Analysis

U.S. potential explains Flutter’s speedy FanDuel move

Is the U.S. sports-betting market underestimated and larger than the industry realizes?

Flutter Entertainment CEO Peter Jackson last week explained why the group had bought a further 37.2% of FanDuel.

One of the main reasons for the move was the total addressable market (TAM) of the U.S.

When Flutter announced its acquisition of the extra 37.2% of FanDuel for $4bn, pushing its ownership of the market-leading U.S. online sportsbook to 95%, the topics of scale, footprint and profit potential were notable.

TAM still untapped 

But just as important was the TAM, in effect the overall size and potential of the market.

Jackson laid out the arguments thus:

  • From $2.5bn in 2018, U.S. gross gaming revenues are set to reach $7bn in 2020.
  • Data specialists Eilers &Krejcik forecast U.S. gross win will reach $9bn in 2021, with $5.6bn of that generated by sports-betting,
  • That figure compares with combined gross gaming revenues of $9.5bn for the UK, Ireland and Australia.

Adding further context to his arguments, Jackson said he expected the sports-betting vertical to be available to 33% of the U.S. population in 2021. That is approximately 108 million people.

For every 5% of the population that is added, an extra $850m in TAM is added to the sports-betting industry, he said.

In addition, Jackson explained that the price paid for FanDuel represented a discount on the company’s true market value. This is compared with its nearest competitor DraftKings.

FanDuel and Fox Bet 

This saving, combined with FanDuel’s potential to generate major profits, have led Flutter to forecast $1bn in revenues for 2020.

Its most recent update showed it had recorded $850m revenues and had 43% market share.

Its nearest competitor DraftKings has forecast $540m-$560m in revenues and 25% share of market in 2020.

New Jersey is the biggest sport betting state in the U.S and FanDuel is market leader there. Jackson said he expects the state to contribute more than $40m to Flutter’s revenues in 2020.

Along with the Garden State, FanDuel is live and investing in Colorado, Illinois, West Virginia, Indiana, Pennsylvania and Iowa.

Flutter also includes the Fox Bet brand. Although it has not performed as strongly as the group would have liked, it will tack onto the Fox Sports TV network to gain major exposure and drive sign ups as part of a sports betting-sports media strategy.    

Jackson added that the group’s bookmaking and betting expertise would enable it to maximize bet frequency and customer retention rates in all those states

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Jake Pollard

Jake Pollard is an experienced journalist and editor who has covered the online gaming and betting industry for many years. He has written for the leading media outlets as well as operators and suppliers in the igaming space. His current areas of focus are wide-ranging and include regulatory developments in the US, emerging markets in South America and how European countries are adapting to a decade of igaming regulation.

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