Bonus Send: The Changeover To Online Casino Is Happening Rapidly

Occasionally we'll take a break from our pithy texts to bring you a more nuanced take at the intersection of sports, gambling, and media. SI's switch to focusing on casino, which appeared on the website today, is squarely in the wheelhouse. 500 words. 3 minutes of your time. Leggo!

I’ve always been a big fan of the rain-snow line in winter storms.

When will the changeover occur?

You know, that moment when the water becomes beautiful crystalline ice droplets, which you can build a man with button nose out of.

So fascinating.

So dorky.

The online gambling industry in the US faces a similar question. When will the changeover occur?

Only this time it’s about the changeover from sports betting to online casino.

It seems the rain-snow line is now somewhere over SI Sportsbook.

The presumption that Euro gaming giant 888 would be able to build a behemoth of a sports betting app with the SI brand it licensed to compete with the likes of DraftKings and FanDuel was a bit of a stretch.

The potential for a foreign operator to mis-read the market and over-extend itself with a brand like Sports Illustrated was always a risk.

This week, 888 admitted as much and outlined its plans to scale back its blanket sports betting promotion for SI. They will now focus on the handful of states that offer both sports betting and online casino, because people spend (and lose) a lot more money on slots.

This slide from 888’s Capital Markets day this week can’t be what execs envisioned when they invested in Sports Illustrated in early 2021. Specifically, they likely never imagined they’d be talking about focusing on the “unsexy sweet spot” of free spins with the vaulted SI brand:

Two things happened here:

1. They are not the first to bank on [insert large brand] automatically activating its audience to become sports bettors. The Score, FOX Bet, and Fubo all struggled to extract profitable bettors from their respective audiences. In fact, only Barstool, unsurprinsgly, was able to activate its audience and immediately achieve double-digit market share in states when it launched (growth beyond their core audience has been another story, but they got that part right). Sports Illustrated was the brand most likely to overvalue its audience, and that’s what’s playing out here. At least Disney appears to have recognized this before making the same mistake. ESPN doesn’t want to become a casino.

2. As Jason outlined two weeks ago, online casino is much more profitable than sports betting. Specifically, slots. People wager more on slots at a single online casino in Pennsylvania in a month than perhaps on the entire World Cup in the US (subscribe to our newsletter!). Indeed, this is why DraftKings, FanDuel, BetMGM and others are willing to spend more to acquire customers in New Jersey, Pennsylvania, and Michigan, three states with both online sports betting and online casino.

Anyway, the industry’s focus is now on profitability, and the single best way to get there is with online casino. Which is now what 888 and SI will try to do.

Side note: Ironically, SI’s rights holder, Arena Group, reported decent results earlier this month on the strength of growing audience and ad revenue, and its stock has held up well over the last year. A control F for “betting,” “gambling,” “sportsbook,” and “888” in their earnings report yielded no results.