Hello and welcome to this week’s Igaming Focus newsletter.
On the slate this week:
- DraftKings u-turn: Company puts brakes on surcharge after no go from Flutter.
- Leading across the board: FanDuel’s Q2 lead.
- Sweating parlays: Operators are making the most of margin-producing parlays.
- Penn’s ESPN Bet will have to deliver during new NFL season.
- Sportradar and Genius Sports report strong Q2s.
- News shorts: New York data, Playtech confirms Flutter-Snaitech M&A news, Latam roundup, Catena Media.
Source: Unsplash
DraftKings’ surcharge turnaround
U-turn comes after news that industry leader Flutter said it would not follow suit.
That didn’t take long: Barely two weeks after announcing that it would tax winning bets in states with tax rates above 20%, DraftKings has turned around and canceled the move. In a post on X, the operator said: “We always listen to our customers and after hearing their feedback we have decided not to move forward with the gaming tax surcharge.” It added that it is “always committed to delivering the best value to [its] loyal customers”.
- Critical mass: DraftKings’ surcharge announcement was heavily criticized by industry stakeholders and, with the rollout set for January 2025, many doubted whether it would actually happen. The operator said the timing would enable it to assess the impact of the charge.
- Polite society: Last week’s Igaming Focus column half-jokingly described this as DraftKings ‘taking stock’ of player feedback and comments, but the group’s own use of the word “feedback” to describe how its customers will have responded to the news was one of those corporate euphemisms that stand out.
- The u-turn news follows FanDuel parent company Flutter Entertainment’s comments yesterday that it has “no plans to introduce a surcharge for winners”.
- Follow the leader: Flutter’s (non-)decision also confirms the comments JMP Citizens analyst Jordan Bender gave to CDC Gaming Reports that the U.S. market leader “will act as the deciding factor in [DraftKings’] decision to move forward with a surcharge.”
- “If Flutter balks at the idea, we believe it lowers the probability [of] DraftKings implement[ing] the change,” he added.
- Standing out for the wrong reasons: Flutter following its nearest rival with a similar levy would have given DraftKings reassurance that it could see the move out. However, being the only operator to adopt this tactic would have placed it in the marketing cross-hairs of its competitors.
- Speaking of Flutter: The FanDuel parent company reported strong Q2 results on Tuesday, revenues were up 20% to US$3.6bn and adjusted EBITDA rose 17% to $738m, with U.S. EBITDA up 51% year-on-year (YoY) and contributing $260m, although the group said Illinois’ tax rise will cost it $40m.
- Commenting on the prospect of U.S. taxes increasing, the group said it would take inspiration from its long track record of operating in high-tax environments in Europe.
- When the levy breaks: Returning to DraftKings, analysis estimated that the charge could generate $200m a year for the group, with the amount halved if states decided to tax those revenues.
- Squaring the circle: DraftKings chief executive Jason Robins has been vocal in saying he does not want winning players or ‘sharps’ on the site. The rationale being that recreational players don’t pay close attention to prices or hold levels and are not so bothered about their bets losing.
- However, those high-staking and (sometimes) winning players generate the vast majority of operators’ handles, so pushing them away in large numbers might have had a significant impact on DraftKings.
Further reading: BetBash delegates vent anger at surcharge.
U-turn if you want to: Surcharge cancellation (announced on August 13) boosts DraftKings’ share price.
Source: Google Finance
Leading across the board
Q2 numbers from Jefferies demonstrate FanDuel leadership.
No duel at the top: The Jefferies team estimates that FanDuel’s net gaming revenue (NGR) growth during Q2 was +37% YoY and “meaningfully ahead of consensus” of +29%. By product, FanDuel’s online sports betting NGR growth was +39% vs. +26% consensus and for icasino it was slightly down on forecasts at +43% (vs. +46% estimates).
Source: Jefferies
Q2 up YoY and QoQ: Jefferies added that online sports betting growth has accelerated in Q2. “All but two states have reported full Q2 OSB data,” it said, showing that handle and gross gaming revenues were up +37% and +40% respectively on 2023 YoY and were both up 26% quarter-on-quarter (QoQ), with new states adding +8%/+10% respectively.
