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The global legalised sports betting and fantasy sports market has enjoyed strong growth over the last year, driven primarily by an increasing number of US states legalising or reducing restrictions on gambling.
Recent new items such as Sportradar’s initial public offering (IPO), 888’s acquisition of William Hill and Endeavor’s move for OpenBet exemplify why there is so much focus on the growth of the US sports betting market, as well as what it means for technology solutions looking to grow in the space.
US market growth
The US saw a 126 per cent year-over-year increase in the volume of online sports betting transactions through the opening weekend of the 2021 National Football League (NFL) season.
Since May, 2018 when the US Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA) which enforced the ban on sports betting, legalisation across the US has boomed. However, the market still has a long way to run in realising its full potential. Currently only 26 states and the District of Columbia have legal, operational sports betting. The two largest states by population, Texas and California, are yet to legalise sports betting but most predictions indicate this is a matter of when not if.
Comparing an established sports betting market such as the UK (GDP: US$2.8 trillion; population: 69 million) to just these two states, California (GDP: US$3.1 trillion; population: 39.6 million) and Texas (GDP: US$1.8 trillion; population: 29.7 million), you can appreciate the immense scale of the opportunity in the emerging US market.
Sports betting is giving US stadiums the potential to operate as entertainment destinations beyond the limited matchday schedule. Another recent example was Austin FC’s deal with PointsBet, a partnership signed off despite Texas being yet to legalise sports betting. When sports betting is finally legalised in the state the first sportsbook licenses are expected to be granted to existing stadiums. Not only does this allow matchday betting during the season, but creates year round revenue with an in-venue sportsbook open every other day of the year. This obviously feeds into stadium and venue innovations creating a frictionless experience for the fan regardless of whether they are there for matchday or to place a bet.
This US gold rush also comes at the same time where regulators are clamping down on sports betting in established markets. The most visible of these are restrictions on advertising. There are growing calls in the UK to ban sports betting shirt sponsorship in the soccer pyramid and Spain has now followed Italy in banning gambling firms from sponsoring team stadiums, equipment, uniforms, and any other aspect of a sports club.
Aside from the US, India has seen strong growth in fantasy sports with the market on track to be worth US$3.7 billion by 2024. There are hopes for sports betting being fully legalised there within the next five to ten years, potentially unlocking another enormous emerging market.
Technology investment
Sports betting is driving the majority of big ticket investment and acquisition activity in both the fan engagement as well as sports data sectors. The artificial intelligence (AI) and computer vision sectors are also getting in on the act too.
Sportradar, the world’s largest provider of data feeds to sports betting operators, recently listed on the Nasdaq with a valuation at nearly US$8 billion. The company has more than 150 sports league partners and provides data to more than 900 sports betting operators. Sportradar’s partners include two of the largest US operators: DraftKings and FanDuel.
At its IPO, Sportradar chief executive Carsten Koerl indicated the company would focus on acquiring AI and fan experiences technology companies. Earlier this year, Sportradar acquired Synergy Sports, a market leader in computer vision and AI-driven video and data solutions for the US sports market.
Rival data provider Genius Sports listed on the New York Stock Exchange in April this year and has a current market capitalisation of US$3.7 billion. The IPO was launched after Genius Sports secured an exclusive deal to be the NFL’s official sports data provider. Like Sportradar, Genius Sports has also been active on the acquisitions front, acquiring FanHub Media, a provider of free-to-play (F2P) games and fan engagement solutions, in May of this year. F2P games include fantasy sports, trivia, bracket challenges and polling applications.
Sports betting (and fantasy sports) is often looked at as an extension of fan engagement. Although the terms cannot be used interchangeably or euphemistically, as we discussed in last month’s expert guide on fan and sponsorship engagement, sports leagues and teams should be focused on the flywheel of fan engagement and first party data. We can monetise our fans by gathering more first party data to understand their needs better, whilst simultaneously building direct communication channels that feed back into personalised opportunities for monetisation.
Sports betting is no different in terms of gathering first party data and building direct-to-consumer (DTC) relationships. However, the path to monetisation is a much straighter line: bet bigger and more often.
Sportsbooks are starting to partner with teams, leagues and media platforms to gain easy access to fans. Just in the last few years we have seen Penn Gaming acquire a stake in Barstool Sports, while ESPN and Sports Illustrated are looking at licensing their brands to sportsbooks. The next step is bringing in specialist third party technology and content suppliers to maximise the return from these deals. The ability to remove friction points across the sports bettor’s customer journey – such as integrating content, account sign in and payment gateways – is the ultimate goal for many technology solutions in the space.
An early example is the PGA Tour and DraftKings deal whereby the latter’s daily fantasy golf users have the ability to receive real-time video highlights for players in their respective lineups via the app. Having a single sign in for streaming and betting, whilst receiving data analytics on all those customers to offer personalised bets, is the next expected wave of powerful tech integration and consolidation across the industry.
Engaging casual fans and micro-betting
Moralising questions of gambling addiction aside, there is much evidence to suggest that placing a bet is one of the best ways to engage casual and younger fans in sports. The simple thesis (reflected in the educational messaging from wagering companies at the start of the NFL season) is that by giving casual fans ‘skin in the game’ via a bet they will have a reason to be engaged in the outcome.
