October NFL Results Favor Bettors, Hit U.S. Sportsbooks' Revenue

November 12, 2024 Marija D

New York saw historic betting handles—New York alone recorded an unprecedented $2.3 billion in wagers, the highest monthly handle ever in any U.S. state. However, this surge in betting didn’t translate into higher revenues, as sportsbooks faced lower hold rates and missed profit expectations.

In New York, while the handle rose, gross gaming revenue fell nearly 14% from September, and the hold rate dropped to 7.6%. The impact was even sharper in smaller markets like Montana, where the Montana Lottery reported close to $200,000 in losses on football bets, despite handling $4.9 million in wagers, a substantial portion of its total betting activity for the month.

CEOs Express Concern Over “Customer-Friendly” Outcomes in Earnings Calls

The unusually high frequency of favorable outcomes for bettors in October raised concerns among sportsbook executives, who highlighted the challenge during recent earnings calls. PENN Entertainment echoed this sentiment, noting that the industry-wide hold was substantially affected by “customer-friendly” NFL results.

The sixth week of Caesars Entertainment CEO Tom Reeg, who referred to it as “the single worst combination of sports betting outcomes” since Caesars began its sports betting operations. In New York, the combined win rate for sportsbooks fell below 5% during the week ending October 13 and plummeted to under 2% the following week, one of the lowest rates recorded outside the Super Bowl period.

BetMGM’s Strong Handle but Declining Margins Amid Parlay Popularity

BetMGM reported strong betting activity in October, reaching its highest sports-betting handle since March 2022. However, similar to its competitors, the operator faced declining margins, impacted by NFL results that favored bettors. An analysis from Jefferies Equity Research indicated that October’s revenue slippage was particularly steep for BetMGM, with a 12% drop attributed to these outcomes. Yet, BetMGM saw record levels of handle in early November, offering some hope for recovery despite the adverse start to Q4.

The popularity of parlay bets, which combine multiple outcomes into a single wager, exacerbated revenue challenges across the industry. Parlay bets, while typically profitable for sportsbooks due to their higher risk, posed a liability in October when NFL favorites repeatedly won, leading to higher payouts. PENN CEO Jay Snowden acknowledged this issue, stating that “a higher parlay mix is great, except when all the favorites are hitting.” Reeg echoed this, explaining that parlay betting is an advantage only when outcomes are less predictable.

Due to these challenges, DraftKings adjusted its fiscal-year projections, reducing its revenue guidance by $250 million and its adjusted EBITDA outlook by about one-third. Despite these short-term obstacles, executives remain cautiously optimistic, with Robins and Reeg forecasting that sportsbook performance will stabilize by year-end, targeting a 10-11% hold rate.