Earnings+More - Same-game changer
Good morning. In this latest issue of Due Diligence, we take a look at the apparent ‘killer app’ in US sports betting, same-game parlays.
It's all about the game and how you play it. Same game, different rulesIn US sports betting, who wins with same-game parlays decides who wins the race. Clear as crystal: The latest data from Illinois gives a perfect illustration of the importance of parlays in general to the shape of the overall market. In January, FanDuel continued its market domination, grabbing just under 50% of the total AGR of $89m, while DraftKings accounted for 27%, with BetRivers (9%), PointsBet (5%), BetMGM (4%), Barstool (3%) and Caesars (1%) trailing behind. Further, and crucially for this edition of Due Diligence, Illinois also gives an insight into the mix of sports being bet on, including parlays. Here, we can see the importance of parlays within the market shares of the top two, in particular. 🧐 FanDuel and DraftKings are the parlay winners Total control: Between them, FanDuel and DraftKings control 70% of the total market by AGR and an even more impressive 79% of parlay AGR. By handle, DraftKings and FanDuel control 68% of the market but 75% of the parlay handle. 🪞 The handle breakdown mirrors the AGR picture Playing catch up: What is abundantly clear is that the rest of the market is failing to catch up with the leaders. The near 32% of handle share among the rest of the market only translates into AGR share of barely about 20%.
FanDuel’s advantage: During FanDuel’s investor day back in November, the company spoke about its record of innovation in parlays, introducing same-game parlays in 2019 before adding a new SGP user interface in 2020, SGP-plus in 2021 (with one-tap SGPs) and live SGP cash out bet tracking in 2022.
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Quick history: The rise of SGPs can be attributed (at least in part) to the Bet Builder/request-a-bet trend started by Sky Bet in the UK in the middle of the last decade. That initial wave saw the birth of SGP provider SportCast, which was acquired by OpenBet in May 2021 for an undisclosed sum.
Who’s on third?House rules: As is obvious from the data and what FanDuel said at its investor day, scale is vital for SGP development. “The sports-betting ecosystem is complex,” says Saunders. “Frankly, I don't think there is an operator in the world who doesn’t need a third party to some extent. That’s the starting point.”
Tangled web: Illustrating the intertwined relationships between operators and suppliers, in 2021 DraftKings announced an SGP agreement with Genius Sports and SportCast.
Coming unstuckCohesive experience: Donal Barron, ex-head of corporate development at Banach and now an independent consultant, says in-house SGPs benefit from being “more cohesive”.
SGP by the numbersAdding to the mix: Describing their impact on DraftKings’ revenues, the analysts at Macquarie noted that its parlay handle mix added 70 bps to the group’s annual hold rate of 7.7% and a 600 bps decrease in promotional reinvestment as a percentage of revenues in 2022.
Further reading: The rise of America’s new favorite way to bet. ** SPONSOR’S MESSAGE ** Tried, tested and proven over a decade in the highly-regulated US market, and continuing to expand across Europe, Latin America, Asia and Africa. GeoComply harnesses the power of its market-leading geolocation technology to protect against fraud, including fake account creations, bonus abuse, account takeovers, stolen identities, money laundering, and more. Visit geocomply.com. Analyst takesLight & Wonder’s move to explore the potential for a joint Australian listing got the thumbs up from the team at Truist. “We think a potential secondary listing there is largely about multiple arbitrage,” the team added. Deutsche Bank suggested that Sportradar’s post-earnings share price fall was an overreaction as the company is “already profitable”, has a strong balance sheet (having paid off $220m of outstanding debt) and part of its investments are in AI, which is currently an investor favorite. DraftKings continued to get the stink eye from the analysts at Roth MKM, who suggested there are more negatives than positives in terms of catalysts. “We don't believe industry revenues will reach the scale needed for DraftKings to generate meaningful operating leverage,” the team added. An eventual primary listing in the US for Flutter is a done deal, going by what analysts on both sides of the Atlantic said about the news that the company was consulting shareholders on a dual listing. Wells Fargo said the move would be a catalyst, while Peel Hunt said Flutter was “taking our ball away”. Calendar
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