of the Picture for US Sportsbooks

Most Recent Sports Handicapping