Igaming Focus: Six years post-PASPA, New York New York, and Games Global cancels IPO

May 16, 2024 8:00 AM
Photo: Shutterstock
  • Jake Pollard, CDC Gaming Reports
May 16, 2024 8:00 AM
  • Jake Pollard, CDC Gaming Reports

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

On the slate this week:

  • Happy sixth birthday to regulated sports betting, although scrutiny and controversy follow the industry wherever it goes.
  • Flutter Entertainment to focus on U.S. growth and confirms New York move.
  • New York margins back to normal and live betting to rise.
  • Games Global cancels $2bn IPO on New York Stock Exchange
  • News shorts

© Johnny Williams/Unsplash 

© Johnny Williams/Unsplash

Happy sixth birthday to U.S. sports betting

The Supreme Court’s 2018 ruling enabled the spread of regulated sports betting and brought huge attention to the industry.   

This week marked the sixth anniversary of the repeal of the Professional and Amateur Sports Protection Act (PASPA) by the U.S. Supreme Court. On May 14, 2018, the court issued its ruling that repealed PASPA and effectively paved the way for the broad swathe of regulation that has led 38 states to legalize sports betting.

  • Deutsche Bank recently estimated that (in the unlikely event) that no further legislation takes place up to 2027, approximately “61% of the U.S. adult population will have access to legalized sports betting” and 52% will have access to mobile betting.
  • But with Texas, California and Florida yet to regulate, the Deutsche Bank team noted that around 94 million American adults still don’t have access to licensed sports betting, while states that had launched in the past two years had “effectively [embedded] an 8% ‘same store’ [compound annual growth rate]” up to 2027.
  • The speed at which regulation of the sector spread and sports leagues adapted to the new environment have been defining features of the past six years, just as the industry continues to lobby for regulation of online casino.
  • Scandal: The number of betting scandals that have involved professional athletes or people close to them has been another feature. And despite betting brands being ubiquitous across all of the country’s sports fields and stadiums, for many there is a major disconnect between the industry and how the public views it.

On social: Ippei Mizuhara leaves the Los Angeles courthouse after his arraignment hearing

Carl Solder/Unsplash

© Carl Solder/Unsplash

Flutter heads to New York as U.S. focus takes priority

New York primary listing and HQ move sets tone as London loses another major group.

New York state of mind: As FanDuel parent company Flutter Entertainment published its first quarter results it confirmed its primary listing and headquarters will move to New York at the end of May as it focuses on the U.S. for its long-term growth.

  • Stateside revenues were up 32% in Q1 to $1.4bn, adjusted EBITDA came in at $26m vs -$53m loss in Q1 2023 and senior management expressed their satisfaction that the group is the leading U.S. operator for both online sports betting and casino.
  • CEO Peter Jackson said that with 52% of net gaming revenue (NGR) and 46% of gross gaming revenues (GGR) (27% of which is icasino GGR share), the group was market leader in both online sportsbook and icasino and its “investments in customer acquisition and product innovation mean we are embedding future profits into the business as we continue to scale”.
  • Chart toppers: The Jefferies team backed this up with its assessment that icasino NGR was up 58% in Q1 and that “after five consecutive months as the number one igaming brand, our tracker suggests that FanDuel also overtook DraftKings as the number one operator in March”.
  • Sweet Carolina: Flutter also noted that its recent sports betting launch in North Carolina had been highly successful. It estimated that one in 20 adults in the state had opened FanDuel accounts.
  • In like Flynn: Marketing and sales costs were high, and margins were impacted by unfavorable results, but Jackson said that it was “important to get in early”. “We find that the acquisition costs in doing so for the benefits of our scale really help us.”
  • The group’s revenues increased 16% YoY to $3.4bn and adjusted EBITDA rose 47% to $514m in Q1 and the company maintained its 2024 U.S. revenue targets of $6bn and adjusted EBITDA of $710m, but high sales and marketing costs and tax, foreign currency, investment hedges led to net losses of $375m in Q1.

April data and Q2 update

Normalized margins in New York as FanDuel leads, live betting on the up.

New York’s new normal: The Empire State’s bookmakers recorded a 32% YoY rise in GGR to $449m as handle rose 27% to $1.9bn in April. Jefferies said margins were +0.4ppts at 9.4%, which it said was a “meaningful +1.2ppts sequential improvement on March’s weak margins (8.2%)” and marked “a return to more normalised (sic) levels”.

