Eilers & Krejcik Gaming: Four takeaways from Q3 GGR trends 

Eilers & Krejcik Gaming’s Sports & Emerging Verticals Practice is led by analysts Chris Krafcik and Adam Krejcik.

Their work on market and policy forecasting is regularly cited by public companies, policymakers, and mainstream media outlets such as Bloomberg, ESPN, the New York Times, and The Wall Street Journal. To learn more about the firm’s Sports & Emerging Verticals research offering, visit http://www.ekgamingllc.com.

We recently published our analysis of Q3 2024 GGR trends, with spotlights on the below companies.
Here are our five key takeaways:

FanDuel combined online gambling share dropped 35bps to 30.4%: FanDuel’s online sports betting (OSB) moat is not as considerable as it once was, and competitors are catching up in key areas (such as single game parlays) where FanDuel was first-moving, best-in-class, or both. That said, FanDuel’s once-middling online casino operation has vastly improved, with the brand likely having nicked a not-insignificant slice of BetMGM’s online slots business, per our research and estimates.

DraftKings lost 355bps to 29.1% share: The Q3 2023 GGR share comp was a best-ever for DraftKings, so the red ink here should be viewed in that context. In OSB, DraftKings’ app graded out number one in our H2 2024 rankings, which bodes well for its efforts to narrow the OSB gap with FanDuel. In online casino, meanwhile, DraftKings maintained its lead amid intensifying competition from FanDuel, BetMGM, and a more aggressive Caesars. 

Hard Rock up 449bps to 5.1% share: Hard Rock’s glow-up is mainly attributable to its Florida OSB monopoly, which relaunched in Q4 2023. To give all the credit to Florida would be unfair, however, as the brand also witnessed significant improvements in product quality. Indeed, its unorthodox OSB app, shaped by ex-Flutter talent and once disliked by our testers, is now a top-ranked performer in our proprietary testing.

Fanatics up 254bps to 2.9%: Fanatics’ slow start and more recent growth spike reflects the brand’s focus on getting its OSB product right (or right-ish) before opening the marketing valve. However, we don’t think that spike is just product and marketing, with checks suggesting Fanatics is getting better at day-to-day execution — retaining the right customers, for example. However, online casino remains a work in progress. 

Five takeaways for the Q3 2024 earnings season

A few highlights from our Q3 2024 Earnings Recap:

Product is king: Our product research has found customers increasingly want differentiation, and operators are aware of that fact. FanDuel fielded multiple questions on its new Your Way product, which is being trialed in two states and allows customers to choose any line they want for players props.

Flutter CEO Peter Jackson said the firm had built the math engine “to price almost infinite options” which could lead to some unique customizable product going forward. Innovation is not just reserved for tier-one operators, though, with Rush Street Interactive (RSI) quick to talk up its proprietary PropPacks reward feature, which gives customers a sports card reward for placing a $10 SGP. If the player on the card hits a points target, customers win cash.

Hold me closer: The disastrous run of NFL results (for operators) at the start of October was well flagged across earnings season, but the market seemed to appreciate that variance was a feature of sports betting, not a bug. DraftKings shares initially fell 6% or so after hours when it lowered guidance thanks to the customer-friendly results. But the stock bounced right back in the days after and were up around 12% in the week after the print. What’s more, we see room for hold to surprise to the upside in Q4.

RSI said football results since that disastrous two-week stretch had been better than average, while the Jake Paul versus Mike Tyson fight was a massive boon for operators’ handle and hold — one firm told us it held 70%+ on the bout.

Multi-brand casino strategy is all the rage: Our product testing found a relative lack of differentiation in casino apps compared to their sports betting counterparts. One effect of that homogenization is customers are less loyal, more likely to switch and therefore market share is more split between operators.

A multi-brand casino strategy therefore makes sense, and operators appear to be leaning in. Caesars talked up the success of its new Horseshoe Casino brand while Bally’s launched the Monopoly Casino brand into the US for the first time in October, replacing Virgin Casino. Even though we see a low-ish base for Monopoly Casino, it should still be largely incremental to the main Bally Bet brand.

At last, a legislative win for operators: While the legislative landscape for further online gambling expansion looks somewhat bleak in our view, operators could at least agree that Missouri passing OSB was a big win for the industry. The state has two big sports cities in Kansas City and St Louis, in addition to a strong land-based casino presence. With OSB operators able to deduct promotional credits (capped at 25% of handle), we see an implied effective OSB tax rate in the mid-single digits of GGR across years one to five.

What’s more, RSI noted the state was a good candidate to pass igaming in the future given the strength of the casino lobby there. On that, though, we are a little more skeptical given how close the sports betting vote was, and we remain more generally bearish on future legislative expansion than the industry is, judging by its commentary on earnings calls.

More M&A on the way?: With OSB and online casino legislation in the US an uphill battle, operators appear to look further afield for growth. DraftKings has already made some moves in this area with its acquisition of Jackpocket in February, but prediction markets could be next on the list — CEO Jason Robins said they were “definitely something we’re looking at in advance of the next presidential election and potentially sooner.”

The company may also be looking at European expansion, per channel checks, and has hired a consultant to investigate M&A opportunities. With US growth potentially slowing down and cash flows ramping up, we would not be surprised to see operators buy their way into adjacent verticals and new markets.

Eilers & Krejcik Gaming is an independent research and consulting firm with branches in Orange County, California and Las Vegas, Nevada. The firm’s focus is on product, market, and policy analysis related to the global regulated gambling market.

Clients include operators, suppliers, private equity and venture capital firms, institutional investors, and state governments. To learn more about the firm, visit www.ekgamingllc.com.