Igaming Focus: NFL gives books second week boost

Hello and welcome to this week’s Igaming Focus newsletter.

On the slate this week:

• NFL results boost U.S. books’ margins and make first two weeks of new season one of the best ever.
• Hold on tight: Truist and Hold Crunch delved into U.S. books’ pricing strategies as ESPN Bet attempts to compete on price rather than promos.
• The rest is politics: Judge greenlights political betting in the U.S.
• At the limit: Massachusetts Gaming Commission’s roundtable on books limiting players.
• SAFE Bet Act gets thumbs down from AGA.
• News shorts: Flutter, Caesars, Brazil, SkyBet, FDJ-Kindred.

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NFL gives books second week boost

U.S. bookmakers see margin boost thanks to favorable NFL results.

Central margins: The second week of the new NFL season has been good for bookmakers’ margins, with the Macquarie team estimating that sports betting operators’ hold levels reached 16% for the week of Sept 9-15, above the “long-term average of 9%” and compared with just under 7% for the previous week.

• The strong performance came from largely favorable sporting results, which showed that single-game NFL holds were 21% on the spread, 7% on the moneyline and 5% on the over-under.
• SGP+: With 56% of the games going “under on the total (points to be scored), we believe this is positive for SGP hold rates”, noted Macquarie, as the week’s four moneyline upsets all helped generate high hold.
• Primetime boost: The primetime games that took place on Monday, Thursday and Sunday evenings accounted for 41% of all bets and “acted as a 120bsp tailwind to weekly hold, with spread bets positive for books in all three games”, added Macquarie.
• Overall, the analysts estimated a total hold of 12% for the week of Sept 9-15, with the NFL generating 16% margins and 9% for other sports. Meanwhile, in New York weekly handle was up 14% YoY and based on that data, Macquarie estimates that Q3 hold in the Empire State is trending at 9.3%.

Positive outlook: The analysts added that digital gaming would not be unduly impacted by pullback from consumers or negative regulatory headlines and should be seen as “a long-term buying opportunity”.

• North American operators will generate $37bn in NFL wagers in 2024-25, a 34% YoY rise, with GGR up 31% (+36% OSB; +25% igaming) and rising to +40% YoY in Q4, added Macquarie.
• Staying in outlook mode, JMP noted that “lower-tier operators” will not be a threat this year and that only “mid-tier” operators such as BetMGM, ESPN Bet, and potentially Caesars have the potential to take market share from DraftKings and FanDuel.
• Market share reminder: “No company outside these two has acquired and sustained greater than 3% U.S. market share on a T3M basis since the launch of New York in January 2022,” JMP pointed out.
• And with in-house tech stacks “continuously improving” and playing key roles in enabling the two leading operators to generate strong margins, digital gaming stocks will “move up on positive game outcomes” and set “the stage for ‘higher highs,’” added JMP.

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Crunch time for hold rates

ESPN Bet is competing for market share on price, but Fanatics isn’t.

Staying on hold: The team at Truist hosted a call with Hold Crunch founder and chief executive Tom Johnson that explored pricing trends following the first week of NFL action and found that by a small margin ESPN Bet had the most favorable prices, while Fanatics by some distance had the worst odds for punters.

• Truist commented that senior ESPN Bet executives had told them that they would avoid competing on costly promotions and instead would rely on ESPN’s brand name to attract customers.
• “We’re encouraged that the book has debuted competitively, leveraging odds to attract customers. We see this as critical, especially as the platform looks to attract a wider audience including those seeking more favorable prices,” said Truist.

Don’t stay in your lane: In week one and throughout the past 18-20 months FanDuel and DraftKings have had the best prices, which Truist calls the “swim lane” and which competitors have “ducked in and out” of, although FanDuel was “consistently slightly more favorable as the two books track one another” on NFL prices.

