The future success of major online sports betting operators in the United States may hinge on an unsurprising but still massively popular offering that somehow keeps getting more popular: the parlay.
Indeed, the biggest U.S. operator sees its customers like a fine wine, perhaps a nice Pinot Noir that just so happens to love a good same game parlay.
Peter Jackson, CEO of FanDuel-parent Flutter Entertainment PLC, said Tuesday that the company’s bold projection of $70 billion in annual online gambling revenue being up for grabs in North America by 2030 isn’t built on a hope and a prayer.
Jackson told the crowd at the Global Gaming Expo in Las Vegas that inflation and greater iGaming participation are factors in their forecasts. However, he added that the biggest change in their estimates has to do with the value its customers could provide.
Ahead of its investor day, FanDuel-parent Flutter Entertainment says it now expects the total addressable market for online gambling in North America to reach $70B by 2030, $63B from the U.S. and $7B from Canada. The U.S. estimate is up 1.5X from Flutter's 2022 investor day. pic.twitter.com/jzHTJ2lQT1
— Geoff Zochodne (@GeoffZochodne) September 25, 2024
While the naysayers (a.k.a. the competition) may quibble with Dublin-based Flutter’s forecasts, Jackson said they don’t have the same sort of “parlay penetration” that FanDuel does.
For example, Jackson pointed to this week's Monday Night Football game, saying that around half of FanDuel’s customers who wagered on the contest placed a same-game parlay.
“We don’t build hope into these forecasts,” Jackson said during a discussion with CNBC’s Contessa Brewer. “We look at the existing customer behaviors, parlay penetrations, the types of margins that we’re getting from customers and that’s how we come up with forecasts.”
The high level of parlay play, Jackson added, “leads to much higher player values.”
So while FanDuel’s future growth may rely in part on new states legalizing sports betting (California and Texas being the biggest ones), Jackson sees the company's existing clientele as providing plenty more themselves.
Everybody Loves Parlay
FanDuel plans to harness the so-called “Flutter Edge” — the term the company uses for the shared expertise and technology between its brands — to help it meet and stoke that SGP demand.
FanDuel also has plans to enhance its online sportsbook, such as a better in-play wagering experience, and is working on another feature that tries to simplify the wagering process, which the company calls “YourWay.”
But people love their narratives, Jackson said, which goes hand-in-hand with sports betting and parlays when they want to wager, such as Swifties looking to back Travis Kelce and the Kansas City Chiefs.
That is not only the case in the U.S. but in other markets where Flutter operates, such as the United Kingdom and Australia.
“This is a global phenomenon,” Jackson said.
Here comes the competition
The comments from the biggest player in U.S. online sports betting highlight the importance of parlays of the same-game variety and otherwise to operators. And while FanDuel may be the leader now, its rivals are looking to close the gap by playing a similar game.
BetMGM, which has labeled 2024 as an “investment year” intended to win back market share, is one of those rivals trying to catch up.
The operator is unique compared to DraftKings and FanDuel, though, as it's a joint venture of U.K.-based Entain PLC and Las Vegas-headquartered MGM Resorts International.
BetMGM announced ahead of this year’s football season that, with the help of Entain’s Angstrom Sports' modeling prowess, it would have “powered-up parlay enhancements.”
Those enhancements, BetMGM said, would make it easier for customers to build SGPs and allow the bookmaker to offer more pre-packaged parlays.
However, Bill Hornbuckle, CEO and president at MGM Resorts, spoke after Jackson on Tuesday and outlined some of the challenges BetMGM has faced. One was Entain’s belief that its sports betting product would work just as well with Americans as it does in Europe and the U.K.
“I think what we all found out relatively quickly was that baseball and football and all the propositions and all the activity cases in America [are] completely different, and the product needed to marry that,” Hornbuckle said.
BetMGM’s iGaming offering, given its connection to MGM’s brick-and-mortar operations, has done well, Hornbuckle noted. And in the early days, the MGM brand and database went a long way toward helping BetMGM. The sportsbook side just needed changes, which are now being implemented following a management shakeup at Entain.
Meanwhile, MGM-subsidiary LeoVegas purchased Tipico's U.S. operations in June. MGM itself also bought game developer Push Gaming.
“Ultimately, I like where we’ve reset the future for BetMGM here and domestically as well,” Hornbuckle said.
Lots of room to run
Moreover, the MGM CEO said the industry is still in “double-digit growth mode," adding that he was “marveling” recently at the expansion still underway in New Jersey, a much more mature market for sports betting and iGaming.
“There’s still a market, there’s still an appeal, we’re reaching a different audience, we’re reaching a broader audience, particularly as you get into the sports products that go in-game,” Hornbuckle said. “While they’re complicated … if you know what you’re doing, it keeps it exciting until the very last moment.”
Hornbuckle also said their online business is relying on both existing and new customers for growth.
MGM, he noted, has a “rule” in Las Vegas and other brick-and-mortar markets that 1% to 2% of customers account for 50% of the company’s gaming revenue. That ratio, he said, replicates itself, albeit maybe to a lesser extent, with online play.
Re: the Entain/MGM partnership in BetMGM... Hornbuckle says the sports betting product needed to be improved in U.S., enhancements now made. Sounds optimistic about the future following the C-suite shakeup at Entain.
— Geoff Zochodne (@GeoffZochodne) October 8, 2024
It's go time
BetMGM has hopefully captured many of these existing, higher-value customers already, Hornbuckle said.
“It’s the broader appeal to the broader market,” he added. “When you talk about parlays, when you talk about the excitement of winning the lottery ticket, because it’s a parlay, all that goes hand-in-hand with market extension, market expansion.”
With all the changes in place and its positioning in brick-and-mortar gaming and new markets like Brazil on the horizon, it is now, for lack of a better phrase, put-up-or-shut-up time for BetMGM.
“We’ve basically, with BetMGM, made our bed,” Hornbuckle said. “We’ve put a great deal of cash into that business and now it’s time to turn up the lever and begin to flow some cash.”
