It’s the beginning of September, and you know what that means — the glorious return of the NFL! Words cannot express how excited I am for this season to get underway. Being a huge Steelers fan myself, I’m very interested to see how they’ll perform now that their quarterback, Kenny Pickett, is no longer a rookie (although I am considerably less excited now that I witnessed the disaster of a game that they had against the 49ers). However, the return of the NFL also brings back something equally as good — Fantasy Football! For all those Fantasy Football players out there, I’m sure you all are just as excited as I am to see our records go from 0-0 to 1-0 (that is, if Josh Allen performs well tonight).
Fantasy Football is one of the most popular methods for sports betting, with some of the biggest sports betting companies like DraftKings and FanDuel hosting fantasy football platforms of their own. However, despite the enormous amount of people who play fantasy football and participate in sports gambling, these companies may not be as successful as you may think.
Since becoming legal in 2018, the sports betting industry is huge nowadays, boasting 60 million players and $8 billion in revenue. The industry became competitive due to the dot com boom, which saw a rise in the use of the Internet and digital devices. Unfortunately for sports betting companies, most operators haven’t made a profit. Sports betting companies usually return the money to people who lose their bets, of which there are decidedly more than people who win their bet. As a result, sports betting companies in most states only keep less than 10% of the bets placed on their platforms, contributing to lower profits.
Moreover, sports betting companies spend exorbitant amounts of money on advertisements and promotions. Think of all the DraftKings, FanDuel, and Caesars commercials you have seen on TV. In fact, DraftKings spent $1.19 billion solely on marketing and advertising activities, making ads and marketing a huge money drainer for sports betting companies.
Lastly, sports betting companies’ low profitability has to do with its novelty as an industry. In 1992, Congress passed a law making sports betting illegal across most of the US. That law was only reversed in 2018. As a result, only 36 states have completely legalized sports betting, leaving out a substantial amount of potential players and subsequent profits.
The future of sports betting is somewhat uncertain. However, sports betting company CEOs are becoming increasingly optimistic about their futures, a sign that sports betting companies are here to stay. Although I may not know for sure the future of the sports betting industry, I know one thing for sure: I’m never waiting until the later rounds to draft a running back ever again.
Sources:
Bloomberg
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