Hello and welcome to this week’s Igaming Focus newsletter.
On the slate this week:
- NFL hold improves in Week 8, but Q4 gets off to a bumpy start.
- Caesars’ digital rise catches the eye, MGM has digital scope while Rush Street delivers strong Q3s.
- Affiliate giant Better Collective hit by the turmoil impacting the sector.
- Keep your friends close: Cali tribes and Sports Betting Alliance join forces against DFS and sweepstake companies.
- News shorts: CDC likes good data, DraftKings to close NJ live casino studio.
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NFL hold improves in Week 8…
… but Q4 gets off to a bumpy start.
Hail Mary for OSB operators: In a week when we were treated to the rare sight of a successful Hail Mary sealing the win for the Washington Commanders against the Chicago Bears, OSB operators had their own reasons to cheer as Week 8 hold levels came in at above average and app downloads improved year-on-year.
- Above average: Macquarie calculated NFL market hold of 12% for the week, beating the long-term average of 9%. Total sports betting market hold for the week was 10%, with sports outside the NFL generating 9% margins.
- Primetime slot: Primetime NFL games on Monday, Thursday and Sunday nights made a strong contribution to the weekly hold, accounting for 31% of NFL bets.
- Sure bets: Six of 16 NFL favorites covered the spread, which is positive for hold. A total of 69% of NFL games went over on the total, which is negative for same-game parlay/prop bet hold rates this week.
- Improvement after slow start: Following the first three weeks of Q4, October’s market hold is trending towards 5.5%, but the Week 8 NFL results are expected to boost the figure. Market hold rate for Q4 is forecast to be 9%, which is still a YoY growth tailwind versus last year’s Q4 hold rate of 8.3%.
- Less volatility ahead: Weekly hold volatility is expected to reduce following the start of the NBA season on October 22, with the league forecast to represent almost 40% of weekly handle going forward. October is usually highlighted as the most volatile month for hold rates, with fewer baseball games as MLB moves into the postseason and high exposure to NFL.
Promo factor: Deutsche Bank said that “across the four states that reported September (PA, MI, CT, KS), promotional spend was up 30.5% YoY for the month, while gross gaming revenue was up 47% and promos accounted for nearly 46% of GGR in September vs. nearly 52% of GGR in September 2023.
- September handle in those four states was up 14% YoY for the month, “which, when coupled with the 30.5% increase in promotions, implies that promotions as a percentage of handle went from 4.8% in Sep 23 to 5.5% in Sep 24,” noted Deutsche Bank.
- Bumps on the road: The team added Q4 “had gotten off to a somewhat bumpy start,” with New York mobile hold coming in at just 5.5% in the first three weeks of October, challenging NFL results and shifting luck back to the players. But it also stressed that it was too early in the quarter to draw any definite conclusions.
- Icasino trends however “remain very strong, and, more importantly, consistent” added Deutsche Bank. Icasino GGR was up 23.7% YoY in September, with West Virginia at +60.6%, New Jersey at +27% and Michigan at +22%.
Keep it on the download: App download numbers are heading in a positive direction. A note from JMP showed U.S. and Canada downloads increased 29% YoY to 936,000 during Week 8; the highest rate of growth through the first eight weeks of the season.
- FanDuel improved its download share to 29% (+300 bps week on week), which was its highest share since the opening week of the season. DraftKings maintained second position with a 23% share, while Hard Rock held third place with 11%.
- Download share is stable: JMP expects commentary from earnings calls to echo a slight increase to the promotional environment on the back of attractive CPAs, with payback periods shortening from prior quarters.
Caesars Interactive
Caesars’ digital rise catches the eye
The U.S. casino giant said it was pleased with digital figures but remains cautious.
Digital promise: Caesars Entertainment’s group revenues and EBITDA were flat YoY at $2.9bn and $1bn respectively in Q3, but the $52m adj. EBITDA – an “all-time quarterly record” – that the company’s digital divisions booked during the quarter was the highlight of the group’s update.
- Early doors: Commenting on its igaming activities since taking over the WynnBet license in Michigan, Eric Hession, president of Caesars sports and online gaming, said customers like the app and “the average worth of the customer is slightly higher so far than on the Caesars app, but it is early to draw any conclusions.”
- Chief executive Tom Reeg said he expected the group’s customer split per vertical to “be 50-50,” but if “there are additional igaming states (that regulate) as we move forward, those would be more impactful than a new sports betting state for us.”
- Florida’s Seminole tribe has settled its dispute with West Flagler over mobile sports betting, but Reeg cautioned against getting too enthusiastic about Caesars partnering with the tribe.
F1 hits MGM as group looks to digital projects
Cyber chops: MGM Resorts’ Q3 net revenues of $2.4bn were a company record but adjusted property EBITDAR was 2% lower than Wall Street forecasts at $1.2bn. Truist Securities said the drop would have been between 3% and 6% if the cyberattack the group suffered in September last year had not happened.
- Digital expansion: Jefferies said the company’s share of loss in BetMGM, its joint venture with Entain, was $3.2m, “well-above our estimated loss of $24.7m,” while Macquarie said the group “is well positioned to execute on digital growth.”
