As more and more states legalize online sports betting and eventually online casinos, tribal nations with existing casino operations are faced with a need to adjust to an unfamiliar space in digital gaming.
The immediate decision for many tribes who have the right to offer mobile betting is between two paths: one where the tribes own and operate their own platform with the help of third-party vendors; and one where the tribes sell their market access to a commercial operator.
“Digital gaming is the future,” said Luisa Woods, vice president of marketing for Delaware North Gaming. “You ultimately can’t avoid it.”
“There is no entitlement for gaming operators to exclusively offer digital gaming, so there’s a necessity to evolve and compete.”
Each path has its own pros and cons and experts point out that there is no one-size-fits-all approach for tribes that have their own differences.
“There's no right or wrong answer on that, they're both legitimate ways to pursue it depending on what the opportunity is, where the property might be located,” said Joe Asher, president of sports betting at IGT. “But I think it's a big opportunity, the key is obviously to become educated, learn about the opportunities, and then decide which approach is best.”
Among the considerations for tribes is assessing their markets, in terms of size and the type of product that can be offered, but also the risk tolerance of the tribe itself.
“There's not a unanimous thought across every tribal nation it's about trying to get a consensus as much as possible because not everyone is going to be in agreement on whether we should do this ourselves and invest that risk capital versus take a revenue stream in and take that money off the table,” said Melissa Blau, director of iGaming Capital. “You will not have consensus there but it's about making sure everyone's voice is heard.”
The pros of the selling market access approach, Blau said, are a significant upfront payment, plus an ongoing revenue share and, depending on the partnership, potential access to another sizeable player database.
The biggest negative, she pointed out, is a loss of control of the customer.
"When your customer leaves, your partner now has an opportunity to communicate with that customer when they're not on-premise, and you've now given that away.”
It is for that reason that Woods believes in the self-operating model for tribes.
“It's certainly easier, and certainly tempting, when [an operator] is prepared to cut you a really big check to gain access to your license, to gain access to your property, to gain potential access to your database to leverage those things to build their business, but they're not doing those things because they're stupid, they’re doing those things because, without them, they cannot build their business,” she said.
“Having insights into who your customers are, and being given the opportunity to engage with those customers is, to me, the most critical piece of expanding your business into digital gaming,” she continued. “If you can't do that you have no way to drive them back to your land-based business.
One added challenge though, Blau says, is that third-party vendors are currently stretched thin with the heavy demand for sports betting knowhow.
“A lot of the third-party vendors are struggling right now because they're being asked to do so much,” she said, pointing out that vendors are tasked with improving operations in existing states and launching in some cases multiple operators in new states, while also adding new clients.
“They're kind of taking it on three levels and they’re all a bit stretched right now,” she added. “And so that's why there's been this growing trend, especially for the large guys to own it themselves.”