Fanatics started its journey recently at the bottom of the Massachusetts sports betting market. Though there will be a climb ahead, PlayMA is projecting a ceiling of a 5% market share for the apparel company’s sportsbook brand.
That means Fanatics could generate up to about $300 million in annual handle.
Plenty of action, to be sure, but nowhere near the 10 digits of betting expected each year at behemoths DraftKings and FanDuel.
Fanatics Sportsbook launched its beta testing product in Massachusetts on May 25. It was open only to Fanatics merchandise and apparel customers. The app is expected to go live for all bettors this month, although no specific date has been released.
It will take months for Fanatics to register meaningfully on the monthly revenue report for Massachusetts sports betting apps. However, that doesn’t mean that Fanatics Sportsbook will be a failure for the sports apparel giant — in Massachusetts or across the US.
Don’t expect Fanatics Sportsbook to dethrone DraftKings or FanDuel
When Fanatics Sportsbook reaches maturity in Massachusetts, third place will be its ceiling.
It’s always difficult for a new operator to overtake existing market leaders, but that’s exactly what the sportsbook will attempt in Massachusetts, Ohio and many other states.
Fanatics has a strong customer list through its apparel business to leverage in its competition with DraftKings and FanDuel. Working against it is the American consumers’ reluctance to create more than one or two sportsbook accounts and regulatory inexperience that has already attracted unwelcome attention in Ohio.
When Fanatics agreed to buy PointsBet for $150 million, Fanatics secured a financially advantageous path to expand in the sports betting industry. Fanatics launched its first retail sportsbook in January 2023, and the PointsBet purchase will grant Fanatics the company, not just Fanatics Sportsbook, access to over a dozen new sports betting markets without paying cumbersome license fees up front.
However, this purchase by itself won’t turn Fanatics into a sports betting giant, and it won’t help for any Massachusetts sports betting revenue. PointsBet decided not to launch in the state. Fanatics is entering a low-margin business saturated with similar products. The Fanatics-PointsBet deal is part of the consolidation analysts have predicted in the sports betting market for years. Fanatics’ competitive customer list is a great feature, but the number of customers who will be willing to create an additional sportsbook is unclear.
How PlayMA arrived at its projection
All those factors, in addition to the analysis of Fanatics’ performance in the Ohio sports betting market, contributed to PlayMA’s projection of 5% market share in Massachusetts sports betting at maturity. Based on the PlayMA pre-launch projections, that would mean less than $300 million bet annually on the online platform.
Fanatics doesn’t need to become the largest sports betting brand to become a success, though. Attracting sports bettors to its apparel business and directing some apparel customers to Fanatics Sportsbook would qualify as a reasonable success. The goal for Fanatics is to benefit from the revenue boost to both business segments, whether that results in market leadership or not.
Why the same four sportsbooks attract most of a state’s handle
Across the US, four sportsbooks capture over 85-90% of the country’s sports betting market share:
- Caesars Sportsbook
DraftKings and FanDuel began as daily fantasy sports (DFS) companies. Customers on these sites were already wagering on sports performances through their bets on fantasy team performance. When sports betting became legal, both companies had long lists of customers to cross-promote sports betting.
Both companies were best positioned to capture most of the new sports betting market, and in states where they both operate, DraftKings and FanDuel have captured the top two spots.
MGM Grand and Caesars Entertainment lacked the DFS customer lists that DraftKings and FanDuel had. Instead, BetMGM and Caesars Sportsbook cross-sold to their casino loyalty customers. While BetMGM and Caesars had customers across the US, they didn’t have the sports betting-adjacent customer lists that DraftKings and FanDuel had cultivated.
Here’s why brand awareness matters
The customer lists and brand recognition of the four market leaders provided crucial advantages over companies such as PointsBet, BetRivers and FOX Bet. PointsBet was an Australian sports betting company. BetRivers is a small chain of casinos in smaller American gambling markets. FOX Bet was an attempt to build a sports betting arm of FOX Sports. None of them were building the customer lists that would translate to the brand awareness and recognition DraftKings and FanDuel enjoy.
