FanDuel Pennsylvania Sports Betting Strategy Worked in NJ
PHILADELPHIA – The boundary is as nondescript as the view from the Walt Whitman Bridge, less than a mile from where the leftward veer in Interstate 76 reminds commuters of where they are.
And now, another state where FanDuel seeks to dominate the market.
"I think we will be the significant market leader in Pennsylvania for some time to come," FanDuel chief marketing officer Mike Raffensperger told Gambling.com.
The biggest earner in New Jersey, which is currently the most fruitful sports betting economy in the country, last week came online to accept bets in Pennsylvania, figuratively crossing the Delaware River like George Washington going in the wrong direction.
How well FanDuel replicates its New Jersey dominance and helps Pennsylvania keep the dollar bills home that have so far virtually crossed the bridge is among the most intriguing facets of this next growth of legal sports betting in the United States. As is the fact that the boundary between the two states is no longer a barrier.
“First and foremost, Philadelphia is one of the great American cities. It also happens to be one of the best sports town in the country,” Raffensperger said. “That part is amazing and super-exciting. But just given the geographic nature of where it is, if you actually just look at the media market, the Philadelphia (designated market area), 35 percent of that DMA is actually in New Jersey.”
Pennsylvanians Bordering on Betting Already
Brendan Bussmann, a gambling industry analyst and partner at Global Market Advisors, said FanDuel has inherent advantages to capitalize in Pennsylvania.
"Pennsylvania is a difficult market for any operators because of its high tax rate," he said, referring to the 36-percent level. "FanDuel has the opportunity to move the needle because of its brand ID and established customer base from their fantasy product and existing product in the New Jersey market that has been serving Pennsylvania customers already. Operators that have an existing customer base will always have an advantage in any market provide they continue to have a solid product.
"There are several factors that allow for a sports betting operator to succeed, especially in a high-tax environment. The ability to have an established customer base that offers betters a good experience are two of the most important factors. However, long-term success will depend on continued innovation, having a conversation with the consumer, and growing the base with the casual fan."
Marketing and familiarity will also be a factor, Raffensperger agreed. But he believes Philadelphians are already primed to become new customers. And bet at the border by New Jersey or Pennsylvania customers will no longer be interrupted by technology in place to assure they are wagering where the practice is legal.
“They have been very familiar, and in many cases, including by our company, advertised to in order to reach the New Jersey population or the folks – when there are many – who commute from Pennsylvania and Philadelphia and in New Jersey,” he said. “They've been, frankly, exposed to some of this, but haven't been able to just enjoy it in their home state.
“And, so, we feel not just from a customer experience, but certainly a commercial opportunity, it's a terrific marketplace for us to tackle.”
That FanDuel customers in New Jersey and Pennsylvania will be able to use the same account in either state figures to be good for business for the New York-based company. Ease of payments remains a nettlesome issue for gaming operators in expanding business and carving into offshore markets in newly regulated states.
FanDuel was able to facilitate the process in Pennsylvania.
“It's one account, a single FanDuel sportsbook account,” Raffensperger said. “What we did was work really closely, obviously, with the Pennsylvania Gaming Control Board to ensure that on the back end, it works seamlessly to the customer experience, but we go through their approved (‘know your customer’) and other kinds of regulation and approval process such that both the application is aware of where you are and works independently with the various regulations of either the (Department of Gaming Enforcement) in New Jersey or the Pennsylvania Gaming Control Board in Pennsylvania to meet their requirements.
“But it's all seamless to the customer, which we really cared about and we thought was really important and invested, frankly, a lot of time and resources into.”
Jason Robins, CEO of FanDuel's sports betting and daily fantasy sports competitor, DraftKings, lamented at the ICE North America summit in Boston this spring about the tangle of regulations facing operators attempting to create a so-called “national wallet” that would not require different registration processes in each state.
The overlap of the Philadelphia metropolitan area with New Jersey made a seamless process especially important. Raffensperger would prefer such a system in every state it eventually operates, but conceded, “each state will have slightly different priorities.”
FanDuel Fourth Mobile Player in Pennsylvania
Sugarhouse Online Casino and Sportsbook – whose retail operation is along the river in Philadelphia – was previously the only online purveyor in both Pennsylvania and New Jersey, generating around $2 million in revenue in New Jersey through a partnership with Golden Nugget since its online betting debut on Aug. 23.
But FanDuel, with its self-described daily fantasy and sports betting user base of more than six million, has generated nearly $90 million in revenue in New Jersey since Sept. 1, according to reports from the state Division of Gaming Enforcement.
FanDuel, which acquired its New Jersey “skin” through an association with the sportsbook at the Meadowlands, made its Pennsylvania entry similarly by teaming with Boyd Gaming to open a sportsbook at Valley Forge Casino Resort. On Monday it became the first online purveyor in Pennsylvania to have its app directly available in the Apple Store.
New Jersey and Pennsylvania Similar Opportunities
Raffensperger said there are “more similarities than there are differences” between the New Jersey and Pennsylvania markets, meaning “we have a lot of confidence in our ability to replicate the results that we (have) seen in New Jersey.”
“I think that Pennsylvania got a lot of things right in that it opened up the marketplace to be competitive, and so that there was a lot of market access in partnership with license-holders, but had the right number of skins and availability of the marketplace,” he said.
"They got mobile signup right, so you are able to sign up from your mobile device and you don't have to be, let's say, be on a casino floor or go through some other kind of kludgy process. You can sign up from your couch, which is how basically everybody engages in e-commerce these days."
An expansion of gambling in Pennsylvania began in 2017 with legalization of online casinos and poker and an allowance for up to 14 casinos.
Sports betting was legalized in October and first bets taken a month later at Penn National Race Course. Ten states currently have legal sports betting underway, with eight more in some form of enacting or implementing after passing legislation.
Pennsylvania’s population of 12.8 million – fifth nationally – makes it a compelling market even with a nation-high $10 million one-time entry fee and tax rate. Sports betting is legal in four of five states bordering Pennsylvania and underway in three of those.
Pennsylvania regulators reported a record $3.3 billion in gambling revenue from fiscal year 2018.
According to a report released by the Pennsylvania Gaming Control Board, the figure marked an increase of roughly 2 percent and $60 million. Slot machine and sports betting contributed largely to the increase, while table game revenue fell. Online casino gaming began on July 15.
There are currently nine retail sportsbooks and four online in Pennsylvania. Its state law allows for 12 online providers affiliated with terrestrial sportsbooks.
Pennsylvania Could End New Jersey Rule
The next several editions of monthly gaming financial reports released by New Jersey and Pennsylvania should begin providing indicators of the impact the newcomer will have on the United States’ new leader in sports betting volume.
“I think they're complimentary,” Raffensperger said of the markets. “I think that for those that commute back and forth, they want to have the opportunity to play during their commute, on their lunch break when they're at home.
“I think there's far, far more white space in this marketplace than there is cannibalizing the business. And, so, in my mind, the pie is growing.”
Bussmann expects the real food fight to begin in four years.
"New Jersey currently sees over 40 percent of its wagers within a two-mile radius with heavy clusters around Philadelphia and New York City," he said. "A successful Pennsylvania market keeps those dollars in the state, whether it be around Philadelphia or the Greater Lehigh Valley area. The number that matters for the region is 2023 when you hopefully have the first stabilized year of sports betting revenue once Pennsylvania, New Jersey, and New York all have mobile wagering."
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