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Erik Lögdberg, MD of Kambi Sportsbook, talks to NEXT.io about challenges and opportunities in the wake of a leadership transition, as well as the future of AI and expansion plans in Latin America.  

As an ever-present member of the Kambi team, Erik Lögdberg has rarely witnessed as much development at the company as he is seeing now.

The MD, Kambi Sportsbook has been with the sports betting supplier since its inception in 2010, when it launched as the in-house supplier to Unibet (now Kindred Group), where Lögdberg worked for five years prior to his move to Kambi. He has previously held the positions of Kambi deputy CEO and COO.

The ensuing 14 years have brought with them, among other highlights, Kambi’s spin-off from Unibet in 2014, a listing on the Nasdaq First North Growth Market in the same year, and a partnership with DraftKings that saw the supplier process the first legal wager in New Jersey in 2018.

Change at the top

In 2024, there is plenty for Lögdberg and the Kambi team to address; not least how it adapts to a new leader.

In January, Kristian Nylén, the Kambi CEO who co-founded the business with Anders Ström, announced his intention to step down by the end of this year. A search for his replacement is ongoing, with Nylén a nominee to take a seat on the Kambi board upon leaving his current role.

This situation means that when speaking to someone with Lögdberg’s experience, there is of course an elephant in the room. The step up to CEO may feel like a natural progression for him at this point, although this is more likely a question for the Kambi board to answer.

Delving in to what a post-Nylén Kambi may look like, Lögdberg says: “First of all, I’m happy for Kristian. He certainly worked hard for Kambi for a long time.

“I think it comes at an interesting time for us, especially with the changes we’re making like modularisation. I think it’s a new era for Kambi, and if we can find the right leadership for that, it could be a really exciting time for us.”

A new structure

The modularisation strategy Lögdberg refers to follows some M&A activity which has led to an alteration in the company’s structure. While Lögdberg himself remains in charge of the sportsbook department, the supplier is now split into other divisions.

Tzeract, named after the four-dimensional hypercube shape tesseract, launched shortly before this year’s ICE London in February. It is focused on the future of trading and artificial intelligence (AI).

Tzeract joins Abios, Kambi’s esports module which it acquired in a deal worth up to SEK270m (€23.5m) in 2021, and Shape Games, the front-end specialist bought by Kambi for up to €78.1m in 2022.

Lögdberg elaborates: “This has brought about big changes for us. In 2021, we said sports betting is becoming so vast, that we should probably prioritise specialisation more so than deep integration. That’s the journey we’re going on now – offering operators a solution to upgrade their entire sportsbook or evolve their existing one with select modules. Making communication work now within the group across the different modules is the challenge.”

Reading between the lines, this strategy is designed to emphasise to sports betting operators that different parts of their operations can be outsourced to sports betting suppliers. The issue of whether the narrative is shifting back towards third-party suppliers, particularly in the US, has been explored before by NEXT.io.

One of the more notable cases of an operator going in-house was Penn Entertainment’s decision to transition away from Kambi to its own proprietary technology.

Lögdberg says: “What’s important is that it doesn’t have to be us that provides everything to an operator. They can take control of some elements, and if they want to, they can use another third party and have them integrate into their platform. Outsourcing and developing in-house doesn’t have to be a black-and-white issue; it can be a mix of the two.”

Fully-powered AI trading is coming

Focusing on the newest member of the party, Tzeract, the division touches on a point of interest across the industry. AI is not a new topic on the agenda, but it comes up frequently in panel discussions, and its impact on sportsbooks going forward is yet to be fully nailed down.

Lögdberg particularly has his eye on bet builders, believing more information should become available to the end user. “Even today, I still don’t think we’re seeing fully AI-powered trading, but I think it’s coming, and I think it will come through more complex offerings,” he says.

“Today, it’s primarily through things like bet builders and player props. You’re moving away from having all the money on what is really quite easy to price. You have huge markets to compare those odds with. You’re moving towards distributing that turnover on far more complex products where there is no comparison.”

He adds: “You’re all on your own as a sportsbook when you offer bet builder odds or when you offer hundreds of player props. It’s much more difficult to price and you have no market to rely on.”

This could perhaps be compared with the development of in-play betting, where human input for the product gradually declined following its introduction in the 2000s.

