Building a market leading business
In May 2018, the Supreme Court of the United States overturned the Professional and Amateur Sports Protection Act (PAPSA). This has transformed the legal sports betting landscape in the US and provided William Hill with an excellent opportunity to expand its global footprint.
Americans are passionate about sport, watching over 2 trillion minutes of sport across more than 11,000 live events each year1 . Many of those fans use betting on sports to enhance their engagement with and enjoyment of the match or race and, since PASPA was overturned, that is now a legitimate exercise in a growing number of states. Prior to PASPA, wagering through the illegal sports betting market in the US was estimated to be nearly US$200bn2 . In 2019, we believe fewer than 5% of wagers have been placed legally.
During the course of the past 20 months, considerable progress has been made to legislate and regulate on a state-by-state basis. By December 2019, 14 states had legalised and regulated sports betting. We are encouraged by the momentum in the number of states regulating sports betting. We are increasingly confident of the potential size of the market and see it falling comfortably within a US$5bn to US$19bn range within the first five years post PASPA. Nonetheless, the market is unlikely to mature for at least a decade.
Regulation is evolving on a state-by-state basis creating a complex landscape for operators to navigate and generating real barriers to entry in the form of market access, capital requirements, licensing and digital capability. Regulation by state typically follows one of three operating models, land-based only, land-based plus ‘tethered mobile’ (where a mobile or online account must first be opened by a customer in a licensed location) or land-based plus remote access (where a mobile or online account can be undertaken remotely, as in the UK). However, land-based wagering is typically only permitted at casinos and in some cases racetracks, while digital licences are typically limited in number and tethered to a land-based licensee. There are also states where there is a single sports betting licence, typically held by the local state lottery.
Our strategic goal is to be a market leader and grow a US business of scale. For a US sports betting operator, there are a number of key components to ensure success: market access through partnerships, a flexible operating model, including software that can be released quickly and cater for different regulations, routes to market and brands, and operational excellence in different combinations of retail and mobile. The capability to provide a service model, such as for a state lottery, will ensure the broadest possible coverage. Finally, a recognisable brand and effective marketing partnerships are essential to delivering a business of scale in the long term.
Market access is the critical starting point for success in US sports betting, as state access is predominantly controlled by land-based casinos, racetracks and state lotteries. It is our intention to enter every US state we can, offering retail and mobile sports betting where permitted by the law in each state.
We have been taking legal sports wagers in the US since 2012 when William Hill US was created from the combination of three small acquisitions. During that time, our growing team of local operators has demonstrated a meaningful competitive advantage, negotiating the regulatory, licensing and partnership landscape, to create a business with unmatched market access, secured in 24 states covering a potential accessible population of over 200 million people.
Since entering the market in 2012, the Nevada business has grown rapidly, providing sports betting at 114 locations, often at small venues away from Las Vegas. The Nevada business is digitally led, with 69% of all betting carried out via online channels and 31% through retail, giving us a market share in Nevada based on gross revenue of 32%. In 2020, pending the completion of the Eldorado-Caesars merger and our previously announced proposed acquisition of CG Technology, more commonly known as Cantor, we will further expand our Nevada position, adding 15 locations. Many of these locations are on the Las Vegas Strip, providing William Hill a leading sports book presence in this iconic location for the first time.
Since PASPA was overturned, we have been investing in people, technology and partnerships to enable the business to take advantage of the new regulatory environment.
In January 2019, we entered a partnership with Eldorado to be their exclusive sports book provider, sharing in all economics related to sports betting. Eldorado is a leading casino entertainment company in the US, currently owning or operating 23 properties in 11 states and a loyalty club with c10 million members. Under the terms of the deal, Eldorado received a 20% stake in William Hill US.
In June 2019, Eldorado announced a proposed acquisition of Caesars. William Hill’s exclusive sports betting rights across retail and mobile carry forward to the acquired company. If completed, Eldorado will be, by far, the largest owner and operator of US gaming assets with a combined portfolio of 60 casinos in 16 states and William Hill will have the greatest secured market access, of any sportsbook operator.
In October 2019, we secured access to Washington D.C. through an exclusive partnership with Monumental Sports and Entertainment, one of America’s largest sports and entertainment companies, to operate a sports book at the Capital One Arena. This sports book, due to open later in 2020, will be the first in a downtown metropolitan area of a major US city outside Nevada.
During 2019, we continued to build out our local team and operating model with a focus on flexibility and scalability. We opened a new digital office in New Jersey, expanded our operations in Las Vegas and launched our new, purpose-built digital platform ahead of the 2019 NFL season.
Aligned with the Group’s intention to move towards a modular digital architecture, using best-in-class components, our proprietary US technology platform provides an efficient, differentiated and scalable product. The platform is already live in New Jersey and is ready to be deployed more broadly as states regulate across the country. Over time, the platform will service all products, retail, online and mobile, while the front end sportsbook experience has been tailored to US customers for use in B2B, B2C and white label operating environments.
Our tailored US product is managed and delivered by the most experienced sports betting team in the US today. Joe Asher has been CEO of William Hill US since 2012, having founded the Brandywine Bookmaking LLC in 2008 which formed the foundation of William Hill US.
As we grow the business we are building out a scalable and efficient marketing capability, enabling us to optimise our return on marketing spend. In addition we have partnered with CBS Sports, giving us a fully integrated, exclusive presence on a leading media and digital platform. CBS Sports is the number two digital US sports brand with over 80 million users per month and one of the largest fantasy platforms. This partnership will drive highly efficient customer acquisition and is another major step forward in our US expansion.
1. Fox Custom Study, 2017.