Sports Betting

Delivered April 3rd, 2019. Contributors: Rosalind R., Raechell A., Wycliffe O. and

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Industry Analysis: Sports Betting

In 2017, the legal sports-betting industry was valued at $270 million in the United States and is expected to grow further over the next five years. The United States Supreme Court identified the Professional and Amateur Sports Protection Act (PASPA) to be unconstitutional and lifted the federal ban on this market, in May 2018. Several states have begun drafting bills to legalize sports wagering. Some major sports betting players in the United States are Caesars Entertainment Corporation, Las Vegas Sands Corporation, and Scientific Games. 

Sports Betting Industry — United States
According to a report published by Eilers & Krejcik Gaming, LLC, the legal sports betting industry in the United States was estimated at $270 million in the year 2017. This industry is expected to continue growing at an accelerated pace due to various drivers that include the steady growth of the economy, increased adoption of digital devices, lenient government regulations, and growth in internet penetration. Factors such as sports betting regulations and high tax rates can hinder the growth of the sports betting market in some states. Key trends of this industry include mobile betting, digitalization, growing penetration of debit and credit card, and a rise in betting on e-sports. 

The federal ban that was placed on sports betting was lifted by the Supreme Court in May 2018, after the PASPA was identified to be unconstitutional. With the ban lifted, many states such as New York, Ohio, Oklahoma, Minnesota, Michigan, Indiana, Kentucky, Kansas, Illinois, Iowa, South Carolina, California, Missouri, Massachusetts, Maryland, Mississippi, Connecticut, and Louisiana have started making new regulations to legalize sports betting. It has been estimated that over the next five years, 32 states in the country will allow sports betting and will result in generating an annual revenue of $6.03 billion. The report also reveals that if all 50 states legalized sports betting, the industry would generate anywhere between $7.1 billion to $15.8 billion, annually.

Key Players of the Industry 
In order to identify some major players in the sports betting market, in the United States, we began our search by looking into industry-specific websites such as USBets and Market Watch; media websites such as Forbes, PR Newswire, and GlobeNewswire; and industry research websites such as Research and Markets. After an extensive search through these channels, we were able to identify three major players of the industry ranked in terms of their annual revenue - 

Las Vegas Sands Corporation has an estimated annual revenue of $13.73 billion. 
Caesars Entertainment Corporation has an estimated annual revenue of $8.391 billion. 
Scientific Games has an estimated annual revenue of $3.083 billion. 

It has been found that all three organizations are major competitors of MGM Resorts. 
Key player #1: Las Vegas Sands Corporation Annual revenue: $13.73 billion 

Las Vegas Sands is an entertainment provider and developer of integrated resorts that consist of best-in-class gaming, dining, luxury hotels, entertainment, and various other leisure amenities. Some of the major properties operated by Las Vegas Sands are Venetian Las Vegas Hotel, Resort & Casino, The Venetian Macao, Sands Bethlehem, The Palazzo, and Marina Bay Sands. The company claims to have an exceptional record in developing some of the world’s largest leisure and business properties. The company is a pioneer in the development and operation of Meetings, Incentive, Convention and Exhibition (MICE) facilities in regard to its MICE-specific Integrated Resort. This resort is considered to be an “industry-leading and extremely successful product” of Las Vegas Sands. 
Key Player #2: Caesars Entertainment CorporationAnnual revenue: $8.391 billion  

Caesars Entertainment Corporation is a casino-entertainment provider and operates over 50 casinos across the United States and the United Kingdom. Rio casinos, Harrah’s Horseshoe, Paris Las Vegas, Caesars Palace, and Planet Hollywood are some of its major properties. The company’s operations consist of gaming establishments, hotels, and riverboat casinos. Over the years, Caesars has grown into an entertainment empire with new expansions, resorts, and acquisitions. Caesars Entertainment Corporation also owns the World Series of Poker tournaments. According to a press release, Caesars Entertainment Corporation claims to be “the leader in legalized gaming” in the United States. Caesars began taking mobile sports bets last year (2018) through the Caesars Casino & Sports app. 
Key Player #3: Scientific Games Annual revenue: $3.083 billion 