Lögdberg says: “When in-play started, it was just a race to get those events and markets out there; people weren’t so worried about whether the prices were right. Bet builders and player props are at the same early stage, where there aren’t really high demands from the end user at this point.

“If you look at sportsbooks with bet builders now, the margins are probably 25%. The optimal margin in a casino is about 3%, so is that the right level? Probably not, but for many sportsbooks, they’re not able to offer it at lower margins because they will be beaten by sharp players.

“I think in general players do notice whether they have money left to bet with, and if you raise the paybacks for the end user, they will be happier with your product.”

Americas key to recovery?

When Kambi’s full-year 2023 results were published following this interview, Nylén said he was “not satisfied” with the performance.

Revenue was up slightly to €173.3m from €166m for the full year, but Q4 revenue was down year-on-year from €57.8m to €44.3m. This was put down to a few factors, including less revenue from Shape Games than anticipated and smaller than expected revenue contributions from two of its largest partners.

It is undeniable that expansion in the Americas will play a strong role in determining whether Kambi can deliver future success. For Q4 2023, 54% of Kambi’s revenue was generated from the Americas, with 43% emanating from Europe.

Looking at the US specifically, Kambi’s initial position of strength was hampered by DraftKings’ business combination with rival sports betting supplier SBTech in 2020 and the aforementioned changes to its partnership with Penn Entertainment, although Kambi is still partnered with Penn Entertainment in retail venues.

Kambi is still live in 23 US states, however, and is partnered with the likes of Rush Street Interactive and betPARX, alongside Bally Bet, a new partnership for Kambi in 2023 after the operator decided its previous in-house sportsbook strategy was a mistake.

Regarding potential future growth in the US, Kambi is keeping a close eye on regulatory developments in California and Texas. While no immediate legislation in California is expected, a sports betting bill in Texas last year at least had the backing of major sports teams in the state.

Should both states regulate sports betting, it would open up a combined population of about 53 million adult residents, or roughly 20% of the entire US adult population. While that would appear a lucrative opportunity for Kambi, those states would likely be dominated by the duopoly of FanDuel and DraftKings, neither of which are powered by Kambi.

But Lögdberg remains bullish. He says: “They [California and Texas] might bring a different regulatory climate, due to the influence of the tribes. Then there’s the retail element, which is interesting to us. That obviously favours the tribes and the local operators. We have a really good historical track record with tribal operators [such as Mohegan Sun and Seneca Resorts]. It all depends on regulation.

“The tribes are immensely strong in California, so it might come down to who they partner with, and it may not be so easy for those leading operators to come in and take 80% market share.”

Indeed, betting handle for Kambi’s tribal partners in North America grew by 128% between 2022 and 2023.

Inevitable Latam expansion

Regarding further expansion in the Americas, the first market that comes to mind is Brazil, which is set to launch its regulated market by July. Kambi has a sportsbook agreement in place with the country’s largest daily fantasy sports operator, Rei do Pitaco.

As was the case in the US though, the market is set to be fiercely competitive from the outset. In October, the Ministry of Finance granted a period of 30 days for companies to present a non-binding prior expression of interest in offering fixed-odds betting in the country, with as many as 134 operators choosing to do so.

It is as yet unclear whether international operators will be able to partner with established domestic operators to gain licence approval.

According to Lögdberg, the importance of local operators should not be understated. He says: “We hope Rei do Pitaco can have a similar journey to DraftKings, and there are a lot of local operators making applications. It’s not all about the likes of bet365 and we hope to have big local players on board.

“Our focus is on creating the most relevant product, building on our global solutions to create a local offering, using the bet builder technology that we have and taking it into the local market. Then it’s about finding the right partners who really know that market and how to win there.” 

This strategy could see the balance of revenue shift in the coming years for Kambi. “I think we certainly expect Latam to take a bigger share of that in the coming two years or so,” says Lögdberg. “Aside from Brazil, we are also live in Colombia with BetPlay, and we are live in Argentina, which is also a very interesting market.”

Kambi shareholders will be keeping a keen eye on both the modularisation strategy and potential expansion in Latam, but particularly crucial will be the new CEO appointment.

Kambi’s share price stands at SEK 99.60 at the time of writing, down from SEK 139.50 at the start of the year. Who can come in to reverse that trend?

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