US Sports Betting Update – Churchill Downs Forced to Wind Down Sports Betting Business Amid Fierce Competition
TwinSpires has emerged as the first major casualty of the fierce battle for market share in the ultra-competitive US sports betting industry. Parent company Churchill Downs Inc., which hosts the Kentucky Derby, made the announcement as it delivered Q4 earnings on Thursday. The company said it could not see a path to profit in the “highly competitive market” and said it would wind down the sports betting and online casino gaming business in the next six months.
Churchill Downs Inc. (CDI) created TwinSpires as an online racebook back in 2008. The company then decided to get into the sports betting business after the Supreme Court struck down the federal ban in 2018. It initially launched a brand called BetAmerica, but that brand struggled to compete with rivals like FanDuel, DraftKings and BetMGM. CDI responded by killing off the BetAmerica brand and consolidating everything under the stronger TwinSpires brand.
TwinSpires Sportsbook is currently available in Arizona, Colorado, Indiana, Michigan, New Jersey, Pennsylvania and Tennessee. TwinSpires Casino is live in Michigan, New Jersey and Pennsylvania. The company revealed that adjusted EBITDA for 2021 decreased $34.9 million from the prior year, mainly due to a $27.1 million increase in the loss from sports betting and casino gaming due to increased marketing and promotional activities. It has been spending millions of dollars to fund a $1,000 risk-free bet offer for sports fans, 24 hours of risk-free casino play, prize draws and various additional promotions.
Pursuing Maximum Market Share with Little Regard for Profitability
CDI can no longer stomach those losses when it cannot see profit at the end of the tunnel, so it has pulled the plug on TwinSpires Sportsbook and the online casino. The online racebook will continue to operate. It will also run retail sportsbooks across the country. Speculation abounded that CDI would try to sell the TwinSpires brand, but the new plan is to sell market access to other hopeful operators that want to take on heavy hitters like FanDuel, DraftKings, BetMGM and Caesars. A company like Bet365 could be a candidate if it decides to make a concerted push into the US market.
“When the Supreme Court overturned the ban on sports betting in 2018, we had high hopes for building a profitable business in this space,” said CDI chief executive Bill Cartanjen. “We have profitable retail books in four of our casinos. However, the online betting and casino space is highly competitive with an ever-increasing number of participants. Many are pursuing maximum market share in every state with little regard for short-term or potentially even long-term profitability.
“We are always committed to building long term value for shareholders. Consistent with this commitment, when we see an investment is not progressing as planned, we will redeploy the capital to other growth projects or return it to shareholders. This isn’t the result we wanted when we started the business in late 2018 but it is the prudent next step forward for our company. We remain absolutely committed and excited about TwinSpires’ online horseracing business.”
Too Many Competitors to Sustain Spend
Four months ago, incoming FanDuel chief executive Amy Howe said the race to grab share of the US sports betting market was unsustainable and predicted that it would end with companies failing. She anticipated that “ultimately this market is going to settle out with three, four, five competitors. There are too many competitors right now to sustain this level of spend.” It has not taken long for the first brand to fall by the wayside.
There are now question marks over rivals such as WynnBET and BallyBet. The latter is one of nine operators to gain a license in New York, but it is yet to launch. WynnBET has launched in New York, and it is now available in nine states, but its market share is small. Last year, it said it would rein in promotional spend, calling the situation unsustainable, but it is currently investing in a $1,000 risk-free bet bonus, a casino bonus and lots of promotions for existing companies. Other operators that launched to great fanfare, such as MaximBet, Tipico and Sports Illustrated Sportsbook, have also gone a little quiet, and they could be at risk.
If there are three to five competitors after the shakeout, as Howe predicted, the prime candidates would be FanDuel, DraftKings, BetMGM and Caesars. They are the four largest operators by a considerable margin, and they have been investing a lot more in bonuses than their competitors. The others with a chance of lasting the distance include Unibet, PointsBet and Rush Street Interactive, which owns the BetRivers and PlaySugarHouse brands. A few European brands – Bet365, Betway and Betfred – are also making tentative moves, so it will be interesting to see how this race ends.
Connecticut Enjoyed Best Month for Sports Betting in January
The launch of online sports betting in neighboring New York did not derail Connecticut’s momentum in January. Nutmeg State operators handled $158.1 million during the month, which represented a 5.3% increase on December’s total. The sportsbooks reported $11.2 in revenue, which amounted to a 7.1% hold. They invested $3.4 million in promotions, so taxable revenue was $7.8 million, meaning $1.1 million went into the state’s coffers. It was just the third full month for legal sports betting in Connecticut, but the industry is growing quickly.
Connecticut only permits three operators to provide sports betting. DraftKings, which teamed up with Foxwoods Casino for access, has emerged as the early market leader. It handled $73.7 million, compared to $62 million for FanDuel, which linked up with Mohegan Sun Casino. The remaining $22.4 million went to PlaySugarHouse, which has teamed up with the Connecticut Lottery. It runs retail outlets across the state along with online sports betting. It handled $13.7 million in online wagers, which amounted to just 9.1% of the online handle and left it trailing DraftKings and FanDuel by a wide margin.