- Across the board: FanDuel continues to dominate on gross gaming revenue (GGR) market share at 42%, DraftKings is second with 30% while BetMGM recorded 6% of GGR share during Q2. However, Jefferies noted that “after further deducting free bets, FanDuel held an even greater 53% share of NGR.”
- Online casino was up 21% in “the three largest and most mature igaming states” that are New Jersey, Pennsylvania and Michigan; and despite them “now being in their 12th/sixth/fifth years as legal markets.”
- #1 again: FanDuel is icasino leader with 24% share of GGR but BetMGM is now tied in second with DraftKings at 21% GGR share although Golden Nugget’s contribution for the latter nudges it up to 24%.
Sweating parlays
Deutsche Bank analysis once again shows importance of parlays to operators.
As CDC Gaming Reports has commented numerous times, parlays are the key product for U.S. sports betting operators. They generate much stronger margins than single bets and consumers clearly enjoy playing them. Recent analysis by Deutsche Bank has shown how much sportsbooks have sweated the product to increase hold levels.
- Huge jump: Parlay hold was 17.8% in 2023 and the product accounted for 25% of handle. “Thus far in 2024, parlays make up roughly 25.7% of total handle, while hold is up to 19.1% (vs 8.5% aggregate hold), 130 bps better than the 2023 parlay hold result,” noted Deutsche Bank.
- As a percentage of handle they have also gone up from just over 26% in June 2023 to nearly 30% in June 2024.
Source: Penn Entertainment presentation
All eyes on ESPN Bet
Penn Entertainment news continues to focus on ESPN Bet.
NFL put up or shut up: The group’s revenue for Q2 was down 0.7% to $1.6bn, but with interactive revenues of nearly $233m vs. forecasts of £220m and digital adj. EBITDA losses coming in at $103m vs. forecasts of $120m, market reactions were positive overall. Industry observers, however, pointed to the upcoming NFL season as the key time when the group will have to prove its digital chops.
- MGMT dealing with it: Chief executive Jay Snowden said improvements to the group’s risk and trading management capabilities were behind the stronger online performance.
- Asked about recent rumors that the group could be open to bids, Snowden batted away the speculation but added the proviso that the company “will evaluate opportunities to enhance value.”
- App improvements: With regard to the ESPN Bet app, Snowden highlighted a number of upcoming UI changes such as integrating links to ESPN results and home pages and to “the category-leading ESPN Fantasy App,” as well as “personalized in-app betting offers” to make it as easy as possible to move the ESPN Bet app, website and its fantasy betting app (as outlined in the picture above).
- New York, New York: ESPN Bet is set to launch in the Empire state later this month, which will expand its reach to 46% of the U.S. population.
- Hold on tight: The group added that it would focus on generating higher margins. In its presentation it highlighted the fact that its hold levels in Indiana, Iowa, Massachusetts, Maryland, Michigan and Pennsylvania averaged 8.5%, placing it third behind FanDuel and DraftKings, and above the 7.5% average of the rest of the market.
On the radar
Leading odds and data suppliers report strong Q2s.
Data driving guidance: Sportradar and Genius Sports raised their fiscal outlooks for the year after reporting major growth in Q2 revenues. Both groups upped their guidance for the year and said operators taking up additional streaming, data and trading services was boosting their revenues.
- Right up there: Sportradar said that in the U.S. its data rights fees with the ATP and NBA had risen 83% to €96m ($105.7m) and had led to a 59% rise in revenues to €60.6m, while ex-U.S. revenues increased 22% to €217.8m.
- Sportradar’s revenues of €278.4m represented a 29% YoY rise and EBITDA was up 22% to €49m, while Genius Sports recorded a17% YoY rise in group revenues to $95m, adj. EBITDA of $21m and net losses came in at -$22m.
News shorts
New York’s betting handle was up 31% YoY to $1.2bn in July while GGR came in at $141m.
Flutter is understood to be carrying out due diligence on a potential £2bn ($2.6bn) deal that would see it acquire Playtech’s Italian operator Snaitech.
Latin America is the focus of much industry attention currently, iGB rounds up Latam-related news from the listed companies.
Affiliate publisher Catena Media’s H1 revenues were down 38% to €29m while adj. EBITDA was down 87.5% to €2.5m as new chief executive Manu Stan and new chief financial officer Michael Gerrow implement measures to turn the company around.
