Hello and welcome to this week’s Igaming Focus newsletter!
On the slate this week:
- Robinhood “keenly looking” at online sports betting.
- November returns to normal as OSB margins recover.
- Fantasy slowdown for FanDuel but not DraftKings.
- VIP business driving Fanatics betting app progress.
- FanDuel and DraftKings are US bettors’ favorite apps.
- Las Vegas Grand Prix brings mixed betting fortunes.
- French igaming’s uncertain future as government loses no confidence vote.
- News shorts: Oddschecker, Miriam Adelson, Ontario
Robinhood “keenly looking” at moving into OSB space
Watching with interest: The impact of trading giant Robinhood chief executive Vladimir Tenev telling investors that it is “keenly looking” at the sports betting space was felt immediately, as sports betting stocks dropped 3% in the aftermath.
- Tenev made the comment during the group’s investor day yesterday. It follows the arrival of Robinhood and high profile trading platforms such as Kalshi and Polymarket on the scene after they launched betting contracts on the 2024 U.S. presidential election.
- Hold your horses: For all the excitement, the gambling stocks recovered during trading, building out a sports betting product was “incredibly hard to start from scratch” and “a more sensible path would be setting up a betting exchange” that would “avoid the risks associated with traditional sports betting,” the JMP team noted.
- Only viable option: The situation could unfold in a similar way to how Fanatics came to acquire Pointsbet and launch its own OSB product, with “M&A [as] the only real viable option” for Robinhood.
- Limited opportunities: Although Robinhood has the unique advantage of having “significantly more funds through its investing platform compared to FanDuel [or] DraftKings,” it would still need technology and product and “the acquisition of a sub-scale operator would still require massive investment [and time], while mid-scale companies remain limited,” added JMP.
Source: Shutterstock
OSB margins recover as sporting results help books
Bookmakers breathe “sigh of relief” as results swing back to favor operators
November normal: U.S. online bookmakers will have breathed “a sigh of relief” as margins recovered from a tough start to Q4, JMP said in a recent note. November trends had rebounded, and DraftKings chief executive Jason Robins recently noted that the month just gone had been more “typical” and even “on the positive side,” with margins above 10%.
- JMP added that operators’ Q4 guidance will also “incorporate typical gaming margins in the back half of the quarter, and the positive commentary suggests estimates are in a comfortable position with only four weeks left in the quarter.”
- Tough comps period: However, JMP also noted that handle is set “to face increasingly tough comps in the coming months” as sports betting legalization and 2023 parlay handle growth of 40%-80% both slow down.
- Handle has “slowed materially” in the last three months compared to H1, added JMP, despite bettors wagering more often and daily bets being “+13% above the T12M average and legs per parlay at an all-time high in November.”
- Big city numbers: The Jefferies team said weekly data from New York showed that “after five consecutive weeks of above average OSB gross gambling revenue margins, Q4 margins are back into positive year-on-year growth.”
- With two weeks “of particularly customer-friendly sports results in October” leading FanDuel and DraftKings to cut FY24E EBITDA guidance by $30m and $120m respectively, “weeks 8-12 of the NFL season all delivered GGR margins above the 9.1% LTM average, including the three most recent weeks all above 10.5%,” said Jefferies.
- The bad run of sporting results in October caused Q4 margins to drop 5ppts YoY to 5.5%, “with FanDuel, DraftKings, BetMGM facing hits of -5.2ppts / -6.7ppts / -5.7ppts” respectively.
- However, following more favorable results in recent weeks, Q4 margins are now tracking up +0.4ppts YoY at 8.5%, said Jefferies.
Reasons to be cheerful
Deutsche Bank said that with October in the rear-view mirror there were “reasons for optimism” although YTD promotional spend has increased 10.3% YoY across the six states it tracks (see visual below) while GGR has dropped 21.3%, “as such, promotions are representing 52.6% of GGR, up ~1,500 bps YoY,” Deutsche Bank said.
- During Q3, promotions grew 42.3% and GGR was up 35.2% YoY, added Deutsche Bank, with promotions representing 37.5% of GGR (+190 bps YoY). Handle in Q3 “was up 21.2%, thus, promotions as a percentage of handle came in at 4% for the period, up ~60 bps from the 3Q23 level (3.4%).”
Standout among the majors: Jefferies said BetMGM’s handle had been progressing strongly in recent months and its margins were now also on a similar growth path. Of the major operators, “trends for BetMGM remain the most encouraging through the NFL season to date, particularly across recent weeks,” the analysts noted.
- Strong handle performance has continued through subsequent weeks in November, with BetMGM handle up +43% across Q4 so far, “considerably outperforming the market up +11%.”
- BetMGM also delivered two consecutive weeks of GGR margin outperformance of 11.3% vs. market average of 10.6% during NFL weeks 10 and 11.
Record high for icasino
Online casino enjoyed a record month in October, with state reports showing a GGR increase of +34% YoY to a record $759m and “states reaching record highs.”
- Deutsche Bank said the +34% growth represented “the fastest rate of same-state igaming growth since early 2022” and that “the particularly customer-friendly sports results in October, this igaming acceleration is likely to have been partly driven by the recycling of customer winnings from OSB.”
- FanDuel maintained its #1 spot for igaming market share in October, with share +2.3ppts YoY to 25%. DraftKings including Golden Nugget was -1.9ppts to 24.1% and BetMGM was -1.3ppts to 19%.
Fantasy slowdown for FanDuel but not DraftKings
It was all a fantasy: Despite their backgrounds in fantasy sports betting and the fact that their customer databases have played key roles in enabling FanDuel and DraftKings to become the dominant U.S. sports betting brands, only DraftKings has maintained its focus on the vertical.
