The Impact of the New York Mobile Sports Betting Market

Author: Matthew Haynes

Less than one month, $1.62 billion in sports betting wagers. An unprecedented market record for mobile sports betting from a state during its first month of launch. One, many will wonder whether will be surpassed.

And even then, the Big Apple still hasn’t been squeezed dry - New York officials’ decision to legalise mobile sports betting was clearly a fruitful one. Many predicted that the state could surpass the likes of Nevada and New Jersey (holders of the previous records) for revenue and when you strip back the canvass, it is easy to paint the picture. Generally, the expected sports betting revenues in the US are flourishing and the state of New York will definitely play a huge role in that (Figure 1).

Figure 1: Sports betting revenue in the US from 2018, with a forecast to 2028

What is perhaps remarkable, is that these record-breaking figures were achieved with only a limited amount of options for customers, with only seven initially available to the public. Of course, the three major US sportsbooks - DraftKings, FanDuel and BetMGM all received immediate license approval, following their huge success and track record across other US states.

In addition, though, there was also some variation in the form of Caesars (perhaps surprisingly the leader after the first month, handling $615 million worth of bets, generating $55 million in revenue) and BetRivers sportsbooks. It was also quite a coup for Australian operator, PointsBet, which no doubt would have been able to capture a number of its native market that are currently living in the state and no doubt, stayed loyal.

Of course, there will have been many different factors that will have an influence on the continued success of mobile sports betting in the state and of course those that are already playing their part. Below we take a look at why New York is such a potent market for the future and why it could become the standalone biggest market in the world - not just in the US.

Densely Populated State

Without a doubt, New York is one of the most densely populated states in the US, playing home to just over 20 million people (as of 2021), across just over 141,000 square kilometres.

The city itself though houses the vast majority of those people in five different boroughs - the Bronx, Queens, Staten Island, Brooklyn and of course Manhattan - considered to be the epicentre of the city.

Despite effectively only being a one city-state, compared to others, New York state also houses hundreds of thousands of people from different nationalities - with many to be found in the city itself, working in numerous different industries.

While of course, not every person in New York will be interested in sports betting, for operators, it is certainly a target-rich environment from a customer acquisition perspective.

Timing of the SuperBowl

For the city, the launch of mobile sports betting could not have been any better. Originally planned for the end of January, the three weeks that it had in the build-up to the SuperBowl - arguably the flagship sporting event on the US calendar, gave operators plenty of time to build up awareness via marketing campaigns.

While New Yorkers also had the opportunity to place bets on prior playoff games in the NFL, before the climax of the season, which surpassed all expectations again for the state, this helped to add substantially to NFL revenue and give sportsbooks an indication as to how popular this was going to be next season.

Indeed, the city of New York responded well to the SuperBowl from a sports betting standpoint, with a wagering handle of $472.1 million in terms of bets placed on the event in the run-up, according to the New York State Gaming Commission (NYSGC).

If sports betting had launched in the state towards the end of January as was initially expected, this could have meant that figures would have been significantly lower. One could speculate that state regulators had planned all along to give New Yorkers as much opportunity and time to engage in SuperBowl betting, however, it certainly did not harm.

What was also useful for the operators was that this time gave them the opportunity to get as much exposure as possible for their marketing materials surrounding the SuperBowl, in terms of boosted odds and even welcome packages based around the big event.

It is not unusual for sportsbooks to take advantage of global sporting events to offer welcome packages to customers and in New York, sportsbooks took full advantage all trying to outdo each other. Perhaps the most enticing came from FanDuel and DraftKings who both offered customers a maximum bet of $5 on the winning team for their chance to win $280 as a SuperBowl sign-up offer. Meanwhile, Caesars sportsbook offered customers a SuperBowl sign-up offer of $1500 as 100 per cent matched deposit.

All of this certainly contributed towards the SuperBowl revenue and it would have been interesting to see how much activity would have come in the state had it been a New York franchise (such as the Giants), that had reached the season finale.

Multiple Sports Franchises of Betting Interest in the State

Where New York may benefit from having opened up mobile sports betting is that the state is home to one of the highest number of sports franchises in the US, with seven major teams across the NFL, NHL, NBA, MLB and MLS, including the world-famous New York Yankees baseball franchise.

What this means is that there are multiple opportunities, many times a week for New York residents to place bets, with some NBA games being played up to three occasions on a weekly basis.

There are a number of months in the sporting calendar that overlap, with three sports being played simultaneously, which could be as many as four major New York sides involved in the action, prompting an opportunity for a significant betting handle.

For sportsbooks based in New York, the marketing opportunities are endless, especially when it comes to promotions and special offers, which could potentially involve combining multiple New York franchises under one boosted odds bet.

In addition, the state is home to many Americans from around the country, who are a key target market for sporting events in a number of other states, particularly if they are fans of teams that reside from there - for example, the Chicago Bulls NBA side in Illinois.

Key Industries That Can Positively Influence New York Sports Betting

What is going to be interesting in terms of mobile sports betting within the state, is the main occupational demographics of each customer. New York, of course, is home to the world’s financial centre - Wall Street, where you can find some of the most prestigious investment banks, hedge funds and asset managers.

Essentially, the day job of the majority of the employees that work in these institutions is gambling to a degree and this combined with the disposable income that they have available, presents a significant opportunity for sportsbooks to target these ‘VIP’ customers as effectively as they can.

A report from 2019, showed that New York City had 978,810 high net worth individuals (HNWIs) - categorised as having a net worth between $1 million and $30 million. Of course, it is highly unlikely that not even five per cent of those engage in sports betting, however, this figure would still contribute towards a major wagering handle for the sportsbooks.

