Flutter has become one of the leading betting companies across the Atlantic. Photo: Spencer Platt/Getty Images
Weeks before the 2016 US presidential election, Paddy Power paid out $1.1 million to customers betting on Hillary Clinton, so the gambling site was so confident she would come out clear winner.
Such was the bookmaker's confidence in Clinton, her representative. admitted then that if Donald Trump wins, Paddy Power will face a double payout and a «seriously expensive egg on our faces».
Flutter Entertainment, the owner of £27 billion Paddy Power, will be hoping it will happen. The next bet on the US will be more fruitful.
In just five years, Flutter has become one of the leading betting companies across the Atlantic. Its U.S. sportsbook brand FanDuel surpasses established casino brands like MGM and Caesars in market share.
In January, its chief executive Peter Jackson called the U.S. Flutter's «natural home» when he announced plans to move its major stock exchange listing from London to New York.
Although the move represents a blow to ailing London. With a stock market languishing amid an exodus of companies and low valuations, it's easy to see why Flutter bosses have set their sights across the Atlantic.
Sports betting in America has soared since the 2018 Supreme Court ruling allowed states to set their own gambling laws. Since then, the bookmaker, headquartered in Dublin, has taken pole position.
Flutter's total US operations generated revenue of US$4.5bn (£3.6bn) in 2023, higher than the US$3bn (£2.4bn) contributed by its UK and Irish business . The US currently accounts for 38% of Flutter's total revenue. The main benefit of moving the primary listing is potential inclusion in US indices such as the S&P 500.
“What Flutter did was strategically ahead of everyone else in every way,” says William Woodhams, CEO of bookmaker Fitzdares.< /p>
Just days after the Supreme Court decision, Flutter took action by acquiring a majority stake. on FanDuel, a popular fantasy sports app with millions of users.
“Everyone knew what was going to happen in America, and everyone knew it would cost a lot of money,” says Fitzdars' Woodhams.
p>
FanDuel already has legions of sports fans signed up, and the company has spent millions on advertising campaigns and celebrity endorsements like Snoop Dogg and Floyd Mayweather to attract customers.
Snoop Dogg is just one of the celebrities promoting the fantasy sports app FanDuel. Photo: PA Images/Alamy Stock Photo
“FanDuel and [its closest competitor] DraftKings used Wall Street money will flood the US with advertising,” says gambling industry consultant Andrew Tottenham.
“FanDuel was created to provide a product for 21-year-old athletes who did not want to bet illegally. By that point he had an incredible database of people who you knew were just starting to play,” adds Woodhams.
Gaming companies quickly discovered that there was no shortage of demand for legal betting once In 2018, states began to open their doors to this industry. “[Americans] are just as, if not more, passionate about betting. And they have more sports that they tend to bet on,” says Paul Girvan, chief executive of PKC Gaming & Leisure consultations.
Americans bet nearly $120 billion on sports in 2023, up 27.5% from 2022, according to the American Gaming Association (AGA). This has resulted in revenues of approximately $10 billion for the growing industry.
In a presentation to New York investors earlier this year, Flutter said it expects the combined U.S. sports betting and gaming market to be worth about $40 billion by 2030.
The staggering sums have sparked a gold rush among companies desperate to make money. In addition to the big casino firms, many of the UK's best-known players have invested heavily in the US.
But in many cases, turning a profit has proven difficult due to intense competition, high costs and the difficulty of complying with varying rules and regulations in dozens of individual states.
A major problem for some was the huge amount of money required to attract customers through free bets, promotions and other gimmicks. «Acquisition costs are the biggest expense in online gaming,» says PKC's Girvan.
In 2021, Flutter said it had already spent more than $1 billion marketing FanDuel since the 2018 deal. By May 2022, FanDuel said it was spending about $290 on each new customer, and it would take an average of 12 to 18 months to recoup those costs.
“Last year we had to pay to attract these customers. These customers have made positive contributions this year, and of course we will also acquire a whole host of new customers,” Flutter chief executive Jackson told reporters in March.
“It's really about the strength of your balance sheet and how long you are willing to pay for the business,” adds Tottenham. “Small companies are fading into the background. They are leaving the markets because they have no path to profitability.”
Flutter's increased spending appears to be paying off after FanDuel reported its first full year of profitability in 2023. But others have not yet reached this point. William Hill owner 888 Holdings said last month it was considering selling or exiting its U.S. consumer business, blaming high costs and bureaucratic red tape.
“We have concluded that the achievement of sufficient scale in the United States, it is unlikely that positive profits will be achieved in the market in an accelerated time frame,” its chief executive, Per Widerström, said at the time.
Flutter had a lot to celebrate after listing on the New York Stock Exchange. Photo: Ellie Joseph
Flutter still faces some obstacles on its way to conquering the United States. The populous western state of California has the highest GDP of any state and a thriving sports industry, but sports betting is still illegal there.
Efforts to legalize it have so far failed, in part because of opposition from Native American tribes, which have a monopoly on casino gambling in the state. There are about 70 tribes in California that own casinos, generating about $8 billion in revenue.
“The tribes' position is that you won't get into this market the way you got into other U.S. markets. They won't allow them to be part of it unless it's their choice,” says Girvan. Girvan believes that even if it is legalized, the tribes are unlikely to agree to any deal that would jeopardize their prominence.
Meanwhile, the fate of Flutter outside the US is ambiguous. The company's sales in the UK and Ireland rose 14% in 2023, but in Australia, which accounts for about 12% of its business, revenue fell 7.1%. Flutter warned that a «challenging» market and increased regulatory costs would impact its profitability in 2024.
At the same time, there are growing signs of a public backlash in the US as concerns about the social impact of gambling grow.
“If there is one thing that has caused a backlash in Europe to online gambling, it is the amount advertising,» says Tottenham.
“We in the gambling industry live in a bubble. What we don't realize is that there are a lot of people who don't like it, don't want it, don't want it in their living room, and don't want this constant barrage. This is causing a backlash and will contribute to what has happened here, which is new restrictions on the industry.»
Charles Ritchie, co-founder of the charity Gambling With Lives, which supports families bereaved by suicide , related to gambling in the UK, adds: “The weakening of gambling laws in the US will have serious consequences in the US, as well as in the UK.
“Wider access to highly advertised highly addictive products will mean not only more people suffering from addiction, but also more suicides, and the government will be forced to act.”
Calls for tougher regulation and higher taxes on gambling companies are also rising. Last month, New Jersey Sen. John McKeon sponsored a bill proposing stronger consumer protections and raising the tax rate on online sports betting and casino gaming in the Garden State to 30 percent from 13 percent and 15 percent, respectively.
McKeon said the proceeds will go toward programs to prevent and treat gambling harm. Flutter's Jackson said in March that the company is doing «a lot of work… to make sure we're leading» on responsible gaming initiatives.
For now, Flutter is winning big by betting on the United States . But as the dark side of the US gambling boom becomes increasingly clear, the betting giant and its competitors could face tougher times ahead.
Свежие комментарии