Global gaming giant bet365 has partnered with Churchill Downs Incorporated (CDI) to gain market access to Pennsylvania's major legal sports betting and iGaming market.
The deal, announced on Monday, clears the way for bet365 to continue its ambitious, albeit cautious, expansion into the U.S. market. The Stoke-based operator is among the largest online betting sites in the world, with annual revenues of nearly $4 billion.
Still, it has so far gained only a limited foothold in North America.
At present, bet365 is up and running in New Jersey, Colorado, and now Ohio, having rolled out its sportsbook app when the Buckeye state went live on January 1, as well as Ontario, Canada, where it has gained significant market share since launching in April.
With its prospective launch of sports betting in Pennsylvania (still subject to final approval from the state Gaming Control Board), bet365 has served notice that it intends to capture a small (but profitable) slice of the U.S. online sports betting pie.
"Off the heels of our launch in Ohio, we are thrilled to announce our partnership with Churchill Downs Incorporated," read an official statement from bet365. "Once live, the world’s favorite online sports betting brand will be available to sports fans in Pennsylvania, offering fantastic site features, including Bet Boosts, Same Game Parlay, Cash Out, and Edit Bet, on top of our market-leading sign-up offer."
After Pennsylvania, bet365 operates has plans for a launch in Massachusetts soon to follow — and possibly Virginia in the months ahead.
In the near future, the operator has submitted an application for a tethered Category 3 license in Massachusetts. The Massachusetts Gaming Corporation (MGC) is expected to approve the company's license in the coming weeks, in advance of a tentative March rollout of online sports betting in the state.
CDI winding down online gaming operations
By partnering with bet365, Churchill Downs is carrying through on its February 2022 strategic decision to focus on core operations and withdraw from the consumer-facing portion of the mobile sports wagering industry, citing concerns over long-term profitability in the highly competitive market.
"We are pleased to partner with a global leader in the online gaming industry,” said Bill Carstanjen, CEO of CDI. "Our relationship with bet365 enables us to maximize the value of our company's sports betting and iGaming market access in Pennsylvania."
However, CDI intends to retain its presence in the retail sports betting sector by continuing to offer mobile wagering on horse racing via its TwinSpires app while monetizing its existing sports betting and gaming licenses.
"The bet365 agreement is consistent with CDI’s strategy to exit the online sports and casino business, monetize the Company’s online sports and iGaming market access rights, and remain focused on growing the TwinSpires online horseracing wagering business.
Pact comes on heels of disappointing full-year earnings
News of bet365's Pennsylvania pact comes only a few days after the UK operator reported a calamitous 90% fall in profits, from $545 million to $60 million, in the fiscal year ending in March 2022.
Despite a substantial 25% rise in overall gaming revenue, bet365's legal sports betting earnings dropped 2% in the period from March 2021 to March 2022.
The operator attributed the shrinkage in bottom-line profits to the $385 million it spent on "increasing brand awareness in new markets," which saw bet365 launch in Argentina, Colorado, Ontario, and the Netherlands.
These figures illustrate the high costs of establishing a market presence in new territories and possibly explain why the UK giant has adopted a go-slow approach in the U.S., where customer acquisition costs are high, and competition is particularly intense.