Former Director, US at Kambi
Max was the first US employee for Kambi where he joined in 2018 to build out the team and sell the sportsbook to land-based operators. Max reported into the CEO and CCO of Kambi and was responsible for signing new commercial deals with operators such as Parx casino and Draftkings in the US. Max is now VP for Gambling.com Group’s US business, one of the largest marketing engines for online operators globally. Read moreView Profile Page
Max, a pleasure to have you with us today. Can we start by walking through how market access partnerships work?
In each state, in any jurisdiction, any online operator needs access to the market. The United States is fairly unique, in that respect. Typically, how access is given out, in these jurisdictions, is through a local regulator, at the state level. In New Jersey, they have a regulator, Pennsylvania has one – their own unique regulator. As such, there is existing land-based operators, in these jurisdictions, that are already conducting business on their properties, within the state, for casino, which is table games and slots. In some cases, it’s called a master license. There is different terminology and nomenclature for wherever it is. But they hold the master license.
As such, they’re the ones who are able to distribute market access. Market access is, basically, the ability and the privilege to do business and really hold commerce, in a state. If you take New Jersey, for example, each one of those master licenses has three different sub-licenses, that they are able to sell out to whoever they choose, who will then be able to get licensed as a sports betting or casino operator.
The difference between New Jersey and Pennsylvania, for example, is for the existing land-based casinos, there are different metrics to which the gaming commissions give out these licenses. In Pennsylvania, there’s only one license they’re able to give out. Per each land-based operator, in Pennsylvania, there’s only one opportunity for someone to do business, as a sports betting operator. There’s about 12 to 15 of casino operators in Pennsylvania, but that correlates, one to one, to how many sports betting operators there can be.
Whereas in New Jersey, I believe that there are 13 land-based operators and each one of them has three market access avenues. So you would have about 39 options for market access, in that state. That’s really the composition of what market access looks like. It’s dictated in the statutes that get passed by the local policy makers, in that given state. It really varies from state to state. In New Jersey, you have a lot of market access. In Pennsylvania, you have limited market access and then there’s states, such as Colorado, which has a lot of market access because the regulator and the policy maker there, allowed for three market access positions there. These market access positions, in the industry, are called skins. So there’s a number of different skins that are available. When you hear people say they have skins for sale or they just purchased a skin, it really is synonymous with market access.
Even further than that, is a state like Tennessee, who does not have existing gaming or an existing gaming commission. They have no casinos in the state, but they will be permitting sports betting, fairly shortly, and they have unlimited market access. Anyone who is a sports betting operator, who could apply for a license, secure a license, will be able to go into that market. Whereas it’s a little bit more stringent and, frankly, there’s just scarcity in some of these states.
Another good example is Michigan. I believe there are 15 land-based casino operators. So the maximum amount of sports betting operators in Michigan, will only be 15. That drives competition, it drives pricing. It just makes the market much more competitive, in comparison to a state like Tennessee.
If I’m a land-based casino, selling a skin, do I just choose the online operator with the largest scale or the most efficient customer acquisition channel?
It’s a case by case basis. In some cases, it’s almost as if the land-based casinos are courting the online operators, because they may be the ones who generate the most revenue. The complexity, within the commercials, is really that the devil is in the detail. Someone like DraftKings or FanDuel or Rush Street or a larger, more household name, in comparison to a smaller, regional, European player that wants to enter the US market, they attract different prices. There is no set rate for market access and they are purely negotiated. In most respects, the commercial structure is that the land-based operator receives a portion of the revenue, generated by the online sports betting operator. In some cases, there is an upfront cost, each year, which is, effectively, just a flat rate and there is, sometimes, a monthly or yearly minimum guarantee of what revenue would be.
