Flutter bets against the house with its bid to take on casino giants
Gamble on the US market is beginning to pay off as rivals join a goldrush, writes
In the weeks leading up to the 2016 US presidential election, Paddy Power paid out $1.1m (£870,719) to customers betting on Hillary Clinton, so certain was the gambling website that she would emerge the winner.
Such was the bookie’s confidence, its spokesman admitted that if Donald Trump won, Paddy Power would face a double payout and “some seriously expensive egg on our faces”.
Flutter Entertainment, the £27bn owner of Paddy Power, will be hoping its next bet on the US proves more fruitful. In just five years, Flutter has become one of the leading betting firms across the Atlantic.
Its US betting brand FanDuel trumps well-established casino brands such as MGM and Caesars in market share terms. In January, its chief executive Peter Jackson described the US as Flutter’s “natural home”, announcing plans to switch its main stock market listing from London to New York.
While its move represents a blow to the ailing London Stock Exchange, it is plain to see why Flutter’s bosses have fixed their eyes across the Atlantic.
Sports betting has exploded in America after a Supreme Court decision in 2018 began allowing states to set their own gambling laws. Since then the Dublin-headquartered bookmaker has taken pole position.
Flutter’s total US operations brought in $4.5bn in 2023 – higher than the $3bn contributed by its UK and Irish business. The US now accounts for 38pc of all Flutter’s revenues. A major draw of moving its primary listing is the potential inclusion in US indices such as the S&P 500. “What Flutter has done is been strategically ahead of everyone on everything,” says William Woodhams, the chief executive of bookmaker Fitzdares.
Just days after the Supreme Court ruling, Flutter made its move by acquiring a majority stake in FanDuel, a popular fantasy sports app with millions of users.
FanDuel already had legions of sports fans signed up, and had spent millions on advertising campaigns and endorsements from A-list celebrities such as Snoop Dogg and Floyd Mayweather to entice customers.
“FanDuel and [its closest rival] DraftKings had used Wall Street money to plaster the US with advertising,” says gambling industry consultant Andrew Tottenham. Gambling firms quickly found there was no shortage of demand for legal betting once states began to open the doors to the industry in 2018. “[Americans] are just as passionate if not more passionate about betting. And they’ve got more sports they tend to bet on,” says Paul Girvan, chief executive of PKC Gaming & Leisure Consultancy.
Americans wagered almost $120bn on sports in 2023, a rise of 27.5pc on 2022, according to figures from the American Gaming Association (AGA). That translated into revenues of around $10bn for the growing industry. In a presentation to New York investors earlier this year, Flutter said it expects the combined US market for sports betting and online gambling to be worth $40bn by 2030.
The eye-watering sums up for grabs have sparked a goldrush among companies desperate to cash in. Many of the best-known players in the UK have invested heavily in the US. But in many cases turning a profit has proved a struggle because of intense competition, high costs, and the complexity of dealing with different rules and regulations in dozens of individual states.
A major problem for some has been the sheer amount of cash needed to get customers on board with free bets, promotions and other gimmicks.
In 2021, Flutter said it had already spent more than $1bn on marketing FanDuel since the 2018 deal. By May 2022, FanDuel said it was spending about $290 per new customer, which was taking an average of 12 to 18 months to pay back.
“Last year, we had to pay to acquire those customers. This year, those customers delivered a positive contribution, and of course, we’ll also acquire a whole bunch of new customers as well,” Flutter boss Jackson told reporters in March.
“It really is about the strength of your balance sheet and how long you are willing to keep paying for business,” adds Tottenham. “Smaller companies are falling by the wayside.”
Flutter’s spending spree appears to be paying off, after FanDuel reported its first full year of profitability in 2023. But others are yet to reach that point. 888 Holdings, owner of William Hill, said last month it is considering a sale or exit of its US consumer business.
Flutter still has some hurdles to jump in its quest to conquer the US. The heavily populated western state of California has the highest GDP of any state and a thriving sports industry, but sports betting is still illegal there.
Meanwhile, Flutter’s fortunes outside the US have been mixed. Its UK and Ireland sales grew 14pc in 2023, but in Australia, 12pc of its business, revenues fell by 7.1pc.
There are growing signs of a public backlash in the US as worries rise around the social impact of gambling.
“If there’s one thing that created the backlash in Europe to online gambling, it’s the amount of advertising,” says Tottenham. “A lot of people don’t like it, don’t want it in their living room.”
Charles Ritchie, co-founder of the charity Gambling With Lives, wadds: “The loosening of gambling laws in the US will have serious consequences just as it did in the UK. More access to massadvertised, highly-addictive products will not only mean more people addicted but many more suicides, and the government will be forced to act.”
For now, Flutter is winning big with its bet on the US. But as the darker side of the boom becomes more evident, the betting giant and its rivals may find tougher times are on the cards.