“Struggling” Fox Bet to migrate onto PPB global betting platform to improve product quality
Flutter opts to settle Fox Corp’s FanDuel stake via arbitration as CEO Peter Jackson states Fox is an “important partner”
Flutter is plotting to move Fox Bet onto its Paddy Power Betfair (PPB) global betting platform to help improve the product as it is incurring disproportionate losses in the US.
Speaking to analysts during the operator’s Q1 earnings call yesterday, Flutter CEO Peter Jackson admitted Fox Bet was “struggling as the product is not as good as FanDuel” because it sits on the legacy betting platform of The Stars Group (TSG).
“Customer acquisitions are lower, particularly on the sports side, and we don’t get the same benefits of the operating leverage [that we get with FanDuel],” Jackson said.
“And with the fixed costs associated with the business, losses are higher and it gives us some interesting visibility of what it’s like for our other smaller competitors facing us down in the US,” he added.
Jackson did not give a roadmap for the migration, although Flutter Group CFO Jonathan Hill did say it would “take time”.
Flutter is currently in the process of migrating FanDuel onto its in-house global betting platform, a few states at a time.
The process started with West Virginia in December last year and four states have now completely migrated, including Illinois and Indiana.
Elsewhere, Flutter has opted to enact an arbitration process in the US courts to settle Fox Corp’s case against it over the 18.6% stake in FanDuel it has the option to purchase.
In April, Fox filed a lawsuit with the New York Judicial Arbitration and Mediation Service (JAMS) requesting an option to purchase the FanDuel stake at the same value Flutter paid Fastball Holdings for its 37.2% share of the business back in December 2020, taking Flutter’s stake in FanDuel to 95%.
Jackson told analysts yesterday that one of the benefits of arbitration was that it could be settled confidentially.
“It hadn’t been our intention to discuss [the case] but I think it’s a pretty regular thing that occurs in the US market and we understand that these mechanisms sometimes have to be used so that we remain supportive of what we’re doing with Fox,” Jackson said.
He highlighted the beneficial partnership Flutter had established with Fox in the development of the Fox Bet brand.
“Fox are a very important partner for us in the market [and] we know Fox has the right to come in and acquire half of Fox Bet,” Jackson said.
“We’ve done an awful lot to support the Fox Bet business and when I look at the step up in the quality of the team and management we have supporting our business and the focus that we’re putting on it from a tech perspective, Lachlan [Murdoch, Fox Corp CEO] has been tremendous in terms of chairing regular meetings to help boost and improve the performance of the [free-to-play] Super 6 products.”
Flutter is planning to publicly list the FanDuel business in the US and Jackson was adamant that ongoing legal proceedings with Fox would not derail that process.
PokerStars and Fox Bet would not be included in any potential FanDuel IPO by Flutter in the US. FanDuel could reach a market cap of more than $30bn if traded publicly, according to analysts.
Flutter reported a 33% year-on-year increase in total group revenue to £1.4bn for Q1 2021.
The operator’s US arm, comprised of FanDuel, Fox Bet, PokerStars and TVG, proved to be the strongest performer during the quarter, where revenue surged 135% annually to £288m.