By Peter Lynch
Speaking at Kambi Group’s virtual Capital Markets Day on Tuesday, CEO Kristian Nylén, COO Erik Lögdberg, EVP Business & Group Functions Cecilia Wachtmeister and CFO David Kenyon discussed the group’s plans to accelerate its success in the global sports betting market.
After an initial discussion from Nylén on the importance of outsourcing, Lögdberg delved further into outsourcing as a model, and the intricacies involved in modern-day sportsbooks.
“In the first few years of Kambi, we worked to establish a new model; the model of outsourcing as a viable option in the market to create the sportsbook,” explained Lögdberg. “And in the last few years, this model has really proven itself. I think it's safe to say you can see the efficiency both in our customers' results as well as of course in our own balance sheet.
“And we now have many operators across the globe in partnership with us going head to head with the leading B2C sportsbooks, and they do this at a lower cost.
“Despite this, however, outsourcing as a model has not yet established itself as the obvious choice of how to do sports betting; and this is, of course, where Kambi wants to take it, and where we think we can take it.”
We believe Illinois can be a €1bn ($1.19bn) GGR (gross gaming revenue) sports betting market by 2026. Pennsylvania could be a €900m GGR market, and New Jersey €700m. And looking at the next phase of regulation, the standout state in terms of size is New York at €1.5bn GGR potential in our estimation David Kenyon, Kambi CFO
With the presence of sportsbooks growing exponentially all over the globe, Lögdberg did, however, warn that there lie many challenges in their production, particularly when it comes to regulation.
“The production of a sportsbook has become so complex and so costly, that only delivering the bare minimum to operate safely is a major challenge,” he said. “Because of regulatory changes, the number of different sets of offerings that Kambi needs to maintain and guarantee regulatory compliance with has exploded.”
Wachtmeister then analysed Kambi’s global reach, with a particular focus on the company’s US operations, and indeed the potential of the US sports betting industry in general.
Since PASPA was repealed in May 2018, Kambi has launched in 14 states. “The US was always a major opportunity for Kambi, and we had our eyes on the United States well before the repeal of PASPA,” noted Wachtmeister.
Kambi, unlike many of our peers, has constantly and consistently avoided the temptation to move and operate in markets where sports betting has been forbidden Cecilia Wachtmeister, EVP Business & Group Functions
She continued by suggesting the reasons behind the group’s growth in the US market: “First of all, we have a long experience in Europe, and with that, we were part of managing the shift from .com to .country, which meant that we were ready for this state by state approach that the US took."
Another reason behind the group’s growth, according to Wachtmeister, is that “Kambi, unlike many of our peers, has constantly and consistently avoided the temptation to move and operate in markets where sports betting has been forbidden. We have a very clean track record, and we also put pride into the fact that we are a listed company, with transparent ownership."
She added: “This is something we believe has gained the trust of prospective partners, and of regulators, which in turn has resulted in us being able to obtain the necessary licences in a relatively fast and easy way.”
Kenyon also evaluated Kambi’s progress in the US, highlighting the company’s partnerships with the likes of Penn National Gaming, DraftKings, Churchill Downs and Rush Street Interactive.
“It’s a market where regulatory and technical compliance are key,” explained Kenyon. “Each state has different demanding requirements, and we can handle them thanks to our corporate technical and operating infrastructure.”
He picked out the key states in the market that are currently showing the greatest potential, as well as the states that could show rapid growth in the near future.
“We believe Illinois can be a €1bn ($1.19bn) GGR (gross gaming revenue) sports betting market by 2026,” said Kenyon. “Pennsylvania could be a €900m GGR market, and New Jersey €700m.
“And looking at the next phase of regulation, the standout state in terms of size is New York at €1.5bn GGR potential in our estimation. Ohio can be a sports betting market of €700m, and Arizona €400m.
“All in all, we think the total addressable market in the US for us by 2026 is in the range of €15bn-€20bn.”