• NBA grab: In other sports, DraftKings offered better prices on College Football and MLB and all eyes will be with the NBA when it restarts in October as “FanDuel offered significantly more favorable odds the 2023 entire season – which resulted in taking handle share from DraftKings,” Truist said.

Top two’s superior product: The two market leaders could grab a “sizable opportunity if they start to use odds to offset” Illinois’ recent tax rises, Truist added, and with pricing used as a tool to combat the tax hikes, FanDuel and DKNG “could increase prices and maintain players given their current product superiority,” said HoldCrunch.

• So far in Q3 odds have only increased “very modestly and largely in MLB,” which has generated an additional $2m in GGR for each operator.
• Should they decide to raise prices nationwide, they could recoup “an incremental ~$240m annually,” which is more than “2x the hit” of the new tax structure.
• However, this would only happen on a gradual basis, “with the two operators likely moving in tandem to one another,” Truist noted.

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The rest is politics

Judge overturns CFTC ruling to allow betting on U.S. elections.

CFTC overturned: Betting on the outcome of U.S. elections is now authorized after a federal judge overturned a ruling from the U.S. Commodity Futures Trading Commission that banned the predictions and events contracts startup Kalshi from offering markets on political bets.

• The CFTC’s September 2023 ruling said Kalshi offering political bets would involve unlawful gaming and could harm the integrity of U.S. politics, but in her opinion released last week, District Court Judge Jia Cobb said Kalshi’s contracts centered on political elections, rather than potential unlawful activity or gaming, and were not subject to the CFTC ruling.
• No public remit: “The Court’s only task is to determine what Congress did, not what it could do or should do. And Congress did not authorize the CFTC to conduct the public interest review it conducted here,” said Cobb.
• Strong signal: Kalshi chief executive and co-founder Tarek Mansour told Reuters that his company’s betting markets will “show the world just how powerful they are at providing signal amidst the noise and giving us more truth about what the future holds”.
• Opponents of Judge Cobb’s ruling fear insiders and those with confidential information could use it in ways that undermine public interest and confidence in politics.
• It also follows a betting scandal in the UK where government insiders with privileged information were found to have bet on the date of the country’s general election this summer.

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Showing up at the limits

Three-hour meeting between Massachusetts lawmakers and operators leaves limiting issue unresolved.

Limits to no limits: The Massachusetts Gaming Commission last week held its digital roundtable with the country’s leading sportsbooks and saw representatives from the largest U.S. betting companies defend the practice of restricting, or limiting, how much they allow bettors to wager.

• Sharp edges: The practice has long been criticized by sharps and seasoned bettors, who say books should be able to stand by their pricing and trading capabilities.
• They also claim that the policy amounts to unfair treatment of players and bookmakers use it more broadly to limit players who have improved and win amounts that reach just a few hundreds of dollars.
• Echoing that thought, the MGC said it was worried recreational bettors were inadvertently getting caught up in being limited by the sportsbooks.
• Show and tell: The hearing, called by the MGC following complaints from local residents, was closely followed because operators had pulled out of a meeting on the topic back in May.
• During the discussion, the operators said they limit a tiny fraction of players and pay close attention to what they bet on.
• But gambling journalist Jeff Edelstein commented: “You’ve heard them talk about advantage players. The translation for that is a good player, a good bettor, a smart player. They are saying, ‘We don’t want smart players. We don’t want good players, because we see them as a threat.'”
• The MGC and the operators said they will examine the issue further, but no commitments were made from either side.

Further reading: Richard Schuetz on the rise of digital betting and the loss of bookmaking know-how.

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Federal SAFE Bet Act gets thumbs down from AGA  

Federal oversight rejected by AGA.

Health and safety: Senator Richard Blumenthal of Connecticut and New York Representative Paul Tonko plan to  introduce the SAFE Bet Act, a new federal bill aimed at regulating sports betting in the U.S. The bill’s full title is Supporting Affordability and Fairness with Every Bet (SAFE) Act and builds on previous efforts by Rep. Tonko to pass federal legislation to oversee the industry stateside.

