MGM Resorts International (MGM 0.02%) started building a sports betting empire soon after the U.S. Supreme Court struck down the federal ban on states authorizing sports gambling in 2018.
The resort operator cobbled together agreements with most major sports leagues to be their official betting platform; teamed up with Boyd Gaming (NYSE: BYD) to offer online and mobile gaming platforms, including sports betting, casino gaming, and poker; and bought the Empire City casino in New York in anticipation of the state authorizing sports betting.
Since then it has set its sights on becoming the second-biggest sportsbook in the country, surpassing current No. 2 DraftKings (DKNG -1.35%). Did that just happen?
Image source: Getty Images.
A dynamic duo
U.K.-based sports betting outfit Entain (OTC: GMVH.F) recently reported earnings results for the first half of 2021 and noted that its joint venture with MGM, the BetMGM betting platform, surged into second place for sports betting and online gaming combined.
With exclusive access to all of MGM Resorts' physical casinos in the U.S. it has been the industry's fastest-growing mobile betting platform, with expanding monthly market share gains and the top online casino platform in multiple states.
BetMGM is live in 12 states, and MGM expects to be in 20 states by the end of 2021, giving it access to approximately 40% of the U.S. While the platform is still reporting operating losses of around $59 million in the first quarter, revenue is expected to hit $1 billion by the end of 2022.
Image source: MGM Resorts.
MGM tried to acquire Entain earlier this year for $11 billion, replicating Caesars Entertainment's acquisition of sports betting partner William Hill, but Entain rejected the offer saying it significantly undervalued the growth potential of the company. Although MGM eventually gave up trying, it's rumored to be back in the hunt again, indicating the importance the casino operator places on mobile sports betting and internet gaming.
Entain's earnings report shows the emphasis is well founded. The U.K. operator reported BetMGM had a 21% share of the sportsbook and online gaming markets combined at the end of May, making it the second-biggest player, while the platform became the leading internet gaming operator with a 29% market share.
That means DraftKings is still the second-biggest sportsbook behind Flutter Entertainment's (OTC: PDYPF) FanDuel, and it's not likely to lose that position anytime soon.
Image source: DraftKings.
A backdoor play
DraftKings' sportsbook is live in 12 states, representing 25% of the population while its recently added online gaming platform is available in four states, representing 10% of the U.S. population.
Certainly MGM's partnership with Boyd Gaming gives BetMGM the opportunity to further extend its reach into the markets where Boyd is established -- the regional casino operator has 28 gaming properties in 10 states -- but DraftKings has its own tremendous competitive advantage through its daily fantasy sports (DFS) operation, its camel's nose under the tent.
The DFS business is active in 44 states, meaning it can hit the ground running when just about any state authorizes sports betting and doesn't need to build a platform from scratch. Players can establish a DFS account at 18 years of age in most states rather than 21 as is generally required with sports betting, so it can develop a relationship and database earlier. DraftKings will also introduce a social functionality to its DFS and mobile sportsbook apps to allow user interaction. Part of what makes Penn National Gaming's Barstool Sports an equally effective rival is the community developed around the platform. And DraftKings, which owns over 60% of the DFS market share, has the highest national brand awareness, ahead of FanDuel and Barstool Sports (BetMGM didn't rank at the time of the survey).
DraftKings' business is doing quite well, with first-quarter revenue tripling to $325 million and the number of monthly unique players (MUPs) more than doubling to 1.5 million.
The fight for third place
Flutter Entertainment says it had a market-leading 40% share of the U.S. sportsbook field and a 20% share in online gaming. It understands that stake will eventually erode, but Flutter maintained its goal is to continue being the No. 1 player in every market it is in.
DraftKings says it plans to continue owning 20% to 30% of the sportsbook market and is shooting for 10% to 20% of the combined online gaming market.
Sports betting is a fast-growing business, but FanDuel and DraftKings look like they will remain the dominant players. While BetMGM's push into second place is based on combined sportsbook and online gaming growth, with the weight tilted more heavily to the latter, the real action will be over who is the third largest sportsbook.
DraftKings seems well situated to remain No. 2 for some time to come.
