Canadian sports-betting firm FansUnite doesn't want your bets

FansUnite Entertainment (FANS.CN) makes most of its money from a sports gambling website it acquired last year that "strives to be the number one choice for Scottish punters." McBookie's U.K.-centric menu of sports-betting action lists two kinds of rugby, and something called Gaelic hurling, among its offerings.

Given the lofty expectations for legal single-sports betting in Canada, one might expect the Vancouver-based firm to launch a sportsbook for Canadian hosers to bet on hockey, curling, and lacrosse. However, CEO Scott Burton isn't sure a Canuck cousin to McBookie is the best play for his company. That's because of how the industry is taking shape in the United States.

"You've got some very big brands that have extremely big budgets, and spend a lot on customer acquisition. They're willing to go quite some time losing money on their users just to get the biggest piece of the pie," Burton told Yahoo Finance Canada in a phone interview.

"That doesn't necessarily play well for a Canadian small cap like ourselves."

The United States has had a three-year head start on Canada, which legalized betting on individual sporting events last month. Canadian sports fans were previously limited to wagers spanning multiple events, known as parlays. The change has caught the attention of big land-based casino operators, as well as large digital sportsbooks like Boston-based DraftKings (DKNG) and Australia's PointsBet (PBH.AX), who see a lucrative emerging market.

Analysts expect Canada will be the next big front in the advertising and marketing war raging in the U.S., as the provinces and territories open up to private operators. Chad Beynon, a New York-based analyst with Macquarie Capital, recently pegged the cost of acquiring sports-betting customers at as high as US$700 each in states where sports betting is legal.

FansUnite acquired McBookie in March 2020 for $2.2 million, shortly before the company went public on the Canadian Securities Exchange. In its latest quarter, the Scotland-focused sportsbook accounted for 92 per cent of the company's $1.07 million in reported revenue.

While FansUnite relies directly on the betting public today, Burton would rather sell the company's technology to big gaming operators than compete against them in his home market.

"We do see a big opportunity in the technology provision side of things. Let the other operators like FanDuel and DraftKings and MGM and Penn Gaming in the U.S. go at it on the direct-to-consumer front,” said Burton, who joined the company when it acquired another Canadian gaming firm in August.

"If it doesn't look like we're going to be a technology provider to anyone significant in Canada, then we'll probably look to enter directly ourselves."

Unlike many rivals in the sports-betting industry, FansUnite does not rely on partners for its technology. The company has a unique platform for sports and esports, which includes pre-match betting, in-play betting, daily fantasy content, as well as a certified random number generator to produce casino-style chance games.

FansUnite has licensed its business-to-business technology in several jurisdictions in Latin America and Europe. The company expects selling the technology to power digital sportsbooks will be a winning bet in Canada, with major companies from media conglomerates to sports leagues looking to offer betting, esports and online casino experiences.

While Burton isn't totally ruling out a Canadian McBookie, he's not assuming FansUnite or its gaming peers would have a meaningful homefield advantage when it comes to luring Canadian customers.

"There may not be a big advantage to the Canadian groups, other than the ones that already own the media," he said. "Groups like Rogers and Bell, I think they have a good shot at capturing good market share."

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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