December 29, 2023

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Sports betting rose to unprecedented heights in 2023, but that growth brought several complications. More operators were squeezed out as FanDuel and DraftKings continued to dominate the U.S. market. Leagues and teams grappled more than ever with problematic betting within their own organizations. And the arrival of ESPN Bet, after years of anticipation, presented another major change to a still-developing industry.

— Eric Fisher [[link removed]]

2023 In Review: U.S. Sports Betting Goes Full Tilt [[link removed]]

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Legal sports betting exploded to unprecedented size and prominence in 2023. Along the way, it claimed some victims while its competitive landscape changed materially.

The topline indicators of the sports wagering business pointed to the robust and expanding market that advocates dreamt of when the U.S. Supreme Court ruled in 2018 to allow states to make their own laws in this area. The American Gaming Association projects [[link removed]] that the total sports betting handle for the year will exceed $100 billion. For the January-September period, $78.7 billion has already been recorded. In November, New York set an American state record for monthly handle with a total of $2.1 billion.

On a company level, too, signs of meteoric growth were easily found. DraftKings is set to end the year with its stock value up by more than 220% amid fast-growing revenue, while FanDuel, the American sports betting market leader, is preparing [[link removed]] its own U.S. stock market entry.

Most dramatically, the biggest brand in sports media, ESPN, finally entered the space through a $2 billion deal [[link removed]] with PENN Entertainment. The mid-November debut of ESPN Bet helped fuel [[link removed]] more state betting handle records in top markets such as Pennsylvania and Massachusetts.

Beginning as a reskinned [[link removed]] version of the former Barstool Sportsbook and Casino app, the Disney-PENN strategy for ESPN Bet, in many ways, looks to replicate the seamless integration [[link removed]] between sports media and betting seen with PENN’s theScore in Canada, where consumers easily move between reading content and building betting slips.

A key early sign of the now-shifting betting market occurred in Pennsylvania, where PENN turned a sixth-place ranking and a 3.8% market share in October, with the Barstool app, into a third-place position and 7% market share—behind only FanDuel and DraftKings—the following month. Thanks in part to the ESPN Bet rollout, PENN’s handle in the Keystone State more than doubled from $32.3 million in October to $66.8 million in November.

Similar dynamics are emerging in other top markets where ESPN Bet is active, part of a push by PENN to target a much broader pool of consumers than just betting enthusiasts. “One of the things we’ve talked about a lot is we’re seeking to reach sports fans, not just sports bettors,” PENN CEO Jay Snowden said in November at the ESPN Edge Conference.

Changing Competition

ESPN and PENN have a highly ambitious goal of achieving a 20% market share position by 2027, a move that would encroach on the current FanDuel-DraftKings duopoly [[link removed]], which currently controls more than 70% of the overall market. (If you include BetMGM and Caesars, the combined market share of that group nears 90%.)

As a result, several smaller entities left the sports betting business altogether, and diminished their presence, or were acquired by other operators. Fox Bet shut down [[link removed]] in August, followed by a similar decision in November from Malta-based operator Unibet to leave the North American market, and WynnBet’s marked reduction of its national-level profile to focus on a few key states. Those moves travel a similar path as the demise of MaximBet, Fubo Sportsbook, and Churchill Downs in 2022.

The sports merchandising giant Fanatics, meanwhile, significantly advanced its sports betting ambitions by completing this past summer a $225 million deal [[link removed]] to acquire the U.S. operations of PointsBet. The arrival of the Michael Rubin-led company, in addition to the similarly well-resourced ESPN Bet, is further squeezing out smaller players and reshaping the American sports betting market.

“In a lot of states, you can really see the market beginning to center around a top-tier group of players including DraftKings, FanDuel, BetMGM, Caesars, ESPN Bet, Fanatics, and maybe Bet 365,” Dustin Gouker, a sports betting consultant and longtime gaming journalist, tells Front Office Sports. “For so many of the other entities out there, how do you even get to 5% market share? What is the value proposition, and how do you really differentiate? Do you have the resources to compete for consumers? So I think we’ll see more players drop out.”