Instead of only watching your favourite team or player, you will watch multiple games to check on the performance of players in your fantasy team or be following specific plays or stats within a game in micro-bets. Micro-betting is a form of live in-game betting on the outcome of an individual moment, such as the next shot in basketball, the next pitch in baseball or the next play in football.
In-game betting makes up more than 70 per cent of the European sports betting handle but it’s a relatively novel concept in the US. However, that is set to change. In what DraftKings president Matt Kalish refers to as “leaning into the TikTok-ification of America”, micro-betting appeals to the shifting fan behaviour towards consuming shorter game highlights and following individual players – not just a team.
Recent investment activity in the micro-betting space includes Simplebet raising a US$30 million round led by YouTube personality Jake Paul’s Anti-Fund and sports betting operator PointsBet acquiring Banach Technology for US$43 million in March this year to expand its own in-play betting options. One of the major technology issues with live in-game betting is ensuring there’s adequate backend infrastructure to minimise latency. This is another area of sports technology that is positively impacted with the widespread roll out of 5G.
Other backend solutions are focused on compliance and integrity requirements. For consumer-facing sports betting exchanges operating across different US states, there are stringent geolocation requirements. With the patchwork of legalisation across the country, sports betting operators need to know exactly where a fan is betting from so they don’t inadvertently break the law. Ensuring the integrity of the sport is integral to betting’s acceptance and growth within the sports industry. More sophisticated data collection and analysis is being used to detect fraud and match-fixing.
Whether the same powerful data innovations will be used to identify and help problem gamblers is an open question. The fervour surrounding sports betting’s explosion in the US suggests this won’t be the priority for innovation in the industry. Nevertheless, technology and data will play a key role in the sustainable success of the industry, especially in the face of criticism and changing regulatory landscapes.
Innovative companies
Below is a sample of some innovative companies offering sports betting and fantasy sports technology solutions.
Geocomply
Fraud prevention and cybersecurity solutions that detect location fraud and verify a customer’s true digital identity. Location checks happen in milliseconds in the background of a player’s session without disrupting their experience. GeoComply has been expanding its offering beyond its primary focus of geolocation into areas such as multi-state know your client (KYC) and digital ID verification, payment and fraud analytics, and responsible gaming.
Notable clients: FanDuel, Bet365
Simplebet
B2B product development company using machine learning and real-time technology to make every moment of every sporting event a betting opportunity. Enabling users to place bets on markets that are created and resulted in just minutes or seconds.
Notable clients: DraftKings
Latest funding: US$30 million (August 2021)
GTG Network
GTG Network (GTG) specialises in the creation of unique technology in the data analytics, content production and gamification spaces. In partnership with Caesars for the NFL draft, GTG’s prediction and arcade games technology powered Games Hub, challenging users to predict the correct order of the first round selections. Other initiatives include the launch of Fan Pick with the Los Angeles Lakers, new fan engagement experiences at stadiums with Cisco, and the continual delivery of sports insights.
Notable clients: Caesars, Cisco, Los Angeles Lakers, DraftKings, Sportsbet
Swish Analytics
Sports analytics, betting and fantasy startup building predictive sports analytics data products. Delivers odds origination, risk management and trading software for the core four US sports.
Notable clients: Major League Baseball (MLB), Sacramento Kings
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Thanks for reading the third instalment of a monthly series examining the world of sports technology, brought to you by Thomas Alomes and the team at Sports Tech World Series.
In each column, we will provide insights into the global sports tech market drawn from our latest industry research, consulting clients and expert interviews. Our aim is to quickly inform you on what’s happening in the industry now, where it’s heading in the future and who are the major players, both emerging and established, operating at the cutting edge of this exciting space.
To make more sense of sports tech, we have classified the industry into sub-categories. Having covered betting and fantasy sports in this edition, the different areas being covered in this series are:
Stadiums and venues
Solutions designed to improve the efficiency and customer experience in stadiums and venues.
Athlete performance and tracking
Devices and platforms used to measure or track athletes with the purpose of testing and improving performance.
Athlete, team and event management
Solutions that support the management of athletes, teams, leagues and events, with a focus on improving overall efficiencies at an individual and organisational level.
Betting and fantasy sports
Solutions focused specifically on the unique challenges of betting and fantasy sports.
Data capture and analysis
Data processing, capture and analysis solutions that support insights and decision making for a variety of sports related organisations.
Esports and virtual sports
Solutions focused specifically on the unique challenges of esports and gaming.
Fan and sponsor engagement
Solutions designed to enhance and improve the experience of the fan, or increase the value for the sponsor, including memberships and social media engagement.
Media and broadcast
Solutions that enable and enhance the sharing and distribution of sports content such as streaming platforms, automated broadcast graphics and online content publishers.
About STWS
Sports Tech World Series (STWS) is the trusted resource in the global sports technology ecosystem. We provide research, consulting and market insight services to help teams, leagues, governments, investors and vendors to achieve results and meaningful impact over the hype in sports technology and sports innovation.
An industry consultant, researcher and speaker, Thomas Alomes is a global leader in sports technology ecosystem growth and development with a passion for connecting the best people with the best ideas. He is currently head of North America at STWS and the founder of Sports Innovation Texas.