Interestingly, a proportion of these could well be ex-athletes who may still register an interest in sports and by extension, betting as a way of still trying to stay involved in the game and no doubt, every sportsbook will be doing its best to secure these types of customers.

Opportunities for Sponsorships within the State

Across many different states, we have seen some of the most successful sportsbooks quickly establish sponsorship links with the major sports franchises in these and now with online sports betting being deemed as legal in New York, it is likely to be a matter of time before all of these opportunities are taken.

What is likely to be part of the deal, is that a sportsbook would secure the rights to advertise and brand itself around the respective franchise’s stadium in both digital and print display format. In addition, television screens that are found around the stadium are likely to include the relevant sportsbook’s logo, while there may also be branding on the team’s website and digital assets.

It means though, that there could be a number of advantages for fans of the franchise, who could qualify for exclusive, special offers or boosted odds on certain outcomes, available when they enter a code found on stadium branding.

These sponsorship deals are perhaps the hottest tickets in town for the sportsbooks and each one will be competing to ensure significant market share. In a similar way to the model in the UK, where various sportsbooks sponsor football clubs, it often means that these sportsbooks automatically win over a certain percentage of that club’s fans, due to the clever engagement that they have with them.

Has There Been a Hidden Cost for Sportsbooks in New York?

With a vast proportion of the noise being around the astonishingly high revenues that online sportsbooks have generated in the state since January, it begs the question, has this come at a price and if so, how much of one?

Despite there being an estimated 1.5 million to two million new sportsbook accounts being opened in New York since sports betting came online, for a number of operators, these certainly did not come cheap.

Marketing, of course, plays a major part in every industry and none more so than online gambling and in, arguably, the toughest place to survive as a business in the world. And while Caesars CEO, Tom Reeg was initially positive about the opening figures, he did eventually call for caution moving forward.

“The volumes in New York were about two times what we were anticipating,” he revealed.

“New York is approaching as large as the rest of the business in Caesars Digital combined.”

Acknowledging the outlay that went into marketing and customer acquisition, Reeg continued: “The initial marketing blitz should tail off given that awareness has been set. There is a realization the entire market needs to shift to a profit focus.”

Despite Reeg estimating that hundreds of thousands of new customers signed up via Caesars’ promotions, he was quick to curtail any investor enthusiasm, stating that the average deposit was estimated at $450 per customer, with many not depositing enough to fully take advantage of the offers.

Meanwhile, DraftKings, the leader in so many states across the US, posted losses of nearly $50 million in New York from January 8, with the entire industry experiencing $200 million worth of deficits.

Following a mid-February 15 per cent stock decline, CEO Jason Robbins explained: “DraftKings…is targeting a two-to-three-year path to profitability for the state.”

When it comes to customer acquisition in the online gambling industry, especially in new markets, there is usually the case, that operators will account for losses in the short term and this is particularly true when it comes to the size of the offers.

There are parallels with the UK market, which, when online gambling first launched, online sportsbooks would offer generous welcome bonuses to customers - many of which were free from stringent wagering requirements (terms and conditions). Over time, this helped customers to form ties with the relevant online betting operators - the point being that everyone likes ‘free money.’

This worked to a degree, however, as the saying goes “there is only one winner” - while customers could not argue at the offers, eventually a majority would find that these free bets were being lost and then they would deposit some of their own money to have another go.

As has been proved in other states, especially over the last year - Michigan which launched in January 2021 has continued to set state records for sportsbook revenue, operators can be successful in the US.

To What Extent Could Gambling Addiction Become a Problem in New York?

What is often not realised by many is that the majority of those people who bet the most are usually those who cannot afford to lose it - there have been many cases of this in the UK, especially over the years.

With New York also being one of the most expensive cities in the world to survive in, becoming hooked on sports betting could lead to a major problem in the state, which can then also lead to crime - a city that has long been associated with a criminal element.

One of the main stipulations of the Gaming Commission in the state was that each operator adhered to strict responsible gambling regulations, including KYC (Know Your Customer) checks and offering self-exclusion schemes for customers most at risk.

Certainly, sportsbooks that operate in the state will want to monitor any potential problem gambling - this is also in their own interests. It can lead to a problem gambler stealing funds and committing fraud to fund the addiction.

As a state, New York is relatively new to the dangers of online gambling, which means educating the most vulnerable in society is paramount and making sure that help is available at the same time.

It will also be interesting to see to what extent marketing is allowed and how far firms are allowed to push the limits in the state. Certainly, everywhere you walk around Manhattan, there are multiple opportunities for operators to take up residence with banners, while television advertising may be banned up to a certain time to help prevent underage gambling.

Final Thoughts

While the state certainly has the potential to become the sports betting leader in the US, there are a number of hurdles that it needs to jump first. In what is arguably the most competitive marketplace, making sure that each operator plays by the rules is paramount - each one will be aggressively fighting for the majority share.

Also, California poses an interesting potential threat. If, as is widely expected, online gambling becomes regulated in the state, it could well eclipse New York, with this having the highest population in the country, in addition to just as many sports franchises. However, if one of the major target markets for sports betting, moves its industry (investment banking) out of the state (as has been rumoured), to save on rent, it could well mean that sportsbooks operating in New York potentially lose a significant amount of revenue.

This no doubt will be a market that will be watched closely by the rest of the industry over the next few months and once the NBA and NHL seasons finish, in the next couple of months, it means that the MLB will be the only major US sport to bet on, while the European football (soccer) season finishes not long after. Where the majority of the sports betting handle in the state will come from in the summer, remains to be seen.

For the most successful sportsbooks in the country though - DraftKings and FanDuel among them, following the same blueprint that has got them to this stage and adopting a patient approach should help them to gain a greater bite out of the Big Apple.