New York Mobile Sports Betting Operators Lose $200M
When New York legalized online sports betting in early January, there was a huge rush from the mobile sports betting industry to capitalize on this large new market. All the big operators such as Caesars and DraftKings were quick to set up shop. As a result, New York quickly became inundated with marketing campaigns attempting to persuade would-be bettors to choose one company over another. With over $2.5 billion wagered in the first 5 weeks, New York has surpassed other leading online sports betting states, New Jersey and Nevada. This clearly showed the post-covid enthusiasm of sports bettors and demonstrated that countless New York sports fans were just waiting for a legal option to enjoy sports betting in their state. New customers numbering in their millions began signing up to online sports betting companies.
You would think that given the sheer volume of new bettors, vast amounts of wagers, and the hype surrounding online sports betting going live in New York, this would result in online bookmakers making a fortune. But unfortunately, the reality of the situation for operators is very different, at least for now. Far from swimming in money, these companies have lost money - and a lot of it. Each new customer costs around $100 - $150 in marketing. In addition, the promotions used to draw in these swathes of new bettors have been extravagant. Many promotions were similar in scale to Caesars’ offer of “free” bets matching deposits up to $3000. This exceptionally warm welcome to New York bettors has certainly hindered bookmakers in the short term, but the idea is that they will gain loyal customers in the long run. While the initial buzz around legalized online sports betting in New York has died down, the over-the-top promotions and welcome offers have also dropped to more modest values. However, this is not before companies have paid exuberantly for them. Additionally, the industry is heavily taxed, which is more bad news for companies like DraftKings. A whopping 51% of their gross revenue goes to the state of New York. So what’s the current state of online sports betting operators? For the week ending 2/13/2022, DraftKings’ reported losses of $50 million. They have claimed about 20-25% share of the New York market, so if you extrapolate this figure, you lead to a staggering loss of over $200 million for the entire industry. This staggering amount of money is a pretty initial investment, but companies are likely to recoup the losses - although this might not be for at least two years. Only time will tell if the first companies to offer online sports betting in New York will regret their decision. But, with customer numbers vastly surpassing expectations, chances are they’ll reap the rewards of cornering a huge new market. Just not immediately!