The more things change …
You ask me, there’s been more above-board talk of whales in the online sportsbook universe in the last few weeks than in the last few years.
While the above is obviously an unscientific assessment, I’m not sure it makes it any less true. Honestly, it’s really the first real chatter I’ve heard. Apparently, whale hunting, whale capturing, the mere existence of whales isn’t something routinely chatted about in the still-nascent world of legal online sports betting.
But that changed, mostly due to DraftKings.
For starters,second biggest sportsbook in the state by gross gaming revenue in March, toppling DraftKings.
“I’m hearing this is all because of one player that moved over to Fanatics,” an industry source told me. “He’s the biggest legal player by far. Makes Ippei look like child’s play.”
The gang at Eilers & Krejcik Gaming heard much of the same, detailing it in their EKG Line newsletter.
“We understand that surge is driven by a very small number of VIPs, which is reflected in the monthly volatility — from $28mm GGR in January to $7mm in February, back to $20mm in March,” they wrote.
Both the industry source and EKG note the same thing: The VIP(s) in question almost certainly waltzed over to PointsBet from DraftKings, as that company’s monthly take decreased.
Which brings us to the second point of whale-ness: Fanatics and DraftKings’ very public spat over the fate of Jon Hermalyn, who used to head VIP operations at DraftKings before bolting for Fanatics and a similar position.
Two weeks ago, in open court, we found out the millions of dollars Hermalyn and his cohorts make in an effort to lure VIPs to their respective sportsbooks. DraftKings is seeking to prevent Hermalyn from working for Fanatics in the first place (citing a non-compete agreement), as well as from taking customers with him.
That’s messy, but for long-term watchers of the gambling space, these stories — and who knows what other VIP madness lurks beneath the surface — brings to mind a series of questions. They are, in order:
VIPs?
In the sportsbook?
For real?
Casino only 1u3hu
“We just didn’t cater to them,” said longtime casino executive Richard Schuetz. “We’d cater to the high rollers in the table games department. Let’s say a guy lost a few hundred grand on baccarat. And let’s say he wanted to bet $10K on some small college. That’s a bet we’d never take, but for him, you’d take it because if he lost, we’d win, and if he won, he’d put it back in the casino.”
Robert Walker, the longtime oddsmaker who ran the book at the Stardust and MGM Mirage, had the same things to say.
“Whales or VIPs would always come from the casino side,” Walker said. “They would be the individuals betting $25,000 or so in blackjack, and it would be hard for us to tell them they could only get $2,000 on an NBA total.”
Both Schuetz and Walker concede they didn’t turn their nose up at the sports bettors, and they did all they could do to make them happy, but red carpets and trumpets were reserved for high-end casino players.
“We’d have trips to the Super Bowl, we’d take them to Alaska for a week of fishing, we’d put them in the best seats for the boxing matches, golf tournaments, we once took some to the Grand Canyon,” Schuetz said. “A trip to a Macau property on a private plane, individual hostesses for each guest. On the high end casino side you treat ‘em well. You just didn’t see it with sports betting.
“Billy (Walters) bet with us at Stardust,” Schuetz continued. “But we didn’t do him any favors.”
Walker said he and his team would do what they could to help out big sports bettors, but it was nowhere near top of mind.
“Our goal was to accommodate them whenever we could, but we never coveted those players,” he said. “We did not have any sports VIPs back then to speak of. We worked closely with the casino to identify ratings. All casino players were rated and we used that rating to extend. We did not worry if VIP won or lost, as the theory was they would give it back in the casino, although more than once I had to remind execs that a VIP negatively impacted our bottom line during quarterly P&L meetings when he beat us.”
But today, a different world.
Well, kind of.
At least for now.
At least for some.
Trojan horse? 732t1z
“It’s been clear since deciding to get into OSB that Fanatics has wanted to invest heavily in VIP,” said Dillon Borgida of Betonu, and former VIP leader at DraftKings and FanDuel. “I do think it’s the right approach, especially given [Fanatics founder and CEO Michael] Rubin’s connections. That said, I’ll be curious to see how sustainable this VIP lift will be since it seems to be a very small group of New Jersey players.”
Chris Grove of Eilers & Krejick doesn’t think the sportsbooks are doing anything different than what other companies in other industries have done forever.
“Power s are important to a range of consumer businesses,” he noted. “Sports betting isn’t especially unique in that sense. You’ll see a top-heavy model at a lot of digital gaming companies, at a lot of travel and leisure companies, and across several consumer goods companies. Gambling is far from the only business that leans on VIPs.”
And Grove recognizes the drive for VIPs in the online sports betting business is very important to would-be market leaders.
“The legal battle between DraftKings and Fanatics is a good reminder that the VIP business is a material and important one to just about any operator with an ambition to ascend to a market-leading position,” he said. “[But] the concentrated nature of VIP play and the competition for those players mean that the ultimate value of VIPs may not be as significant as the GGR numbers of a given operator suggest.”
So VIPs are important to the online sportsbooks, whereas they weren’t terribly important to the old-school brick and mortars.
If you sense a “but” coming …
But bear in mind there are currently only seven states where online casino is legal, New Jersey being one of them.
“Retail casinos did not historically incentivize sports bettors, but on the digital side, both groups are taken care of with very similar perks and rewards,” said Borgida. “I think this has been a winning strategy for Fanduel and DraftKings. They were first to the punch incentivizing sports betting players which created strong loyalty. Some of those players then end up as top casino players.”
Follow-up questions on the topic were sent to Grove at EKG. Here they are, in their entirety:
“Do you think/know if the VIP programs are more ‘robust’ in the iCasino states? And do you think when/if more iCasino states come on board, more attention will be paid to VIPs in that space?”
His answer was as succinct, to the point, and resolute as humanly possible.
“YES AND YES,” all-caps.
… the more they stay the same.
