The gambling industry has been part of our culture for centuries, and not just since the advent of casinos. Historians estimate that gambling began before written history, around 3000 BC when it’s estimated the first six-sided dice were used.
According to a 2014 American Gaming Association study, the gambling industry was worth $240 billion, including providing $38 billion in local, state, and federal taxes. It also employed 1.7 million people in 2013.
Since that time, the US has legalized mobile sports betting in 18 states and counting, giving sportsbook operators the opportunity to reach millions of people worldwide without having to own an acre of property.
Moreover, major gambling companies like FanDuel, DraftKings, and PointsBet don’t own a single in-person casino. DraftKings (NSDQ: DKNG) is one of the largest gambling companies on the New York Stock Exchange. Second only to Las Vegas Sands (NSDQ: LVS); DraftKings focuses solely on its in-app experience and software application.
COVID-19 notwithstanding, the act of walking into a casino and placing a wager will never go away. However, the emphasis on mobile betting has never been bigger.
As more gambling companies become tech companies, the industry will look much different in 20 years than it does now.
What Makes A Tech Company?
Defining a tech company is difficult because there are so many. In fact, there are over 557,000 companies categorized as tech businesses in the US alone, all within different industries and verticals. How to identify a company as specifically a tech company requires defining our terms.
TechNation.io defines a tech company as, “a business that provides a digital technical service/product/platform/hardware, or heavily relies on it, as its primary revenue source.”
Looking at the major technology companies in the United States, we see a widening range. Apple’s main product is the iPhone which features hardware and its iOS software. There are also tech companies with no physical products like Spotify’s music stream platform and Oracle’s enterprise database software.
By that broad definition, we can certainly see how companies investing heavily in software and programming like FanDuel and DraftKings can meet the criteria to be defined as tech companies. Furthermore, when DraftKings went public in April, it was explicitly referred to as a tech company rather than a gambling company. SBTech Chairman Gavin Isaacs said at the time,
“The combination of DraftKings and SBTech brings together two tech-native companies with the customer at their cores.”
Their tech investment strategy is clearly working out. In October, DraftKings peaked at $64.19 per share with a more than $20 billion market cap.
The Transition Has Already Started
PointsBet CEO Jordan Atkins, in an interview with SBC America, discussed the changing landscape of the business as it marches towards digital.
“Modern sports betting is ultimately a technology business. To not have full control of your technology will never truly allow a business to build and maintain competitive advantages in such a competitive space like sports betting, an area PointsBet has focussed on from day one. PointsBet owns and controls its technology in-house, as well as managing its own trading and risk in-house.”
PointsBet features a $1.66 billion market cap while owning a proprietary betting system called “PointsBetting”. The high-risk, high-reward betting system is one of their biggest claims to fame, along with their aggressive free bets and bonuses. Available in just four states, PointsBet is one example of a company prepared to take the world into the future of gambling with technology at the core of its strategy.
They are not on the same level as the gambling giants, of course. Caesars Entertainment (NSDQ: CZR) is one of the largest casino companies in America. In September, Caesars purchased William Hill Sportsbook for $3.7 billion. With intention of launching the largest online sportsbook in the country, Caesars is beefing up its technology portfolio while creating a gambling conglomerate.
With locations in 13 states, Caesars’ push for gambling dominance could become reality as it transitions resources to mobile betting.
Perhaps also reading the tea leaves, MGM, Golden Nugget, and Penn National Gaming have begun intensely focusing on bringing mobile betting to the consumer. With gambling industry players of this magnitude already making moves to become as digital as possible, it’s easy to see the trend continuing market-wide.
Once sports betting is legal nationwide, mobile betting will be cheaper to operate, be more widely available, and easily controllable. As the gambling industry continues to evolve to serve changing customer habits, their most valuable asset will be their technology.
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