DraftKings, a fantasy sports website
The growth of online sports betting and casino gaming across the U.S. has led to soaring revenue for sportsbook companies, but an already crowded race for consumers’ dollars is about to get more competitive.
DraftKings, which reported quarterly results that beat Wall Street’s estimates on Thursday, has emerged as the biggest player in a space where several companies are jockeying for market share.
The gaming company said its revenue jumped 57% to $790 million for its third quarter ending Sept. 30 as it expands into new jurisdictions, broadens its customer base and keeps existing customers spending on its platform. Its success, which sent shares more than 16% higher Friday, came not only from sports betting, but also from online versions of casino games.
It’s been a winning plan that others in the fast-growing industry have followed. But a space that already boasts names like FanDuel, Caesars, MGM and Fanatics is about to get more crowded on Nov. 14, when The Walt Disney Company plans to launch ESPN BET in 17 states.
Overall revenue from online sports betting is projected to reach $7.6 billion by the end of 2023 in the U.S., largely driven by its introduction in more states over the past year, according to data from research firm Statista. Revenue is expected to grow yearly by 17.3% to reach a projected market volume of $14.4 billion by 2027.
The market for sports betting began to take shape after a 2018 Supreme Court ruling cleared the way for states to determine their own laws on the matter. Today, online sports betting is legal in more than half of the U.S.
Meanwhile, despite being legal in just six states, revenue in the online gaming market is projected to reach $19.1 billion in 2023, according to Statista data. The games are online wagering on traditional casino games, such as blackjack, poker, or slot machines. Revenue for online gaming is projected to grow 12.9% yearly and hit $31.1 billion by 2027.
DraftKings has emerged from the pool as a clear leader in the sports betting and online gaming space. Wall Street has enjoyed what it has seen from the company, as shares have spiked nearly 200% this year.
Last month, DraftKings overtook rival sportsbook FanDuel for the first time in market share to become the leader in the U.S. across online sports betting and casino gaming, according to market research firm Eilers & Krejcik Gaming.
DraftKings accounted for about 31% of online sports betting and casino gaming revenue in the third quarter through Aug. 23, while FanDuel’s market share fell to 30%, according to Eilers & Krejcik.
“We are winning,” DraftKings CEO Jason Robins said in a conference call with analysts Friday.
He added that the company plans to move into new markets in the coming months with launches in Maine and North Carolina, pending regulatory approval. Currently, the company has launched mobile sports betting in 22 states and iGaming in five states.
As more states legalize sports betting and online gaming, companies only have more potential dollars to win. But that doesn’t mean multiple competitors can thrive in the space long-term.
“The market isn’t big enough to support more than maybe two or at most three platforms,” said TD Cowen analyst Lance Vitanza.
Vitanza said Wall Street has been pressuring sportsbook companies to grow their bottom lines. The companies have been relying too heavily on marketing and promotional activity to grow their customer bases as they duke it out for market share dominance, he said.
“They’re all hoping that if they can capture enough market share, they’ll get to a point where everyone else will stop and they can become less promotional,” Vitanza said.
Robins told investors Friday that DraftKings is prepared for the increased competition and plans to reduce promotions in 2024.
Chris Krejcik, executive director at Eilers & Krejcik, said it remains to be seen whether DraftKings can hold onto its lead.
“FanDuel remains close behind, after all, and the competitive landscape — through the imminent introduction of ESPN Bet and the ramping up of Fanatics — is about to get a lot tougher,” he said.