- JMP reports that FanDuel’s fantasy betting app was downloaded just 179,000 times so far this season and the company has 3% market share in the space, down 52% from 2022.
- Pick of the bunch: PrizePicks continues to lead the field and DraftKings is #2 with 7% market share, where it can draw “incremental cross-sell channels and earnings opportunities long term,” said JMP.
- Fantasy operators have increased downloads 64% so far this season, and the 6.8 million downloads represent 37% market share across all sports betting, online casinos and fantasy apps during the 2024 NFL season.
- Sports betting app downloads in the U.S. and Canada totaled 857,000 and were -9% YoY, but +24% ex-ESPN Bet, during Week 13 of the NFL season.
Source: Shutterstock
VIP business driving Fanatics progress
Fanatical: Fanatics Betting and Gaming is making strong progress as it makes “a strong play for podium positions in its U.S. online sports betting state markets” as it “captured third place in the massive New York OSB market and settled marginally behind third placed BetMGM in Maryland during October,” according to Vixio.
- In mid-November, Casino Reports said that Fanatics’ handle market share stood at 8% across 20 states, Steve Ruddock’s Straight to the Point newsletter reported that it reached the #3 spot in New York and “is also gaining steam in Massachusetts, where it ranks fourth behind DraftKings and FanDuel and is nipping on the heels of BetMGM for third place.”
- The brand’s progress is all the more remarkable for the fact that at the start of the year it barely registered.
- In December 2023 STTP wrote that “Fanatics believes that its database of sports fans willing to pay $100-plus for an authentic jersey and team-licensed gear” means it has “unique ways of engaging with its existing customers that, quite frankly, other sportsbooks can’t.”
- Improvements to its app have helped, but more importantly it’s its targeting of VIPs that has enabled it to drive up its handle and market share numbers.
- The Wall Street Journal said Fanatics “wants to be known as the betting app for true sports fans,” but Ruddock said this was “a euphemism for VIP bettors.”
Source: state filings and Alfonso Straffon
FanDuel and DraftKings are U.S. bettors’ favorite apps
Bonusing key recruitment tool for Fanatics and ESPN Bet
FanDuel and DraftKings continue to be U.S. bettors’ favorite sports betting apps, according to the latest Morgan Stanley biannual sports betting survey.
- The Morgan Stanley analysts said the industry was still “in its early innings,” with momentum continuing and “participation rising in all states, including those that have been in operation the longest.”
- BetMGM confirmed its strong Q3-Q4 showing by recording the largest increase in terms of app preference. It was the only app to see an improvement outside of the two market leaders since the previous Morgan Stanley survey in 2022. Fanatics’ and ESPN Bet’s generous bonuses were the main reasons for players using those apps.
- Younger respondents bet through parlays by more than 12% compared to older players.
Grand Prix brings mixed betting fortunes to Las Vegas
Sin City set to look for contract extension as F1 deal enters final year
Vegas mix: Betting operators reported mixed performances as a result of the Formula One Las Vegas Grand Prix that was held during the weekend of 24 November. The Las Vegas Review-Journal said BetMGM’s handle doubled compared to last year’s maiden Grand Prix, while Red Rock Resorts’ Station Sports also enjoyed record handle and easily beat last year’s total.
- Caesars however failed to exceed the prior year’s handle and said this was due to lower volumes of in-play betting caused by driver George Russell leading from start to finish, while Westgate Superbook said its handle was just 35% of last year’s.
- The Las Vegas Convention and Visitors Authority’s contract to host the race ends next year, the group said it plans to pursue a long-term contract.
Source: Shutterstock
French igaming sector faces uncertain future…
… as government loses no confidence vote
Political upheaval: Hopes of seeing online casino regulated in France, the largest European market yet to regulate the vertical, next year have been thrown into doubt as MPs voted to overthrow the government yesterday.
- The vote came as a result of MPs rejecting the government’s 2025 budget, which sought to save €60bn through a mixture of tax rises on corporations, goods and cuts to social services.
- For the country’s online gambling sector, the main concerns now revolve around the increased tax hike set to hit online sportsbooks next year and the working groups that are due to study online casino regulations – the first of which took place this week and focused on addiction.
- What will happen to the icasino regulatory project is unknown, although the governments’ need to raise funds remains.
- France cannot hold another set of parliamentary elections until July 2025 at the earliest following President Emmanuel Macron’s decision to call snap elections this summer. He will have to appoint a new cabinet as quickly as possible.
- Addressing the French parliament on Monday, he said he could not compromise with more demands from far right and far left MPs and added: “Each one of us has to assume their responsibilities, and I’m taking mine.”
News shorts
Oddschecker plans to issue its own set of awards to UK sportsbooks, with categories ranging from ‘most popular sportsbook’ to ‘best in-play product’ and ‘best bet builder’. The company said it will use its site traffic and betting activity metrics and combine them with user opinions to decide on its final list of winners, which will be announced in January 2025.
Miriam Adelson, the widow of Las Vegas Sands owner and committed igaming opponent Sheldon Adelson, is reportedly investing millions of dollars to push for casino legislation in Texas. Local press reports said she had donated nearly $14m to legislators so far in 2024. The Texas legislative session is set to begin on January 14, but sports betting regulation is still some way off.
iGaming Ontario, which represents the licensed companies operating in the province, will become a standalone agency in 2025 and no longer report to the Alcohol and Gaming Commission of Ontario. Both currently report to the Ministry of the Attorney General. The move is hoped to ease potential conflicts of interest as AGCO also oversees the Ontario Lottery and Gaming Corporation, which looks after Ontario’s retail casinos and runs highly successful online gambling products.
