The latest financial results of two major betting companies have placed intense focus on the importance of the US market for gambling revenue. The half-year results of Flutter Entertainment plc showed a 20% fall in earnings with UK revenue falling 4%, but the share price rose due to impressive growth in the United States, which has exceeded all expectations.
888 Holdings plc has also experienced a decline in its UK business with half-year revenue falling by 25%, which led to a fall in the share price. The difference in the market’s reaction to the results is explained by Flutter’s dominant position in the US, while 888 is more reliant on its UK business for revenue. 888 CEO Itai Pazner said the reduction in revenue is primarily due to the conditions in the UK gambling market.
Flutter Entertainment plc, which owns a variety of betting brands such as Betfair, Paddy Power and Sky Bet, along with FanDuel, the betting subsidiary serving the US market, said investment in the US, increased gambling regulations and a higher spend on problem gambling initiatives led to the half-year reduction in earnings. The company also introduced safer gambling measures costing £48 million, such as a £10 stake limit on slot games and deposit limits which apply to all customers. Similar measures were also implemented by 888.
However, Flutter said it has not witnessed “discernible signs” of a reduction in customer spending on its betting sites due to the cost-of-living crisis, a phenomenon which has resulted in Entain, owner of Ladbrokes, issuing a lower revenue forecast.
Uncertainty in the UK gambling sector
Flutter Entertainment plc and 888 Holdings plc have reported that the first-half revenue has been affected by the introduction of initiatives that promote safer gambling, ahead of potential government restrictions. This comes after the UK government’s white paper on gambling reform was once again delayed, with the industry expecting restrictions in the UK market, which are likely to include the introduction of maximum stakes in online casinos and a possible ban on betting companies sponsoring football shirts.
The delay, for the fourth time, has caused consternation and a high degree of uncertainty in the industry with the UK government coming to a standstill. Following the removal of Boris Johnson as Prime Minister by Tory MPs, all policy decisions have been put on ice until a new leader of the UK government is in place, including measures to help Brits with the cost-of-living crisis.
The increasing importance of the US gambling market
Flutter’s figures demonstrate that the company is best placed to capitalise on its strong position in the US market. The company is represented in the US by its subsidiaries including FanDuel, which has a market share of almost 50% of the sports betting market, making Flutter the biggest player in the region. Its US brands are now responsible for around one-third of the group’s overall revenue.
The US betting sector has witnessed a betting boom since the legalisation of online gambling in key states such as New Jersey in 2018, and New York, which became the 18th state to permit betting on sports online in January 2022. The importance of the US market is underlined by a record of over $57 billion worth of bets being placed by Americans in 2021.
Flutter CEO Peter Jackson commented that FanDuel is exceeding all expectations. Indeed, revenue in the US could be around 25% higher than forecast, and annual revenue in the US is expected to be between £2.3 billion and £2.5 billion. FanDuel is the first online gambling operation to achieve a quarterly profit in the US, which raises the prospect of achieving the aim of annual profitability in 2023.
The effect on the Australian gambling market
The gambling market in Australia continues to grow with research by the Australian Communication and Media Authority revealing that over one in 10 Australians gambled online in the first six months of 2021, an increase of 8% compared with the previous year. IMARC Group valued the online gambling market in Australia at over £3.3 billion in 2021 and forecasts that it will be worth almost £5.5 billion by 2027. Off-shore online gambling operators must meet stringent requirements with regard to safer betting in order to obtain gambling licences issued by a State or Territory. This gives a clear advantage to home-grown online gambling operators who are better placed to comply with the strict rules.
As the Australian gambling market is already heavily regulated with an emphasis on player protection, this creates a benefit for players as Australian online gambling operators offer a high level of legitimacy with online betting sites required to adhere to safety guidelines as part of the licensing process.
This has not deterred operators in the region, which has led to an increase in new Australian betting sites competing with the established online gambling heavyweights. New sites are taking the fight to well-known brands by offering customers common betting industry innovations such as apps for iOS and Android, a range of payment options and generous bonuses. According to the IMARC Group, one of the reasons for the growth of online gambling in Australia is increased smartphone usage, so it is no surprise to see Australian online gambling companies developing apps to take advantage of these advances in technology. Furthermore, online gambling sites such as Picklebet also operate in markets in North America, creating the prospect of a share of the lucrative US market.
The importance of the US gambling market, which has seen exponential growth in recent years, has been underlined by the first-half revenue of two of the major players in online gambling. The uncertainty over the UK government’s white paper on gambling reform has contributed to the fall in revenue from the UK gambling market. Implementation of player safety measures by UK betting operators has also contributed to reduced revenue with companies now looking to the US for revenue growth. As the boom in online gambling in the United States shows no signs of abating, the companies with an existing presence in the US are set to reap the rewards.
