The latest round of financial results from publicly-traded operators of online sportsbooks shows that the house doesn’t always win, at least not in the current, super-competitive environment for internet gambling.
In particular, the first half of the National Football League’s regular season has been good for gamblers. Favorites have been covering point spreads and plenty of games have been higher scoring than expected, leading to winning wagers on successful teams and on the "Over" for point totals.
Take DraftKings Inc. On Friday, the Boston-based company reported results that were affected by the success bettors enjoyed during the early part of the NFL’s regular season, including 89 percent of prime-time NFL games going Over their total during the quarter that ended September 30.
“As has been widely publicized, NFL game outcomes have been favorable to players this year for a number of reasons,” Chief Executive Officer Jason Robins noted to analysts and investors during a conference call.
According to Robins, 71 percent of favorites and 57 percent of Over bets won for NFL prime-time games through Week 7 of the NFL season. There were also no upsets by underdogs of seven-and-a-half points or more before Week 8, in addition to four NFL weeks in which more than half of the favorites won, the CEO said.
“A very popular parlay bet is to pair a large favorite on the moneyline with other bets,” Robins said. “Therefore, when large favorites win consistently, parlays hit more frequently.”
'Thank you Jets and Saints'
DraftKings reported revenue of $213 million for the quarter ended September 30, which was up 60 percent from a year earlier. That said, the company reported a net loss of $545 million for the third quarter and nearly $1.2 billion for the first nine months of 2021.
The company also tweaked its revenue guidance for 2021, bumping up the midpoint to $1.26 billion but lowering the ceiling slightly to $1.28 billion.
This guidance, DraftKings said, included a $25-million blow to revenue that was mostly because of “customer-friendly NFL event outcomes” in October. That followed a $25-million "revenue headwind" in the third quarter, which was "largely driven by unfavorable NFL sport outcomes," the company said in its latest earnings presentation.
The impact could have been bigger for DraftKings too, if not for the New York Jets and New Orleans Saints coming through with upset wins in Week 8 of the NFL season. Robins said between last Thursday and this Monday “favorable event outcomes” drove a positive swing of more than $25 million of revenue.
“October has been an exciting month to say the least, with two very challenging hold weekends only partially offset by last weekend, which was very positive,” Chief Financial Officer Jason Park said during DraftKings’ conference call. “Thank you Jets and Saints.”
October-feast for bettors?
The comments suggest it is possible for online sportsbooks to lose, although operators presumably expect to be winners in the long run. The latest financials from sports betting companies also show they are willing to spend a lot of money right now to acquire customers and grow market share — especially as legal sports betting continues to spread — in the hopes it will translate into long-term profits.
Numbers released this week by the Iowa Racing and Gaming Commission show that while $249.9 million was bet at online sportsbooks last month in the state, operators only generated around $3.5 million in revenue from internet-based wagering. The 1.4 percent win rate for October was only slightly better than that of September, when the hold for online sportsbooks in Iowa was 0.8 percent.
In other words, plenty was being bet at the books, but the books weren't squeezing much revenue out of those wagers.
Dublin-based Flutter Entertainment Plc, which owns almost all of FanDuel, reported Tuesday it is now consistently seeing betting volumes on NFL Sundays that are on par with the 2021 Super Bowl.
And despite the rush of betting, the bookmaker still took an approximately $20-million hit from "adverse sports results in October" in the U.S. That was in addition to around $80 million in additional financial hurt the company experienced due to "unfavourable sports results" in other markets in the first 24 days of October.
Flutter tweaked its guidance as well, saying it now expects its adjusted EBITDA loss in the U.S. to be between approximately $340 million and $370 million. The company's previous loss guidance for adjusted earnings before interest, taxes, depreciation, and amortization was somewhere between $300 million and $370 million.
“This is just the business we're in, and sometimes results go against us,” said Peter Jackson, chief executive of Flutter, during a conference call for analysts and investors.
Et tu, book?
Some of the money sportsbooks had to spend in the third quarter was due to the generous offers they were making to bettors.
Nevada-based Caesars Entertainment Inc. disclosed this week its handle for sports betting and iGaming soared in the three months ended September 30, which was due in part to the launch of its revamped Caesars Sportsbook.
However, the company’s digital unit swung from an $11-million profit a year ago to a $190-million loss for this year's third quarter. Net revenues, it said, were still "negatively impacted by a sports betting hold percentage that was below our typical range.”
Caesars said in its financial results its “hold” or “win” from sports betting is typically around six to nine percent of all wagers. That was lower in the third quarter for a few reasons, including efforts to woo bettors.
“The low hold percentage was driven in part by increased odds and profit boosts, which are promotional enhancements that improve odds or wager payouts for customers,” Caesars said in its quarterly report. “In addition, our hold percentage was negatively impacted by competitive pricing strategies and lower than typical hold in certain betting markets.”
???? Happy Hour Boost ????
— FanDuel Sportsbook (@FDSportsbook) November 5, 2021
Julius Randle to record a double-double
Was: -115
Now: +150????
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Some day the generosity from books may end. Caesars isn’t done spending, though, especially on advertising.
Caesars CEO Tom Reeg said during their earnings call this past week they plan to remain aggressive with their marketing during football season.
The CEO even noted they recently filmed more television commercials, which would be in addition to the nationwide ones they’ve already been running starring actor-comedian JB Smoove.
“We're going to be all over the place in terms of media,” Reeg said.