Also contributing to the consolidating market is the slowing pace [[link removed]] of state expansion. North Carolina’s legalization [[link removed]] in June led the charge in 2023, though a formal start date for wagering hasn’t yet been finalized, and Vermont is set to begin sports betting in January. Meanwhile, California and Texas, the two most populous states—and therefore industry whales—have thus far shown stiff resistance to legalization.

The Lone Star state in particular won’t formally revisit the issue until at least 2025, when its legislature next meets, though Mark Cuban’s recent deal [[link removed]] to sell a majority stake in the Dallas Mavericks is predicated in part on the possibility of building a major casino and arena complex in Dallas.

“Over the last five years, new state launches were a big part of the overall growth trajectory for sports betting,” Gouker says. “That’s going to be less the case going forward, and the growth will be more incremental, certainly until we know what’s going on in California and Texas.”

Troubling Behavior

The explosion of U.S. sports betting was paralleled by a rise in players and coaches breaking league and team rules. In October, the NHL suspended [[link removed]] Ottawa Senators forward Shane Pinto for half a season for “activities related to sports wagering,” marking its first modern-day, gambling-related suspension. The NFL, meanwhile, modified [[link removed]] its rules in September after the suspension of 10 players this year for gambling violations, seeking to protect the integrity of the league by seriously punishing players for betting on games and betting activity at team facilities.

In college sports, the state of Iowa [[link removed]] came down hard on the football and baseball programs at Iowa and Iowa State, eventually securing [[link removed]] guilty pleas from five athletes for underage gambling. But it wasn’t just players who found trouble in this area: Alabama fired [[link removed]] baseball coach Brad Bohannon in May for suspicious betting activity in a scandal that also led to the resignation [[link removed]] of Cincinnati baseball coach Scott Googins.

The issue has grown so critical for the NCAA that new president Charlie Baker began [[link removed]] a lobbying effort in October to update state laws and protect student-athletes from sports betting-related harassment and coercion. Those political efforts haven’t received nearly as much public focus and attention as the organization’s maneuverings around name, image, and likeness (NIL) rules. But given that the U.S. sports betting market is nearly 100 times the size [[link removed]] of the NIL business, the NCAA’s work here could become a far more impactful endeavor.

It’s just one of several 2024 sports betting subplots that currently leave more questions than answers for the burgeoning industry.

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Front Office Sports Today 2023 Year In Review

Courtesy of CU Athletics

With Taylor Swift taking over the NFL, Prime Time in Colorado, and the ongoing saga between the PGA Tour and LIV Golf, it sure can feel like a lot has happened this year around the business of sports. As we continue our review of 2023, Front Office Sports’ newsletter co-authors, Eric Fisher and David Rumsey, join FOS Today to share their favorite stories of the past 12 months.

Listen and subscribe on Apple [[link removed]], Google [[link removed]], and Spotify [[link removed]].

Conversation Starters In beating Rice in the SERVPRO First Responder Bowl Tuesday, Texas State won its first ever bowl game. The firsts didn’t end there. Check it out [[link removed]]. The TV numbers are in for the Peacock Network’s first exclusive broadcast of an NFL regular season game. See [[link removed]] the results. Attention FOS readers: What do you think will happen in 2024 in the business of sports? Send us your predictions for the future of pro leagues, ownership, media rights, venues, college athletics and the rest. Respond to this email, and we might run your answer in the newsletter. Related Stories U.S. Sports Betting On Pace To Hit $100B In Wagers [[link removed]]by Eric Fisher [[link removed]]Sports wagering activity accelerating to unprecedented levels. ESPN Treads Lightly with Promoting Its Own ESPN Bet [[link removed]]by A.J. Perez [[link removed]]The much-anticipated first weekend didn't lead to over-the-top promotion. Senators’ Pinto First Modern NHL Player Suspended for Gambling [[link removed]]by Doug Greenberg [[link removed]]Shane Pinto’s suspension is an NHL first since PASPA’s repeal in 2018. Advertise [[link removed]] Awards [[link removed]] Learning [[link removed]] Video [[link removed]] Podcast [[link removed]] Sports Careers [[link removed]] Written by Eric Fisher [[link removed]] Edited by Peter Richman [[link removed]]

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