The Reality of the Current Market and How it Affects the Sports Betting Industry
In the increasingly competitive US sports betting market, many operators are meeting challenges competing with four large operators controlling most of the market across the US. As a result, global Sports Betting company 888 Holdings recently admitted to facing challenges in remaining profitable in the sports betting market, leading the company to make the difficult decision to shift its focus.
The sports betting industry has been leveling off across the country. 888 is hardly the only company shifting its focus from sports betting to online casinos and iGaming. This competitive market has left many other operators to exit the industry altogether.
Recently, UniBet withdrew its operations from Iowa, followed by FuboTV, which also decided to shut down operations. MaximBet has been the most recent to terminate its operations in sports betting. These smaller operations, unfortunately, could not afford to continue. To cut costs and ensure future profitability for their businesses, these companies were led to back out entirely from the sports betting market.
Results of the William Hill Purchase
In 2021, SI Sportsbook decided to borrow a significant amount of money to purchase William Hill International from Caesars. This created a looming $1.9 billion in debt that was prohibiting future growth for the company. As of last month, the company reported a 13% decrease in third-quarter earnings. This unfortunate perfect storm resulted in SI Sportsbooks withdrawing their presence from the sports betting industry in those states, leading them to shift their focus to states where their casino and iGaming services are also planning to be offered.
“The ultimate structure of the William Hill acquisition has left the Group more exposed to changes in interest rates (36% of gross debt is fixed and 64% has floating rates), which has, in turn, impacted its ability to reinvest excess cash flow in accelerating growth in the short term,” 888 said in a press release. “In the coming weeks and months, the Group may look to access debt capital markets, using proceeds to repay up to £347m (equivalent) of bank loans which were drawn to redeem the William Hill 2026 Notes.”
Despite the aftermath that the William Hill purchase left the company in, 888 CEO Itai Pazner claims he does not regret the decision to purchase the sports betting company. He directed his concern for the state of the company toward the current economic environment in the US. He claims the current economy created circumstances outside of the company’s control.
What This Means For The Future
“Our original plan here was to build a nationwide sports bet operation in 12-15 states. It’s become clear to us that the intense competition in sports betting and the dominance of the top four brands, means it will be very difficult to deliver positive returns without evolving our plan.” Chief Strategy Officer Vaughn Lewis (The top four brands he is referring to are: DraftKings Sportsbook, FanDuel Sportsbook, Caesars Sportsbook, and BetMGM Sportsbook)
Their new evolved plan moving forward primarily focuses on iGaming and online casinos. Lewis refers to this plan as “Betting 2.0.”
Unfortunately, shifting your foothold in the current market is unrealistic for many operators. Many smaller operations have been forced to withdraw entirely. The fact that SI Sportsbook has the opportunity to shift its focus and market to different audiences is, in and of itself, a hopeful progression for the company amongst the sad reality of many.
Numerous operators have accredited harsh competition, economic conditions, and profitability as the primary reason for the downfalls of their companies.
An Optimistic Future
Despite these volatile conditions that exist today, some industry experts remain hopeful for the future. The American Gaming Association (AGA) recently noted in their industry Outlook in October that they are anticipating future conditions to be better.
888 CEO Itai Pazner holds a similar outlook – at its Capital Markets Day, he said, “our long-term potential remains exciting. Building our unified tech platform will present us with real future growth opportunities as we take advantage of our world-class brands, product and content leadership, and customer excellence to set our business for the next decade of growth.”
Mac Daniel is a Michigan native and freelance writer for PlayOnlineCasino and PlayOnlineSportsBetting. He has experience writing about a wide variety of topics, including healthcare, tourism, non-profit organizations, and most recently casino and sportsbetting news. To check out more of his work, visit: playonlinemichigan.com