Five Reasons US Online Gambling Will Be Dominated By A Few Brands – OnlinePokerReport.com

The US online gambling market is still in its infancy, in the process of figuring itself out. So, how many different brands will gamblers have to choose from when the industry settles into its stride?

New Jersey and Nevada have had online gambling for a few years now, giving us an idea of how things might play out elsewhere.

We can also look to the United Kingdom for what to expect. The US online gambling market is expected to be similar in size to the UK within a matter of years. Sports betting is also expected to make up a large portion of US online gambling activity, as it does across the Atlantic.

There are already 22 online casinos in New Jersey, 15 online sportsbooks and four online poker rooms. In the UK, the top 10 brands control about an 80% market share between them.

Looking at those numbers on their own, it seems reasonable to expect a lot of competition in the US market as it expands. However, New Jersey and Nevada are special cases due to their long history of brick-and-mortar gambling. The UK is also very different from the US economically, culturally and from a regulatory perspective.

When the dust begins to settle in the US, its quite likely that the market will be dominated by a relatively small number of brands. Heres why.

The recent string of corporate tie-ups is the biggest sign that competition could be limited. The market hasnt even gotten off the ground yet. Some potential competitors are acquiring or merging with one another.

The biggest and most recent of these is the acquisition of The Stars Group (TSG) by Flutter. If that goes through as planned next year, it will create the worlds largest gaming company by a good margin. TSG also acquired an elite UK brand in Sky Betting & Gaming last year.

Flutter, for its part, was created by a merger between Paddy Power and Betfair. It went on to acquire FanDuel following the fall of the federal sports betting ban in the US in 2018.

This is far from the only example. Another is the GVC acquisition of the bookmakers Ladbrokes and Coral in 2018. These two brands had already merged in 2015.

It would not be surprising to see further consolidation of brands into large conglomerates in the coming years. In fact, it would be somewhat surprising if we didnt.

Where the brands are already established, like the UK, they continue to operate semi-independently. In new markets like the US, however, theres little reason to operate multiple brands under the same vertical. Flutter will likely concentrate on PokerStars, Fox Bet and FanDuel, and GVC on Roar Digital and the Party brand.

It isnt only big deals between gambling companies that we see, either. Operators are scrambling to get smaller deals in place with both media outlets and various sports leagues and teams. Some of these agreements are exclusive.

Just looking at a few of the deals in place for TSG/Flutter, we have:

Other major gaming companies have likewise been working on various sports and media partnerships. These are going to be key to marketing in the US.

Latecomers to market will have a hard time finding such partnerships and may not be able to compete without them.

The amount of money American companies spend on advertising also acts as a barrier to entry for some operators.

Total gambling ad spent in the US this year is projected to be around $735 per capita, compared to around $485 in the UK. Thats more than a 50% difference.

A young marketmeans that companies big and small will be advertising more intensely than they would in an established one.

In 2015, as the US daily fantasy sports market gained traction, FanDuel and DraftKings spent over $200 million on advertising between them. As the US online gambling market opens up, expect a flood of advertising dollars from the likes of Flutter/TSG, GVC, Caesars and so on.

That creates a huge disincentive to smaller international brands eyeing the market, let alone anyone trying to establish a new brand. The cost just to get noticed amidst the noise will be astronomical at first and likely stay that way for several years.

Part of the reason that brands proliferate in Europe is that it consists of a large number of similarly-sized countries. Many of these end up producing their own national brands. And when those national brands reach a certain size, they sometimes spread out into adjacent markets.

Paddy Power was an Irish brand that spread to the UK before merging with Betfair. Swedish company Betsson has similarly become a force in the UK and throughout Europe. And so on.

North America is just starting to see some cross-border brand expansion from Canada to the US.

The sports app theScore, which now has a betting product, is the lone example, so far. With sports betting legal in only a fraction of US states, the size of the Canadian and American markets is similar at the moment.

Once more states legalize betting, though, the US market will be much larger than Canada. Cross-border branding will flow mostly the other way at that point. Its unlikely that the US public will ever have much interest in Mexican brands, either.

In the long-run, the key brands in the US will be either homegrown or owned by major international companies.

There could, in fact, be many brands in the US market eventually. If thats the case, though, many will not be national brands.

The nature of the US market is that its divided because online gambling is being legalized on a state-by-state basis. Each has its regulatory requirements and an individual licensing fee.

Geographic expansion in the US, therefore, comes not only with a marketing cost, but licensing and development costs as well.

The major brands like PokerStars/Fox Bet, Roar Digital, Caesars, etc. will launch wherever they can. Smaller brands, however, might choose to focus on just one or two states in order to keep those costs down.

Furthermore, some states will not allow private companies to operate at all. Some are granting their state lotteries a monopoly, which will keep those brands local. See, for example, Sportsbook Rhode Island.

Other states require online operators to have a land-based partner, such as a casino. Big companies like GVC and The Stars Group have shown a preference for selecting smaller partners, which wont interfere with their branding.

However, popular casinos such as Parx in Pennsylvania are seeking out white label partners to provide their online gaming platforms. Parx has already expanded into neighboring New Jersey because it is almost as well-known there as it is in Pennsylvania.

Its dubious whether the Parx Online brand would fare well elsewhere, however, where the casino doesnt enjoy the same name recognition.

The most likely way things will play out, then, is that there will be in the vicinity of eight major national brands, but the same few companies will own many of these:

Depending on how things go, some other international operators like 888 and Kindred Group may manage to establish a national presence in the US. Kindred is already trying with its Unibet brand in New Jersey.

Beyond that, there will likely be a large number of local brands based on state lotteries, land-based casinos and racetracks. These are unlikely to hold much market share at the national level.

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Five Reasons US Online Gambling Will Be Dominated By A Few Brands - OnlinePokerReport.com