What Next For Kambi?

For the Kambi Group, 2019 has been a year of ups and downs. The first half of the year was fairly successful, with the company reporting a 25.3% growth in revenue. However, the end of the year hasn’t been so good. In December, the group’s share price experienced quite a significant fall of 35%. The reason for this significant plunge was that the company’s partner announced it was going to be purchasing its main competitor, effectively negating Kambi’s chances of operating successfully. So how did this all come about and what does the future hold for Kambi?

DraftKings is an American company that was founded in 2012 and specialises in both sports betting and fantasy sport. In 2018, DraftKings became the first legal mobile sports betting operator in New Jersey, following the state’s decision to relax its gambling laws; the company’s since expanded to several other states. The Kambi Group operates as a B2B (business to business) provider of various services to do with sports betting. It currently provides DraftKings with its online gambling platform. DraftKings is one of the top US betting brands, along with competitor FanDuel, both of which focus on the same areas of gambling.

Earlier in 2019, it was rumoured that DraftKings was looking to expand into more areas of gambling, enter more states throughout the US and eventually enter foreign markets as well. To facilitate this, the company was reportedly going to merger with SBTech, a provider of technology for the sports betting industry firms like Rizk Casino. It was recently announced that DraftKings have in fact gone ahead and acquired SBTech. Technically speaking, the two separate companies are actually being acquired by Diamond Eagle Acquisition Corporation, which on completion of the merge will change its name to DraftKings.

There are several reasons why DraftKings has gone through with this and most of them are to do with the company’s long-term expansion goals. Right now, DraftKings is mostly focused on the US market, while SBTech has mainly worked in the European market. Following the merger, DraftKings should be able to expand into Europe much more easily and quickly.

There’s also the fact that DraftKings is looking to expand beyond sports betting and fantasy sport. With the merger of SBTech, the company’s hoping to take a slice of the online casino market. Online gambling is technically illegal in the majority of US states, though in recent years, a few states have adopted a less restrictive approach to online gambling. If more states continue to relax their gambling laws, this could create a potentially huge US online gambling market - this is what DraftKings wants to be a part of.

In short, DraftKings has long-term expansion in mind and has partnered with SBTech to realise its goals. The company extended its contract with Kambi just a few months ago in August. There’s a good chance that this contract will be terminated thanks to the SBTech merger. Looking forward, Kambi has something of an uphill battle on its hands. If more states do go ahead and loosen their online gambling laws, Kambi will have to really try hard if it’s going to take a slice of this growing market. Since it likely won’t be able to rely on its partnership with DraftKings, it will have to establish new partnerships with other similar companies if it’s going to stand a chance of succeeding. It’s going to face a lot of competition, especially since SBTech is already very well established, with more than 50 partners in over 20 jurisdictions.

When Kambi’s contract with DraftKings was extended, it looked like the two were going to be doing business together for quite some time. However, the merger with SBTech and DraftKings’ expansion plans have seemingly put Kambi in the difficult position of having to build itself back up again.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.