• Speaking at a recent press conference, Tonko said the bill will focus on affordability, advertising and artificial intelligence, while states wanting to offer wagering would have to meet federal minimum requirements and apply to the US attorney-general to do so.
• Standards issue: Blumenthal said the bill was “not telling states what to do”, but that they had to meet certain standards and would still have “a lot of freedom within those parameters to do more”.
• The American Gaming Association expressed its disapproval, saying it amounts to a “nationwide prohibition” on sports betting.
• “Introducing heavy-handed federal prohibitions is a slap in the face to state legislatures and gaming regulators who have dedicated countless time and resources to developing thoughtful frameworks unique to their jurisdictions, and have continued to iterate as their marketplaces evolve,” said the AGA.

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News shorts

August roundup
JMP’s August roundup noted that with half of the states having reported, DraftKings and FanDuel had lost market share on a monthly basis “as several mid-tier competitors increased share”.

• Initial data points indicate positive momentum for customer acquisition/spend for the two market leaders, while Caesars’ Q3 share was +126 bps QoQ, BetMGM +157 bps and BetMGM was “seeing progress stemming from its investment phase, although we believe it is still early to assess customer retention with higher levels of promotions,” added JMP.

Rate drop to benefit Caesars
The recent decision by the U.S. Federal Reserve to cut its interest rate by 0.5 percentage points could make Caesars stock “the top beneficiary in the gaming sector,” the team at B Riley commented this week.

• The analysts said that “for every 100bps in lowered rates, Caesars’ interest expense declines,” while “FCF increases by $60m”. The group could also look to refinance its “$1.6bn, 8.1% fixed senior notes sometime next year, as rates are likely to continue to fall” while CAPEX could also benefit by dropping ~$250m in 2025

Flutter’s numero uno deal
Flutter Entertainment has acquired Playtech’s Italian operator Snaitech for €2.3bn and in the process become the #1 online gambling operator in Italy with c30% market share. The deal is expected to complete in Q2 2025 and as part of the transaction Playtech will pay out €1.7bn-€1.8bn of the sale amount in dividend to shareholders.

• FanDuel’s parent company paid a 16.5% premium (or 9x multiple) on the 5.6x EBITDA multiple the group had in 2023. Playtech acquired Snaitech in 2018 for €846m in 2018 and the brand generated €256m EBITDA in 2023.
• Flutter will run a multi-brand strategy Italy and Jefferies said the transaction is expected to generate €70m in operating cost synergies and €10m in CAPEX savings.
• In Mexico, Playtech has settled its dispute with Caliplay and now holds a 30.8% stake in the Mexico-based online operator’s parent company.
• Caliplay recently paid Playtech €150m in overdue fees and will continue paying those fees in future, while Playtech has agreed to provide its software and services to Caliplay for the next eight years. It will receive $140m from Caliplay over the next four years as part of the agreement.

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Newslines

Offshore sportsbook Bovada has pulled its operations in Kansas, Louisiana and Pennsylvania and is now restricted in 14 sports betting markets, having received a cease-and-desist letter from Louisiana regulators in early August.

Brazil is set to ban the use of credit cards for online gambling as part of the country’s upcoming regulations of the sector and authorities plan to crack down on unlicensed companies that keep operating in the market post-regulation.

Cookie monster: The UK’s Information Commissioner’s Office has reprimanded Sky Betting and Gaming for unlawfully processing people’s data through advertising cookies without their consent. The ICO said the company trading as Sky Bet was processing consumers’ personal data from Jan-March 2023 and sharing it with advertising technology companies before they had the option to accept or reject advertising cookies.

France’s competition authority has given its conditional approval to Française des jeux’s proposed €2.6bn acquisition of Unibet parent Kindred Group as long as FDJ commits to running separate brands post-acquisition. Should it complete, the transaction will provide FDJ with a major pan-European brand and follow its €150m acquisition of #2 French horse racing operator Zebet.