NFL bettors in the U.S. enjoyed October. Sportsbooks? Not so much.
Numerous operators and states have reported stalling betting revenues in recent weeks as a lack of upset results in the NFL meant a frenzied month of sports activity did not equal a rise in profits for operators.
A significant factor in the month-over-month decline in revenue is that sportsbooks had a very profitable September. In New York, September was the second-best month ever in terms of online sports betting operators’ gross revenue, something that was also true for Michigan and Virginia.
The fact that month was so good has underlined the October struggles, but the numbers are certainly striking.
Notably, in New York, sportsbooks’ gross revenue fell 14% month-over-month despite the Empire State recording the highest monthly handle ever seen in the U.S. at $2.3 billion. Hold fell to 7.6%, down more than two percentage points. Meanwhile, in the smaller Montana market, the Montana Lottery lost nearly $200,000 on football bets in October despite taking $4.9 million in football wagers, 65% of its total betting handle for the month.
Sportsbook leaders curse sports betting outcomes
Across the U.S. in October, operators’ win rates largely sat at around the 7% mark amid the lack of NFL upsets, as well as two early favorites to make the World Series, the New York Yankees and the LA Dodgers, going all the way.
The flat revenue despite huge betting handles in many jurisdictions prompted executives to curse sporting results in recent earnings calls with investors and analysts.
DraftKings CEO Jason Robins said on Friday that the industry giant was “stung” by what he described as “the most customer-friendly stretch of sport outcomes that we’ve ever seen early in the fourth quarter.” Also last week, PENN Entertainment executives stated that “industry-wide hold has been negatively impacted by customer-friendly outcomes” this quarter.
Caesars Entertainment CEO Tom Reeg called Week 6 of the NFL season “the single worst combination of sports betting outcomes we’ve seen since we started the business.” In New York, the combined operator win rate was under 5% for the week ending Oct. 13 and below 2% the following week.
Higher parlay mix worsens impact
Some executives also highlighted that unfavorable sports results are more troublesome in today’s sports betting environment given the increased prominence and customer popularity of parlay bets.
PENN CEO Jay Snowden said on the company’s call that “having a higher parlay mix is great, other than when all the favorites are hitting and parlays are also hitting.” Rees echoed that statement, noting that the shift towards more emphasis on parlay betting “cuts against you” when favorites are winning across the board.
“That’s really been the last five weeks,” Snowden explained. “And the first weekend of November was very consistent with what we saw in October.” NFL favorites won 10 of the 15 games in the first weekend of this month.
Operators’ win rates in October have been low enough to have had a marked impact on Q3 results and projections into the winter. Perhaps most prominently, DraftKings has cut its fiscal-year revenue guidance by $250 million and its adjusted EBITDA outlook by one-third in light of the results.
However, executives are remaining optimistic about their full-year outlook. Reeg and Robins both predicted that their respective companies will finish with a hold of 10-11% for the year despite the poor start to Q4 for online sports betting revenues.
