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Home News Casino

Analysis reveals why some operators in Massachusetts withdrew

igw by igw
March 3, 2023
in Casino, News, Sports Betting
Reading Time: 2 mins read
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Massachusetts’ second-tier sportsbooks won’t be able to reach profitability at market maturity. They will need between 7 and 8 percent of the total market share in order to be profitable, which seems like a steep climb.

Are You Doomed From the Launch?

Independent consulting firm Eilers & Krejcik Gaming explains why some second-tier operators didn’t apply or have withdrawn their applications.

Based on PlayMA’s market projections for $5.7 billion in sports gambling handle maturity, the consultancy estimated that each operator would require between $32 million to $36.6 million in annual revenue to achieve profitability.

FanDuel and DraftKings are the main players in the US sports betting market. However, it is difficult for smaller operators to generate such revenues. BetRivers didn’t bother to apply, while pointsBet and bet365 did.

PointsBet’s director for communications Patrick Eichner did not give a direct explanation when asked why the sportsbook pulled out of the race in the last hour. Instead, he stated that the company decided to “best optimize the market” where it has operations. This includes 13 US jurisdictions as well as Ontario.

The analysis also raises questions about the State of Massachusetts’ handling of promotional writeoffs. This is the largest uncertainty in PlayMA’s market maturity projections.

The analysis uses a scenario that is consistent with other states, where the promotional deduction is 40% gross revenue and about 3% of the betting hand. It concludes that promotional bonus bets can boost the handle between 2 and 4 percent, or approximately $100 million. Based on the national average sportsbook holding of 8%, it suggests that operators’ revenues could increase by around $7.9million if promotional bets are included.

According to the analysis, sports betting revenue in the state could exceed $60 million at market maturity. However, all of this would depend on how the state approaches promotional write-offs.

There is still plenty to think about. It’s not clear how the consultant came to the conclusion that smaller operators would need to reach 7%-8% market share, especially considering that 8% is the average national sportsbook holding. Is it possible that small sportsbooks are doomed elsewhere?

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