U.S. World Cup win was ‘customer-friendly outcome’ for sports betting: Analyst

Chad Beynon, Macquarie Group Senior Analyst in Gaming, Lodging and Leisure, sits down with Yahoo Finance Live to talk about sports betting trends during the 2022 World Cup in Qatar, comparisons to other sports, and DraftKings' new inclusion of horse-race betting.

Video transcript

DAVE BRIGGS: At the World Cup in Qatar, it's a win. And you're in the elimination round for Team USA today against Iran. And in the 38th minute, 24-year-old American superstar Christian Pulisic got the Americans on the board. He took a blow from the opposing goalie, breaking the scoreless tie. Pulisic left the game. But the US held onto that lead, and they get their first World Cup win in eight years. They advance the elimination round. They'll get the Netherlands on Saturday. USA.

93% of the betting handle on today's crucial US-Iran World Cup match, as you might expect, on the red, white, and blue, according to Caesars. Meanwhile, more than 20 million Americans were expected to wager 1.8 bill on the Qatar World Cup.

Let's talk about it with Chad Beynon, Macquarie Group senior analyst of gaming, lodging, and leisure. Josh Schafer also here with us. Nice to see you, sir. Let's talk about this win for the US. What does it mean in terms of the sportsbooks today and moving forward in the World Cup?

CHAD BEYNON: Sure. Thanks, Dave. Yeah, so sportsbooks gave a little bit back to the players, obviously. This was a customer-friendly outcome. That's kind of what we call it. Now, what's a little bit more important is it was a customer acquisition tool. So maybe you actually opened up accounts for players who weren't betting on college football, professional football, NBA, NHL, et cetera. And this was kind of the acquisition tool that kind of got them into the system. You do from time to time want customers to win.

So far, during the NFL season, it has been a bookmaker-friendly season so far with hold rates somewhere between 8% and 9%. And an outcome like this certainly kind of moves that back in the favor of the customers. But yeah, actually, yeah, just completely around acquisition. That's the positive to take out of this.

JOSH SCHAFER: And Chad, we see this often in the sports betting space when you think about maybe Tiger Woods in a golf tournament or the US and the World Cup where kind of the general public can get behind one player. I think the US and the World Cup is even more of an outlier than, say, Tiger is.

But you get to the point where the sportsbooks actually might not want the favorite-- the fan favorite to win because they're going to owe so much at some point. I mean, how much of a concern is that moving forward, do you think? Is it a concern for Saturday, or would it only be a concern if the US, which was more than plus 1,000 at the beginning of the tournament, makes a real run here?

CHAD BEYNON: Yeah, it's difficult for the bookmakers because, really, the only thing they can do is make the payout lower. So pretty much move the odds a little bit more than they traditionally would. Historically, you're going to try and kind of have a neutral entrance into any kickoff or sporting event here.

And you just can't do that, right? You're just not going to get the bets on the other side. So maybe you kind of move some of that. I had heard that the over, under, maybe that pre-match was moved slightly, just to try and get some people to bet on that side of the action. But yeah, that's really all you can do.

The other way we think about this is, it's about one week's worth of NBA action. So while you're giving a little bit up, it's not like it's a Super Bowl event over and over again, right? It's just one game, where you're getting this extra inflow. And generally, we see about 10 billion of handle per month in the US. So, yeah, it looks like over the course of the World Cup, we'll probably see somewhere between 1 and 2 billion. So it's a little less than, I'd say, 20% of monthly handle or volumes.

JOSH SCHAFER: And we had heard from different sportsbooks heading into the World Cup, with it being in NFL season and in football season and NBA season, as you mentioned, might not be as popular of an event to bet on. Any sense as to where we're at as far as who's betting on the World Cup? Are they not betting on football? Or is there just more gambling happening in general? What's it been like the last two weeks?

CHAD BEYNON: Yeah, I'd say in general, we've seen the numbers move up. One of the companies that we track, Geo Comply, has done a really nice job, particularly in new states, like Maryland, for instance. Just went live right around Thanksgiving, and they've published some of the data just in terms of the population penetration at this point. And usually, we think about somewhere around 5% of penetration in states on the traditional sports.

So with World Cup, to your point, maybe you see that increase a little bit, somewhat broader demographics on the gender side, on the preference side, on the income side. So hopefully that helps. And again, hopefully, it keeps them into the other sports. Yeah, I would say, traditionally, soccer is a low volume sport in the United States.

When we look at some of the global companies, I mean, this is much more important in the UK, Spain, Italy, some of the Latin American countries. And the companies that I follow are looking to expand into those markets. But yes, certainly, in the US, it's not as big of as a sport as the Big Four here.

DAVE BRIGGS: I want to shift a bit, Chad, to the stock story, the investor story, draftkings.com, for example. In a year where we have states coming online all the time, 30 legalized states, that stock is down 48%. Are there some that might not survive? And at the same token, is there room for a newcomer in this space as Fanatics, a private company worth $27 billion, suggests they'll come online in January?

CHAD BEYNON: Yeah, good question. In the not survive camp, we have seen several books close down. These were companies that weren't able to get 1% market share. And the marketing dollars were just not getting them to where they thought the market share or the revenues would achieve.

In terms of DraftKings, they continue to say that the playbook is working, right? On their last earnings call, they did give 2023 EBITDA or cash flow guidance that was below expectations. But they believe the lifetime values of the customers that they've acquired will move this model to be profitable in the fourth quarter of 2023, and then for the full year of 2024. So we think they have enough cash on their balance sheet to certainly survive.

I'd like to see them look at other acquisition tools, like the one that they made today, right? You're trying to expand the reach of the customers that want to play on your site. And that's been one of the issues with DraftKings. As it relates to new companies, Fanatics met with the investor community last week.

And they talked about 100 million people in their database that kind of mirrors what the United States looks like. Pretty well diversified in terms of ages, in terms of gender. And they're being patient. They're looking to launch in the first quarter of 2023 and then be live in most states by football season of next year.

But as of now, we do like DraftKings. I know they have caught some heat here in terms of the forecast for next year. But I do like where the overall TAM is going. And I think this is a bellwether in the space.

JOSH SCHAFER: And Chad, you mentioned that move today by DraftKings. They're adding horse betting, which we know is a big part of what FanDuel is doing and kind of a big driver in the space in general. What do you make of DraftKings' move, and how much of an eventual driver do you think that can be? Do you think they can maybe steal some market share from what FanDuel already has in the horse betting space?

CHAD BEYNON: Yeah, the customer acquisition side of things is, I think, an evolving calculation. DraftKings and FanDuel have the market share that they have because each company had between 5 and 10 million of fantasy players that they were able to cross-sell into real money gaming, real sports betting. Horse betting, those customers haven't been cross-sold well from anybody.

Churchill Downs, with their Twin Spires product, has the lion's share of that business, over 50% market share. So I think the goal is to have a product where sports betting customers may want to bet on horse racing and vice versa. So I think it will open up kind of a catalog of new customers that they currently don't have in their database. And this is kind of on the back of what they did last year, acquiring Golden Nugget, which opened them up to more female-friendly customers in the online slots category.

DAVE BRIGGS: I'm going to stick with the NFL for now. Chad Beynon, Josh Schafer, good to see you both. Thanks so much.