  • FanDuel was GGR share leader at 50% (-2ppts YoY, +1ppt MoM), DraftKings held 34% GGR share (+2ppts YoY, +2ppts MoM).
  • Combining data from April with the first week of May suggested that Q2 handle was up “+33% YoY with GGR +2% on margins -2.5ppts at 8.1%”.
  • GGR growth was subdued by weak margins so far in May at 4.8%, “the weakest since Super Bowl week (1.1%)” Jefferies said.
  • By operator, GGR increased +4%/+6%/-30% for FanDuel/DraftKings/BetMGM, handle growth was stronger at +26%/+53%/+17% respectively.

Sopranos, HBO

©  Sopranos, HBO

Let’s have a parlay: Analyzing parlay data in January and February, Jefferies said they were the most common bet type in Illinois and represented 58% of all bets and 28% of handle. The average parlay stake size was $18.70, compared to $38.70 across all bet types and sports combined.

  • Unsurprisingly, parlay penetration was highest at FanDuel at 65% of bets and 36% of handle. DraftKings was second at 56% of bets and 26% of handle and BetRivers third at 49% and 26%.
  • BetMGM and ESPN Bet’s parlay action represented around 40% of bets and 20% of handle for both operators.
  • FanDuel’s average bet size was lowest for both parlays ($16.70) and total bets ($30.32), “implying a more recreational customer,” said Jefferies, while Caesars had the highest average bet size at $49.91 for parlays and $114.24 overall.
  • After parlays, basketball was the next most popular bet over the period, making up 19% of bets and 39% of handle, with an average bet size of $79.60.

Live and direct: Picking up on live betting, Jefferies noted that Genius Sports’ NFL in-play volumes reached 22% and its in-play GGR rose 140% YoY in Q1. Live betting is expected to be “a major US growth driver” in the next few years, “as penetration catches up to the 70% noted in mature European markets”, the analysts added.

Further reading: CDC Gaming Reports recently reported on DraftKings’ decision to focus on developing its live betting product.

Games Global rows back on $2bn New York float

Move comes as a surprise as group CEO says future listing is still part of plan. 

Cancel that: Games Global, the online casino games provider that was set to list on the New York Stock Exchange as part of a $2bn float, unexpectedly pulled the pin on the project and said the listing was not in the “best interests of stakeholders”.

  • The company came to life in 2021 when it bought the B2B division of Digital Gaming Corporation, the corporate parent of Super Group, which operates the Betway sports betting and Spin casino brands.
  • Double-entendre? Games Global CEO Walter Bugno said the company was “disappointed” that the IPO was not going ahead, but that meetings with investors during the process “further cemented our confidence in our strategy and that what we are building at Games Global is unique”.
  • With the group recording a 23% YoY rise in revenues to €273m and adjusted EBITDA was up 10% to €121m in the last nine months of 2023, Bugno said an IPO would have been “an accelerator, not an absolute necessity, for our business strategy”.
  • He added that Games Global would return to the process at a later date and “continue to monitor the capital markets going forward and make the appropriate reconsiderations as to an IPO in the future”.

New York Congressman aims for federal bill on betting advertising

The Democrat Congressman from New York Paul Tonko is working on a federal bill that would impose new restrictions on how sports betting advertisements are offered to U.S. consumers. The bill, called the SAFE Bet Act, is set to be introduced later this year and will focus on advertising language, affordability and restricting the use of artificial intelligence as part of gambling marketing.

  • Terms like ‘no sweat,’ ‘bonus bets,’ or ‘odds boosts’ will be banned, sportsbooks would not be allowed to accept more than five deposits from a customer within 24 hours and would have to apply “affordability checks” on customers before they make large bets, although from what bet size that would come into force has not been determined.
  • Betting ads during live sporting events would also be banned. Tonko commented that he’s not “looking to outlaw gambling, but that the current “unrestricted, wild west environment is not helpful to anybody, and we think it’s necessary to have some restrictions”.

News shorts  

IGT revenue was up 1% YoY to $1.07bn in Q1 thanks to strong lottery growth. This helped offset the 1% drop in its gaming and digital product sales as CEO Vince Sadusky told analysts the group was “in the best shape we’ve been in in a decade”.

EveryMatrix enjoyed a 66% Q1 revenue rise to €39m as EBITDA more than doubled to €22m. The company gained certification in Peru and launched its casino aggregation content with DraftKings in New Jersey during the period.

Games Global has signed a licensing agreement with the mixed martial arts event organizer UFC that will see it produce UFC-branded online slots. The first games will launch in July and the rest are set to launch over a three-year period.

What we’re reading: Department of Justice tells Supreme Court Florida sports betting case is beyond its remit.

See you in two weeks!