ESPN and its partner Penn Entertainment on Tuesday launched a sports gambling platform, ESPN Bet, in 17 states. The company is hoping it can grab a piece of the nearly $85 billion global sports betting market.
It’s been five years since sports betting became legal, and most states now allow it. Jordan Bender, an analyst at JMP Securities, said in that short time just two companies — DraftKings and FanDuel — have gobbled up about 80% of the market.
“Those are the companies that have the time advantage,” he said. “They’re the ones that have been able to grow their businesses a lot better.”
It’s hard for new platforms to enter the market because users generally stick to one, maybe two sports betting apps. ESPN hopes it can steal them away because of its status.
“Does that entice you? It’s a little difficult to say,” Bender said.
Because sports betting is less about brand recognition and more about how well the platform works.
When the Caesars Sportsbook app launched last year, users got up to a $3,000 deposit match. Bernie McTernan, a senior analyst at Needham & Co., said that helped the app scoop up 40% of the market, only to drop into the single digits after people burned through the incentives.
“I think it’s easy to give people money and have them gamble on your platform. The harder thing is retaining them for years,” he said.
New betting platforms have to offer something special, McTernan said. For ESPN Bet, that’s its media content on ESPN.
“You know, you’re checking your fantasy team for fantasy football and you can easily make bets about your players,” he said.
Or you’re in the app watching a clip of your favorite commentator previewing a game and you can easily bet on it. A seamless user experience could be a win, McTernan said.
But Andrew Zimbalist, a sports economist at Smith College, said this could backfire for ESPN, especially if gambling starts to drive its content. That’s because sports loyalists and sports bettors watch and read differently.
“If that role of sports switches to here’s an opportunity to lose money betting and drive yourself crazy, then yes, I think it can have a deleterious effect on the company’s finances,” he said.
Especially, Zimbalist said, because online sports gambling is a relatively unknown industry.
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