Scientific Games is a leading developer and provider of technology-based services and products in interactive gaming, worldwide gaming, and lottery industries. The company specializes in game content and gaming machines, table game services and products, casino-management systems, lottery systems, interactive gaming that includes sports betting technology, social casino solutions, and lottery services and content. Scientific Games is known to access innovative technologies through equity investments and strategic acquisitions. In the year 2018, Scientific Games partnered with Caesars Entertainment Corporation to power the company’s Caesars Casinos & Sports app via its OpenBet technology. 

Important Industry Happenings 
With the federal ban on sports betting lifted by the United States Supreme Court in 2018, there have been a number of milestones met throughout that year with major debuts, mergers and acquisitions, partnerships, and openings. The following are some key highlights that took place in the industry in 2018 - 

Scientific Games announced its acquisition of NYX in January 2018. 
In May 2018, the Supreme Court announced its decision about the PASPA being unconstitutional. Several states were actively pushing to keep federal laws out of sports wagering. That same month, Paddy Power Betfair acquired FanDuel. 
In September 2018, Harrah’s Philadelphia was third in line to apply for a sports betting certificate in Pennsylvania, after Parx Casino and Hollywood Casino. 
In October 2018, Scientific Games acquired Don Best Sports with the aim of expanding their platform portfolio to include Don Best’s expertise and trading platform. That same month, Harrah’s, Sugarhouse, and Rivers casinos were consented for PA sports betting certificates. 
In November 2018, Rhode Island became the first state in New England to legalize sports betting. That same month, Caesars Entertainment and MGM became the founding members of the Sports Wagering Integrity Monitoring Association. NBA announced its first betting-data partnership with Genius Sports and Sportradar. 
In December 2018, a new sports betting bill was drafted which provides the United States Attorney General with purchase of data. Washington DC, Kentucky, New York, South Carolina, Missouri, Virginia, and Tennessee have drafted pre-filed bills to legalize sports betting in their states. There has also been a report that indicated the sports betting handle in New Jersey reached $330 million that month. 

 

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Trends: Sports Betting

There are three major trends in the United States' sports betting industry, namely: changes in the market due to an amendment in gambling legislation, new technology in the market, and new players in the market. These were identified as major trends that will shape the future of sports betting industry by more than one reliable source, such as Bloomberg and Marketwatch. You will find more details about each one below. 
Changes in the market of u.s. sports bettingAt the end of 2018, the U.S. Supreme Court overruled the 1992 gambling legislation  known as the Professional and Amateur Sports Protection Act (PASPA). The PASPA made it illegal to engage in sports betting outside of Nevada with minimal exceptions in Delaware, Montana, and Oregon. This change in legislation has led to the legalization of sports betting in six additional states, specifically: New Jersey, Delaware, Mississippi, West Virginia, Rhode Island, and Pennsylvania. On the other hand, New York and Connecticut have placed partial laws on sports betting which are still being reviewed. These opens possibilities for growth within the industry if state and federal lawmakers support policies related to it.  It is predicted that the U.S. sports betting market will be worth approximately $3 to $5 billion by 2023. 

New players in the marketThe effects of the change in gambling legislation is already being felt as established gaming companies are expanding into sports betting. Here is a list of the upcoming players in the market:

 Caesars Entertainment Corp. — has 47 casinos in five different countries and is considered to be the most recognizable company in gaming. They are currently looking into ways of adding sports gambling into their casinos.
 Penn National Gaming — has gaming terminals, mostly slot machines, in 29 different establishments across the U.S. and Canada. Since the lift in ban on sports betting, they started offering it at the Hollywood Casino in West Virginia. 
 Boyd Gaming Corp. — this company has one of the biggest sports book connections in Nevada with over 40 years in the industry. They recently partnered up with FanDuel Groups to expand online and sports betting across the United States.
Gold Nugget Casino and Palace Casino — the general managers for both establishments stated that their casinos will open a sports book.
NEW TECHNOLOGY in u.s. sports bettingTechnology companies have been creating avenues to make it easier for customers to "make small, casual bets" through online interactions and mobile applications. One notable company is Singlepoint, Inc. which is responsible for developing a mobile gambling platform called Stakehaul. This mobile application makes it possible for users to bet on practically anything from who can finish a task first to sports and world events. It currently has more than 70,000 downloads with a "double digit percentage rise" in user activity monthly making it a top-ranked app.

