US sports betting: Online market share

FanDuel’s dominant position

FanDuel has become the clear market leader in terms of online sports betting. While other operators may have managed to generate a similar market share of handle in some states, FanDuel’s structurally higher margin (due to a superior parlay betting product and arguably best-in-class risk management) has led to a substantial market share lead in terms of gross win. 

While the focus is on gross win, a number of states split out promotional activity, and share of net revenue is the key metric. Looking at a state such as Pennsylvania shows that there can be material discrepancies between the share of sportsbook handle, gross win and net win between operators.

A number of operators have recently announced that they are leaving the US sports betting market, as it has proven very difficult to achieve medium-term profitability as a sub-scale operator. 

How will US sportsbook market share evolve?

In terms of how market share may evolve over time, if we look at mature online sports betting markets, many of them have high levels of concentration of leading operators.

Australia has the highest concentration of market share, with the top operator (Sportsbet – Flutter) having grown organically to achieve 43% market share and the top three operators achieving 81% market share.

Flutter also has the highest market share in the UK at 40%, although this was built through M&A between three major brands. 

While Italy remains a relatively fragmented market, this has always been the case. The US market, on the other hand, appears more likely to have a similar market concentration to that of Australia or the UK in the medium term.

Is the podium for US betting positions fixed?

However, that is not to say that the current market leaders will remain the same. In the UK and Australia, there have been shifts in market share over time as certain operators have garnered substantial market share from nothing. There is no reason that one of the leading brands in the US over time could be one that is not currently one of the top five or even top 10 operators.

Market share change can evolve slowly over time, or it could be the result of a specific event. In the UK, SkyBet became a market leader through its focus on mobile betting, while in Australia, Entain became a market leader through M&A activity. In terms of the US market, the most likely events to drive substantial market share change are:

• a change in market dynamics as operators look to shift from top-line growth to profitability, leading to a reduction in promotional spend and potentially lower investment in products by some operators in an attempt to balance the books
• the increasing sophistication of customers, meaning that product becomes even more important than promotions or brand – this could be driven by the growing significance of a strong and diverse in-play product offering
• M&A activity to generate scale through inorganic means