You may have one operator say that they will give you 5% of the revenue, but someone who is much more anxious and may be, potentially, desperate to get in the market, they may release 10% of revenue. It really just depends on how much each online operator wants to give up. The competition is dictated, first, by the market access landscape, of how much scarcity there is, which affects the elasticity of demand of how the pricing gets affected. As a result, online operators in each state, may pay a significantly different fee, greater or lesser, depending on what the climate of the economics looks like.
So DraftKings and FanDuel can likely bargain for much better rates than the smaller players?
Yes, they certainly can get in the scarce markets. But what you’re seeing and public knowledge is, companies like DraftKings and FanDuel specifically, doing deals with other organizations. FanDuel did a deal with Boyd, who has access in multiple states, so they are able to, collectively, group these assets together and derive market access from just one player. Then they only have to do one market access deal to cover 13 or 14 states, or wherever Boyd does business. This is similar to DraftKings with Penn National and DraftKings with Caesars. It’s basically like going to Costco and being able to buy in bulk, versus having to do an individual deal, which works out well for both parties. I think it’s mutually beneficial because the land-based license holder only has to do a deal with one person and the sports betting operator only has to do a deal with one entity. So there are some economies of scale there, as well, where there’s less negotiation and it’s more about, let’s move forward.
In terms of the commercials of the deal, if we take the Caesars and DraftKings deal, I think there were terms in there that enabled Caesars to have the right to launch their own sportsbook or iGaming, as well as having the partnership with DraftKings. How do the land-based operators look at these deals?
Again, a lot of it is dictated by the market access structure. If it’s a land-based operator, who wants to have an online interactive sports betting product, they’re very likely going to reserve that first skin for themselves. You start to see, in the news, that DraftKings has access to the second skin in Indiana, but the third skin in Colorado or first skin in Michigan. A good example of that would be Penn National, where they maintain the right to the first skin, in every state. Effectively, what that does is, it guarantees themselves a spot which is predicated upon what the policy makers – and voters, in some states – will be able to pass. It’s, basically, giving them the right and protecting them to be able to offer sports betting, in a given jurisdiction.
If there’s already sports betting legislation approved or if it’s upcoming or even if there’s no thought of sports betting, in a given jurisdiction, it’s really helping them gain market access, potentially, if that case does arise. To answer your question, they want to make sure that there is a competitive market and they don’t want to have someone just purchase all of the market access, to limit the market. The big land-based players, like Eldorado or Caesars or Penn or even Rush Street, those large, multi-state operators are the ones who are dictating the terms, in most cases.
Who do you think is the best online player, at market access?
A lot of the deals are confidential but, clearly, if you are able to strike a deal with someone who has multi-state access, like Penn – PointsBet has done deals with Penn – then in terms of the breadth of the states available, I think DraftKings and FanDuel are getting ahead of the curve, in most cases. They’re doing deals in states that don’t have legislation yet or the legislation hasn’t been approved. But that’s not to say that other players won’t be getting into the market. I guarantee you that there are guys at DraftKings, FanDuel and almost every online operator, looking at market access deals in states where we don’t even, necessarily, anticipate legislation this year or next year. It’s really a front-running game, where you’re constantly trying to find out where the ball is going to land and not necessarily where it is, right now.
Who’s the best at it? It’s hard to say, without knowing the definitive commercials. But everyone works towards it and it’s a very results-oriented binary. You either have market access or you don’t. In that respect, it’s pretty clear who has market access.
When you’re looking at some of the deals that have been announced and the partnerships, how do you look at the players that are going to capture the economics, online?
A lot of the economics are, obviously, FanDuel and DraftKings, with their Daily Fantasy Database. They may have an existing set of players, where they may be able to negotiate a smaller rate, because they already have players that they will, likely, more easily be able to convert, rather than just trying to find new players. It cuts down on acquisition costs, which thus, makes the bottom-line revenue much more attractive for that land-based operator, that’s working on a rev share agreement. It’s really hard to define but it’s something that’s pretty clear, when you see these announcements of who is constantly making deals and who is entering markets.