Another rising technology in sports betting is kiosks. SB Tech already has betting kiosks available in various casinos in Mississippi and New Jersey. Currently, the International Gaming Technology PLC or IGT is also field testing their crystalbetting terminals which will be customizable to suit customers needs. The IGT terminals will allow customers to directly place a bet on the kiosk's screen while viewing a game. It will also allow them to modify the screen and audio. These options for customization are specifically targeted at bettors who love in-play gambling but are dissatisfied with current mobile applications. 
ConclusionTo summarize, the Supreme Court's overruling of the 1992 PASPA has led to big changes in the sports betting industry in the U.S. It has opened opportunities for an increase the sports betting market, with more notable players such as Caesar Entertainment Corp. expanding into the industry. Online interactions and mobile applications are also major technological trends that is currently seen in the sports betting industry.

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Case Studies: Sports Betting

We found two case studies of US companies that are leading in the sports betting space. These are Caesars Entertainment and Madison Square Gardens (MSG). Both companies have engaged in partnerships as a way to improve their market positions. While Caesars Entertainment launched the Prudential Center Caesars Club promotion to market its brand, MSG has been involved in a series of mobile marketing campaigns to reach a new audience. Below is a comprehensive compilation of our findings.
CAESARS ENTERTAINMENTHOW THE COMPANY HAS IMPROVED ITS MARKET POSITION#1 Partnership deals
Caesars Entertainment launched unique partnership deals with NBA and NHL through Harris Blitzer Sports & Entertainment (HBSE), which led to the expansion of its market base to include New Jersey sports fans and over one million attendees of concerts and live events at the Prudential Center annually.

#2 Regional market and Las Vegas market
The company recently focused on renovating and reinvigorating "long-neglected" assets and prime center-strip locations to increase its market share in the regional markets including Las Vegas which comprises 55% of its total EBITDA.
HOW THEY EXPANDED TO REACH NEW AUDIENCES THROUGH MARKETING LAUNCHING EXCLUSIVE CLUB AT PRUDENTIAL CENTER: Caesars Entertainment recently opened a 5000sq ft VIP premium center after its HBSE partnership deal and deployed various marketing activities to expand its reach to the New Jersey region.

SPENDING ON NON-GAMING ENTERTAINMENT MARKETING: The company transformed its traditional business model and invested in marketing to enhance non-gaming entertainment, lodging and dining experiences which targeted the changing consumer behavior patterns. These initiatives enabled the company to gain competitive advantage and attract a new market segment of non-gamer customers. 
ANY RELEVANT MARKETING CAMPAIGNSPrudential Center Caesars Club promotion Caesars conducted an exclusive marketing campaign at its Prudential Center Caesars Club to promote its brand and exclusive premium products to the new segment of New Jersey sports fans. 

Link to the creative is found on the attached google doc. 

MESSAGING: The company publicized its logo along with the tagline "Shoot for a Million" during an ice promotion to advertise its brand. During the event, other game specific messages were used such as "Score for the Shore," in-game,” and "Live Like a Caesars VIP". 

MARKETING CHANNELS USED: At the Prudential Center, the company used 80 digital boards and a large 4,800-square-foot outdoor LED board along with Caesars' branding on Club Level tickets, premium wristbands, and concourse pillars. The company also used an app-based reward promotion and ran a social media contest. 
DATA ON MARKETING SPEND FOR THE CAMPAIGNSThe company did not disclose the information in the marketing spend for their Prudential Center Caesars Club promotion. However, we noted that the company spends approximately $235.7 million on advertising and marketing activities in the US.