- Improvements are expected from Entain’s tech stack and the group is scheduled to launch with major Brazilian media conglomerate Grupo Globo in January.
- On the analyst call, chief executive Bill Hornbuckle confirmed the Formula 1 Grand Prix held in Las Vegas will impact FY24 EBITDA by c$30m the group was “looking at the same number” in 2025.
Rush Street execution paying off
Runners’ rush: Rush Street Interactive chief finance officer Kyle Sauers and chief executive Richard Schwartz were both highly positive about the company’s outlook as Q3 revenues increased 37% YoY to $232m and adj. EBITDA shot up to $23.4m vs. $4m last year.
- The group also upped midpoint FY24 adj. EBITDA guidance by 24% to $82m-$86m, announced a $50m share buyback scheme and Sauers said RSI “continues to attract new players at really attractive prices,” was “seeing very good predicted LTVs” and the “buyback program was the right thing to do” as RSI was at a point where it has “best visibility into the cash flow prospects.”
- Schwartz added that RSI was monitoring “really exciting opportunities in Latin America” and expansion in Canada, with the province of Alberta “coming online, hopefully later next year.”
- JMP said the RSI story was “heading in a positive direction, but fairly valued” and with a focus on igaming markets, “management has built the business to be the fifth largest in terms of EBITDA in online gaming, including those in the private market.”
Better Collective hit by affiliate turmoil
Affiliate giant has already cut 100 positions as it seeks €50m in savings.
Better Collective also feels the heat: Times have been tough for online gambling affiliates and the leading firm in the sector Better Collective has already cut 100 jobs as it seeks to make savings of €50m following the lowering last week of its FY24 revenue and EBITDA guidance by 25% to €355-€375m and €100-€110m respectively.
- Chief executive Jesper Søgaard said on LinkedIn that “the decision was prompted by shifts in the U.S. market as well as a continued slowdown in commercial activities in Brazil,” while ex-affiliate Kyle Scott Laskowky said Better Collective and others had acquired many affiliates at inflated prices, which then got caught out by the ‘site reputation abuse’ update Google introduced in May.
- Prior to the update, much affiliate traffic in the U.S. and other markets came from their content partnership pages with outlets like the Miami Herald, Newsweek or The Daily Telegraph in the U.K.
- Laskowky explained that with those pages no longer ranking for SEO, the small and medium-sized sites Better Collective acquired no longer perform on Google and eventually “the music stopped” for the affiliate giant.
I will go on record that the affiliates saying they will come out of layoffs stronger…that’s nonsense. You’ve saved money, which I know is the goal. But a ton of very smart, talented and hard-working people are no longer working for you. I do hope they turn it around, of course.
— Dustin Gouker (@DustinGouker) October 29, 2024
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Keep your friends close…
Joining forces: Indian Gaming Association conference chair Victor Rocha’s latest webinar on sweepstakes and DFS saw Chris Cylke, the American Gaming Association’s senior vice president of government relations, tell listeners that sweepstakes’ legal standing was “murky” and too risky for AGA members to offer to their customers.
- Cylke added that the AGA had pushed for “more robust action from the Department of Justice and FBI in terms of investigating and prosecuting some of these bad actors.”
- In response, the Social and Promotional Gaming Association, the trade body that represents a number of sweepstakes companies, said “social casinos with sweepstakes prizing are legal in most states” and “the sweeps promote the social gaming activity.”
- SPGA added: “Entries can never be purchased – just like any other “enter for free” or “no purchase necessary sweepstakes offered by regional, national, and international brands.”
- Times a’ changin’: A previous webinar hosted by Rocha showed how times had changed in California as tribal stakeholders also joined forces with former archenemy the Sports Betting Alliance to campaign against fantasy sports betting and sweepstakes companies from operating in the largest state in the country.
- They’re behind you! In his exchanges with Rocha, SBA president Jeremy Kudon said: “We’ve been going after each other, when the real problem is right over there. This is a moment for all the regulated companies and the tribes to root it out. It’s like a pandemic right now.”
- Lost the memo: The SBA includes operators such as DraftKings and FanDuel, but mentioning sweepstakes still seems to be part of DraftKings’ MO.
As you can see, the California tribes and the U.S. regulated gaming industry are united in taking on illegal gambling and bad actors operating in California. There will be no quarter, no mercy. First, we eliminate the homegrown threats, then we target the offshore operators.
— Victor Rocha (@VictorRocha1) October 30, 2024
News shorts
Following our flagging up of Sports Handle and US Bets’ state-by-state datasets last week, we thought it only fair to highlight these excellent resources from Casino Reports for online sports betting and icasino and this latest data website from industry analyst Aflonso Straffon.
DraftKings is set to close its Atlantic City live dealer casino studio and lay off 101 employees from January. Next.io reported that the company announced the news to all staff at the studio on Monday and said the move was part of its integration of Golden Nugget Online Gaming, which it acquired in 2022 for $1.5bn.
