There could be 32 states offering legal sports betting within five years…gambling may even be legal at Bushwood:
My good friend Greg Bettenelli just so happens to cover the sports betting industry from the angle of a Venture Capitalist in Los Angeles (he is also a great golfer and horse handicapper) and he just wrote about the big changes ahead.
The stock market makes it easy to rush out and place bets on the potential big winners, but Greg sees the risks as well:
Here’s the problem: Sports betting is a very low-margin business. The take rate of sports wagering is around 5 percent, while it’s closer to 20 percent in horse racing. And in unregulated markets (which will occur somewhere in U.S.), the price of the product is going to get close to zero. It’s going to be hard to make any money, and customer loyalty will be basically nonexistent without pricing power.
As a result, there will not be enough for everyone to split and be happy. Look at Robinhood, which has essentially taken all of the economics out of retail equity trading — overnight. Look at the margin of sports wagering in Vegas — it’s almost nothing. It likely won’t end well for most players. But a few are going to crush it (I hate saying that, but it’s true). And I bet the winners will surprise us.
Greg Walks through all the potential winners from the news and the list is long:
In addition to all the sports leagues like MLB, MLS, NCAA, NFL, NHL and the PGA, keep an eye on media companies like AT&T (DirecTV), CBS, Comcast (Golf Channel), Disney (ESPN), Fox, Time Warner (Turner), Verizon (Oath) and Action Network/Barstool Sports (with the backing of the Chernin, Kerns and Jacobs dream team). Don’t be shocked if StubHub and even Ticketmaster figure out a way to get in the game, as they know the customers with high propensity to bet on sports.
You will also learn a lot more about the likes of DraftKings and FanDuel (again), Boyd Gaming, Churchill Downs, IGT, MGM Resorts, Paddy Power/Betfair, Penn National, Stars Group (SkyBet), Stronach Group, William Hill, Wynn Resorts and then tribes like Mashantucket Pequot, Mohegan, Morongo, Pechanga and Seminole, which have all been active in gambling at the state level.
Greg does not even mention Scientific Games ($SGMS – lotteries and slots) whose stock was already on fire and exploded on the news:
Our fund, Social Leverage, invested in one sports gaming app a few years back called Linestar. We wanted to participate in the possible future of sports betting and fantasy sports. Linestar helps people build lineups for fantasy sports and is a profitable company. They had to get creative as the industry has been in a legal for much longer than anyone has expected.
I will be bugging Greg a lot more than usual in the coming months to make sure I catch the right trends in the public markets.
Also published on Medium.