Kindred Group’s flagship brand Unibet is a big deal in Europe. In the US, not so much.
Unibet Casino is available in New Jersey and Pennsylvania but doesn’t hold much market share in either. Until this week, the sportsbook alone was available in a further four states. However, it announced Thursday that it would shut down operations in Iowa. (Internationally, Unibet also has a poker product but has not attempted a US launch in that vertical.)
CEO Henrik Tjärnström told investors that the plan was to “focus more on multiproduct states.” That presumably means New Jersey and Pennsylvania. Other states have legalized online casinos, but Michigan and Connecticut have no available licenses, while Delaware is a lottery monopoly. That leaves West Virginia, but it may be too small a market to be attractive.
Unibet also has market access rights to Illinois and Ohio. From the sounds of things, though, it may not exercise those options unless those states authorize more than just online sports betting.
In the presentation of Kindred’s Q3 results, the company asserted that it wouldn’t leave the North American market entirely. It says it hopes to make Unibet a top-ten operator in those states it does target. That’s a relatively modest ambition, yet it would still take some work for Unibet to get there. In the meantime, Kindred has several higher priorities to deal with.
Busy Times for Kindred Overseas
Faced with disappointing numbers in the US, Kindred will naturally want to prioritize the markets where it’s doing well.
For starters, it has recently relaunched as a regulated operator in the Netherlands. That follows a nine-month blackout period during which it had ceased gray market operations to seek a license.
On that front, at least, things have gone well. Its Q3 report describes the new site as being off to “a flying start.”
There’s also the World Cup to look forward to next month, which always drives a huge surge in betting action for European sportsbooks.
On the other hand, Kindred also has some difficulties to tend to. It’s fighting a legal battle with Norway, an important gray market whose local government monopoly is trying to force it out.
Then there’s its self-imposed commitment to achieve zero revenue from problem gambling. The company promised to accomplish that goal by the end of 2023, but it’s proving more difficult than expected.
When it announced the objective in 2020, Kindred said it had found that 3.9% of its revenue came from high-risk bettors. For the first half of 2022, that figure sat at 3.2%. In Q3, it bounced back to 3.8%.
Facing a similar backslide last year, Kindred pointed out that there is some seasonality to problem gambling stats. But even looking at things year-to-year rather than quarter-to-quarter, it seems that progress is very slow. With time running out on its self-imposed deadline, Kindred will have a lot of work to do in 2023.
What Does a Top Ten US Operator Look Like?
When speaking to investors, companies naturally want to put a positive spin on things. Saying that Unibet will be a “top ten” operator in select states implies membership in an elite club. However, given that a small number of national operators dominate the US market, being in the top ten is more of a precondition to staying relevant at all.
Considering the Michigan market gives us an idea of what this looks like. Unfortunately, Unibet doesn’t operate there. However, it’s the only large state which reports revenue for individual operators, thanks to the one-brand-per-partner rule.
The same Big Three that dominate the national market also hold the top spots in Michigan: BetMGM, DraftKings and FanDuel. Together, they had 70% of the online casino market in September and accounted for almost 80% of sports betting handle.
The fourth place for casino is BetRivers, with a 6.4% market share, while Barstool takes that spot for sports betting, with 6.1% of September handle.
Then there are 11 other operators fighting over the remaining crumbs. In Michigan, being a tenth-place operator means having about 2% of the online casino market and less than 1% of sports betting handle.
Indeed, that’s roughly where it is in Pennsylvania. Although many Pennsylvania licensees partner with multiple brands, Unibet is the sole partner of Mohegan Sun Pocono. Thus, we can see that it accounted for 1.7% of online casino revenue in September and 1.0% of sports betting handle.
A Difficult Climate for Smaller Operators
That said, even if Unibet is close to being a top-ten operator in Pennsylvania, it may not stay there. At one time, it held over 10% of the Pennsylvania online casino market. By this time last year, it had already dropped to 2.1%. An additional drop of 0.4 percentage points wouldn’t be worrisome for a larger operator, but it shows that Unibet’s position is still eroding in proportional terms.
The US, in general, has not shown itself to be a friendly market for bit players. Its enormous potential has attracted a lot of contenders. Yet just a few years in, we’re already seeing attrition start to occur. Just this year, we’ve lost several brands from the US online betting space:
Part of the reason may be the liberal marketing expenditures by the likes of DraftKings and Caesars. As unpopular as those are with investors, they create an inhospitable climate for competitors who are unable or unwilling to spend at that rate.
Organic Market Growth Won’t be Enough
The silver lining is that the market is still growing, and Unibet benefits from that. Kindred reports that – excluding the newly-created Ontario market – its revenue from licensed North American activities grew 7%.
However, that’s still much worse than it would be if Unibet were holding on to its market share. According to the American Gaming Association, year-to-date iGaming revenue in the US is up almost 40% from 2021, and sports betting has gained nearly 50%.
Of course, that includes some newly-launched markets, but the same is also true for Unibet. Its launches in Indiana, Arizona and Iowa all happened in either Q4 or the very end of Q3 2021.
Even well-established states are growing, usually by double-digit percentages. Looking at Pennsylvania again, for instance, the state’s online casino revenue has risen 28% year-to-date versus the same period in 2021, and online sports betting handle is up 17%. On the other hand, Unibet has lost revenue and handle there, as well as market share.
So, as modest as its ambitions are, there’s work to be done in the US if it doesn’t want to end up being forced to throw in the towel in other states as it has in Iowa.