Analysis: Five Key Takeaways From A Huge Week In US Sports Betting

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US sports betting

It has been a whirlwind couple of weeks in US sports betting, with deals and earnings calls galore.

You could be forgiven for missing some news amid the maelstrom, so we rounded up some key highlights and themes:

1) Everybody wants same game parlays

When the market leader keeps paying lip service to one of its products, competitors tend to take note. And that has been the case with same game parlays (SGP) over at FanDuel Sportsbook.

The operator dedicated a slide in its earnings report to the product, noting more than 50% of customers placed an NFL SGP last season.

Source: Flutter investor presentation

It also delivered “structurally higher margin” than normal products, FanDuel said.

Who else is involved?

Only BetMGM had a similar offering last quarter, although it is provided by a third party (Genius/Sportcast) rather than proprietary.

However, that is all changing. DraftKings Sportsbook now has the same Genius-powered SGP product installed. Barstool will have a Kambi SGP in place by football season.

“SGP is a huge, huge betting opportunity as it relates to NFL,” said Penn CEO Jay Snowden.

One potential wrinkle that FanDuel mentioned: it is better to have a proprietary product with full control over pricing. DraftKings, for example, will have different odds on the SGP compared to its ‘normal’ offerings.

2) Product, product, product

In that vein, improving the product was a popular topic across the operator earnings calls.

As DraftKings CEO Jason Robins put it: “We believe the winners in this space will have a relentless focus on creating the best product for consumers.”

That seems to be a shared view with a shared solution: own your technology.

What does that mean for US sports betting industry?

Good things. We should see more innovation around product. Caesars said it would be more aggressive on limits for example, while DraftKings rolled out a massive menu of unique NFL season-long props.

Or as theScore’s John Levy explained the company’s proprietary promo engine:

“Someone like Mr. (Dave) Portnoy is going to go crazy with stuff.”

“If you typically have to wait on a third-party, it takes too long or the event has come and gone. So in our case, it gives us the maximum flexibility to be very creative, but then to be able to execute almost instantaneously.”

By the same token, it was not a great week for suppliers. Kambi shares dropped 33% after the Penn/theScore deal was announced. Scientific Games dipped 5% after losing Golden Nugget as a customer to the DraftKings acquisition.

3) Casino to the fore

To that end, the online gaming market is heating up. Only four states have legalized iGaming, but there is a sense of inevitability about some level of growth. In some ways, online gaming feels like sports betting just after PASPA: a nascent industry that could blow up.

As Robins put it:

“I think we’ve always felt it’s going to be sports first and then iGaming. That is the natural evolution. States are going to be more comfortable going sports first.

“Once they get used to the tax revenues coming in and see more states doing it, we think more states will get comfortable with iGaming as well.”

iGaming is one area where DraftKings perhaps trailed casino-first rivals like BetMGM. But the Golden Nugget deal helps rectify that and signifies a market heating up. Penn also pledged to invest heavily in casino with Barstool-branded games after acquiring its own studio this year.

Elsewhere, Flutter predicted growth in gaming, backed by the expertise from “running the world’s largest online casino business.”

They all have some ground to make up though. BetMGM is streaking away, per its investor deck.

Source: MGM Q2 investor presentation

4) Having land-based presence is important in US sports betting

DraftKings spoke about this after the Golden Nugget deal, saying it wanted to offer VIP experiences to high-value customers at casino resorts and restaurants.

It is the sort of thing Caesars and MGM already can do, but there are other ways to make a retail footprint count.

Caesars, for example, is giving its 54,000 frontline staff a QR code and incentive to sign customers up for the sportsbook app. That is a cheap source of new customers. And the FanDuel Sportsbook at The Meadowlands has shown a destination sportsbook can be profitable in its own right.

5) Go big or go home

In its report, Flutter made frequent references to the so-called FanDuel ‘flywheel.’ In short, customers signed up in 2019 and 2020 are now paying the acquisition costs for new customers. It is presumably a similar story over at DraftKings and possible at other early entrants as well.

Meanwhile, the land-based business of companies like Caesars, Penn and BetMGM are thriving again post-shutdown. It means these companies all have a lot of cash to throw at marketing. Caesars has $1 billion earmarked for the next two and a half years, and even that might not be enough.

These warchests make it very hard for any B2C newcomers to compete.