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First or Best: Sports Betting Edition

There has no doubt been a rush of activity in the regulated sports betting scene in the United States since the May repeal of PASPA. It seems like every day there is news of a new partnership, or a sportsbook opening its doors to excited gamblers. With all this activity, there are bound to be some growing pains, and this brings up yet another question when it comes to the new sports betting market:

Is it better to be First or to be Best?

Well, the great scholar Ricky Bobby once said, “If you’re not first, your last.” While we don’t necessarily agree with this adage, there is still a healthy debate to be had around the position of these new sportsbooks. Let’s have a quick look at both sides of the argument.

The Case for Being First

There are some obvious reasons why being the first to do anything is important. First and foremost, it is typically the biggest news story. For example, even though they were not spearheading the legal activity which finally resulted in the repeal of PASPA, Delaware managed to sneak in ahead of New Jersey to become the first state outside of Nevada to take a legal sports wager. Now, that did generate some buzz in the press, but ultimately the state is so small that it is going to be difficult to use their figures to build proper projection models for other states.

After the news cycle around Delaware receded, it was on to the first “big” state to take action, New Jersey. It seemed like every casino had been working on deals in the background waiting for the legislation, as within hours there were partnerships announced with several high-profile European operators as well as the Daily Fantasy Sports groups ready to pounce on legal sports betting. Within a couple of weeks, most of the major properties were accepting bets.

One other reason that being first is important is that many novice players won’t know about shopping for the best lines and prices, likely sticking to only one sportsbook for all their betting needs. Now, this may change in the social media era, but ultimately, a new player is unlikely to switch allegiances without a very compelling reason. With that in mind, being one of the first on the scene will definitely help fill databases with new gamblers.

The Case for Best

Making a case that it is more important to have the best product rather than being first to market is predicated on the early-stage operations having issues. This has without question been the case in the states that rushed to take sports bets, and the question that remains is if these “growing pains” are enough to make someone change providers.

We have to start with the initial offerings in Delaware and New Jersey, many of which were thrown together without proper integration into the current gaming platforms. This can be confusing for someone who now has to create a separate sports betting account and make anew deposit even if they already had a casino account with the same property. Also, the lack of integration has an effect on loyalty programs, which will be a huge piece of the competitive advantage of these sportsbooks.

One of the more interesting issues that has been faced by a couple of the legal sportsbooks in New Jersey has been pricing the bets. Seeing that each state is going to set tax rates individually, there will be a sliding scale of fees that sportsbooks will want to pass along in part to players. However, the early failures by both Draft Kings and Fanduel in pricing their bets caused a major backlash in the press. Anyone who learns about gambling will quickly realize that they are paying more to bet with a regulated site than heading offshore to the black market, and that is exactly what the offshore operators are hoping for. While both companies adjusted their prices, there is no question that the tax implication is going to continue to wreak havoc across the industry. States that have yet to pass regulations may find themselves rethinking the tax rates, as it is important to keep the ecosphere healthy, and taking that much money from players who are betting is a recipe for disaster.

The choice of providers is another thing that the later adopters get to be more clear about after watching those who have been the first to market. Any issues with integration or with the product offering as a whole will be exposed, giving those who stayed patient a chance to improve on their partnerships. As much as being first is important from a position of trying to get players to switch between sites, having a product that works properly and that players feel comfortable with is still just as important to the longevity of the relationship with the player.

First or Best?

So, where do we stand on the First or Best issue? Well, with our experience in the industry, we tend to land ever so slightly in the “Best” camp – yes, getting to market quickly is important, but if it only the difference of a few weeks then we want to see products that are fully functional and integrated into incumbent player management systems.

What we do think is that casinos who think they may get licenses in their states should be investigating partnerships and signing deals in principle now, so the integration plans can be drawn up even if they can’t be executed for a few months. This will save precious time when it comes to getting the next wave of sports betting operations off the ground.