Aug 1, 2023 - Economy

Fox Bet flops as FanDuel and DraftKings dominate sports betting

Illustration of a slot machine featuring a basketball, baseball and football, ending in three dollar signs.

Illustration: Brendan Lynch/Axios

The graveyard of upstart online sportsbooks is filling up as the digital gambling market consolidates around the biggest players with the deepest pocketbooks and brand recognition.

Why it matters: Gambling operators are engaged in a digital gold rush to grab market share as more states legalize online sports wagering.

Driving the news: Fox Corp. and Flutter Entertainment announced Monday that they're closing Fox Bet after it barely made a dent in the U.S. gambling landscape since launching four years ago.

Catch up fast: Fox launched the sports betting platform in 2019 with The Stars Group, which was acquired by Dublin-based Flutter in 2020.

  • Flutter is also the majority owner of FanDuel, which has a 44% market share in U.S. gaming, the highest of any online sports gambling platform, according to a note by Eilers & Krejcik Gaming analyst Chris Krafcik.
  • Fox Bet, by contrast, was a "bit-part player" with "well below" 1%.

Flashback: Flutter CEO Peter Jackson said on a March earnings call that he expected "between half and two-thirds" of its $75 million in non-FanDuel losses to go away if Fox Bet were shut down.

The big picture: The demise of Fox Bet follows the recent closure of several other small sportsbooks that never gained much traction, including MaximBet, FuboTV and TwinSpires.

  • Meanwhile, Australian sportsbook PointsBet suddenly offloaded its U.S. operations to well-capitalized upstart Fanatics last month.

State of play: Having established themselves as fantasy sports players years before the legalization of sports betting, FanDuel and DraftKings have a massive head start in securing gambling customers, while BetMGM and Caesars Sportsbook have strong brand recognition from their associations.

  • Bank of America analyst Shaun C. Kelley on Tuesday raised his second-quarter revenue projection for DraftKings by a range of $50 million to $100 million.
  • BetMGM — which is jointly owned by Entain and MGM Resorts International — last week reported that it reached "the key milestone" of positive EBITDA in the second quarter. Bank of America's Kelley had projected a $40 million EBITDA loss.

Online sports betting is now legal or poised to go legal in 29 states, according to the Action Network.

  • Another eight states allow sports betting in person but not online.

Worth noting: Fox had big plans for Fox Bet when it introduced the app in 2019, but those plans hit a snag over a lengthy legal dispute with Flutter in 2021 over the price that Fox would have to pay to buy a stake in FanDuel.

  • Last year, an arbitrator said that Fox has the right to buy an 18.6% stake in FanDuel from Flutter, but not at the price it was hoping for, Sara and Axios Pro's Kerry Flynn reported.
  • The legal drama delayed Fox's ability to roll out the app in the U.S.

Be smart: "These days, the smarter smaller players aren't attempting to go head-to-head with FanDuel and DraftKings," Krafcik, managing director of sports betting and emerging verticals, tells Axios in an email.

  • "Rather, they're attempting to carve out niches for themselves via a combination of product and marketing," he said, noting the success of platforms like Betr "with its influencer-led marketing and microbetting-focused product."

What's next: Fanatics is expected to use its acquisition of PointsBet as a springboard into the market, hoping to buck the trend of upstart sports betting operations going belly up.

  • CEO Michael Rubin has said Fanatics will use its extensive customer database to promote its new sports betting platform.

The bottom line: Even the marketing power of Fox is not necessarily enough to lure customers away from the entrenched leaders in the sports betting industry.

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