Had Fanatics entered sports betting before bettors found their favorite sportsbook apps, Fanatics could’ve rivaled Caesars or BetMGM. With its late entry, Fanatics has the added challenge of convincing bettors to go through the registration process for a sportsbook they haven’t already chosen.
Peeling customers from competing sportsbook brands
Various studies show that most American sports bettors will sign up for three or fewer licensed sportsbook apps. The registration process includes one to three pages of personal information, including an address and social security number. That’s not counting the sportsbook apps that have to verify bettors’ information and request driver’s license or utility bill uploads.
Part of a sportsbook’s ability to capture market share depends on its ability to attract customers first. It’s no wonder that the consistent market leaders are the four companies with the most brand recognition in gambling.
In an analysis of the Fanatics deal, gaming research and consulting firm Eilers & Krejcik argued that Fanatics and bet365 could be long-term threats to DraftKing’s and FanDuel’s duopoly in the sports betting industry. Both companies offer good products, but neither company offers a disruptive product — so PlayMA isn’t as bullish.
Superior odds-making or cross-promotion won’t make customers rethink the industry. A company such as Sporttrade, which has a completely different pricing and play model, has a better chance of forcing DraftKings and FanDuel to rethink their product than other traditional sportsbooks.
Fanatics brand association with gambling could backfire
Fanatics is a well-known sports apparel company, but its reputation in apparel won’t necessarily translate to sports betting. Apparel customers are sports fans who are willing to shell out substantial amounts of money on products that demonstrate their commitment as fans.
Some sports bettors treat their wagers the same way. A bet on a team may be a vote of confidence in their team. Wagers can be used as a way to demonstrate support for less money than a new jersey.
However, sports betting is a low-margin business. The only reason that hold amounts can reach as high as 12% is the inexperience of so many sportsbook customers. Professional sports bettors consider many factors in deciding which wagers to place at which odds and at which spreads.
Many amateurs bet their teams regardless of the likelihood of the team’s victory or the amount of vig the sportsbook collects. When customers buy team memorabilia, they get a concrete item for their value, not the possibility of a future payout.
Fanatics’ well-known brand could also run into problems as responsible gambling becomes increasingly important to sportsbooks, their regulators and the public. Being a fanatic sports fan is normal. Being a fanatic gambler requires treatment.
Fanatics has already come under scrutiny for offering a bonus bet to everyone who purchased certain apparel items in Ohio. Ohio regulators shut the promotion down, revealing why experience in the sports betting industry is critical to long-term success. Fanatics has told PlayMA that the apparel promotion will not be attempted in Massachusetts.
At this point, we don’t yet know how competitive Fanatics’ welcome bonus will be among the MA sports betting promotions.
Striking the balance between enthusiastic fandom and overly aggressive marketing is part of the challenge of operating in the gambling industry. The association of sports fanaticism with Fanatics will complicate its ability to strike that balance.
What does success in Massachusetts look like for Fanatics?
When Fanatics Sportsbook fully enters the Massachusetts market, its three main goals will be to bolster its existing apparel company, carve out a steady amount of market share composed of loyal customers and avoid regulatory action.
Fanatics Sportsbook has an American customer list that many sportsbooks lack. Its purported plan to offer credit at its apparel store in exchange for sports betting activity could convert high-frequency apparel buyers. The high-frequency buyer segment could form the bulk of Fanatics Sportsbook’s revenue.
However, the sportsbook market leaders have already fine-tuned their marketing processes to produce ads that can pass scrutiny in the strictest jurisdictions. These kinds of operational advantages come with hard-won experience, and Fanatics will have to tumble down the learning curve that the sportsbook market leaders have already traversed.
If Fanatics can secure its own group of loyal customers without attracting unwelcome regulatory attention to itself and the sports betting industry, it can find success in Massachusetts and other major sports betting markets. Fanatics’ inexperience is more dangerous to its long-term market dominance than its competitors.