As Caesars Entertainment has established a stable market share in Las Vegas and regional markets by focusing on renovating and reinvigorating "long-neglected" assets, it has been able to decrease its marketing spend from $994 million in the first half of 2017 to $907 million in the first half of 2018, giving it a significant source of margin growth.
ANY AVAILABLE METRICS OF SUCCESS The company is expected to experience a 24% increase in its customer engagement along with an 87% engagement lift in click-through rates by integrating its AI backed-up one-to-one marketing via email with a CRM platform.

In the regional markets and Las Vegas, the company is able to gain a notable margin growth of 7.5% EBITDA that is compounded annually through 2020.
INFORMATION ON CONSULTANTS THEY HAVE BROUGHT ON TO DELIVER WORKThe company partnered with Persado and Sales Force in order to implement AI-based email marketing with the CRM system.
MADISON SQUARE GARDENSHOW THE COMPANY HAS IMPROVED ITS MARKET POSITION #1 Partnership
MSG invested in E-sports market by acquiring a stake in the North American E-sports team, Counter Logic Gaming (CLG) to expand its presence in the fast-growing E-sports business and establish as a strong brand in New York.

#2 Spin-off of Company
MSG announced the possible spin-off to create a separate, public company for its sports franchises, including the New York Knicks and New York Rangers. This initiative is aimed at enhancing strategic flexibility and gaining better confidence of the investors as well as growing portfolio of the company to connect with newer sports markets.
HOW THEY EXPANDED TO REACH NEW AUDIENCES THROUGH MARKETINGMOBILE MARKETING: Currently, MSG is enhancing its mobile marketing campaigns for various arena such as New York Knicks, New York Rangers, New York Liberty, regional television networks MSG and MSG Plus by expanding its digital marketing database and leveraging new communications platform to connect with home-based sports audiences. 

DIGITAL TRANSFORMATION: The company transformed its digital presence at msg.com to directly serve fans, customers, and partners better and expand its reach in the market to connect with a new audience. 
ANY RELEVANT MARKETING CAMPAIGNSKnicks and Rangers (MSG) marketingMSG launched Knicks and Rangers marketing campaign to promote sales of the new team app and increase fan engagement/interaction.

Link to the creative is found on the attached google doc.

MESSAGING: The campaign used traditional whiteboard approach and an MSG Script using the message "download the Knick App."

MARKETING CHANNELS: The company used anthropomorphized phone representing the app, Featured Rangers and Knicks spot animation panels and screen displays along with Vimeo videos.
DATA ON MARKETING SPEND FOR THE CAMPAIGNSMSG did not disclose its financial details on the marketing spend for the Knicks and Rangers (MSG) campaign. However, the company released its financial details on the operating expenses and revenues.
ANY AVAILABLE METRICS OF SUCCESSMSG's revenue has been rising continuously from 2012 ($728 million) to 2018 ($1559 million). Through the Knicks and Rangers (MSG) marketing campaign, the company was able to win the prestigious Telly Award in the sports entertainment category.
INFORMATION ON CONSULTANTS THEY HAVE BROUGHT ON TO DELIVER WORKDuring the launch of its mobile marketing initiative, the company partnered with Phizzle Mobile. MSG also worked with consultant Judy Podraza to promote digital transformation of its online website.

The company consulted IdeaRocket during the Knicks and Rangers marketing campaign.

Sources

From Part 01

As the Sports-Betting Industry Transforms, Entrepreneurs May Find It Hard to Get in on Gambling Profits -- but Related Businesses Will Thrive

entrepreneur.com

Publication Year: 2018

From Part 02

Bloomberg - Are you a robot?

bloomberg.com

Publication Year: 2019

Quotes

"The U.S. now says the U.S. Wire Act bars all internet gambling that involves interstate transactions, reversing its position from 2011 that only sports betting was prohibited under the law passed 50 years earlier."
"The U.S. Supreme Court ruled last year that states other than Nevada could also permit sports betting. New Jersey and other states that now allow sports wagering restrict those activities to individuals physically within the state."