DraftKings Inc. attempted to introduce a winning bet surcharge in its high-tax states, which backfired due to strong public opposition, forcing the company to withdraw this controversial move. Previously, its main competitor FanDuel's owner Flutter Entertainment publicly announced that it would not implement a similar surcharge. The decision to backtrack may be crucial for DraftKings to maintain its competitive edge.
DraftKings Shows Admirable Adaptability
Despite the controversy, DraftKings has managed to gain market share in the US sports betting sector. JMP Securities analysts estimate that by July 2024, DraftKings will hold 37.8% of the total US online gaming market in the states reported, up from 35.5% in the second quarter. This growth was achieved in the typically weak month of July, thanks to a rebound in betting profit margins to over 10%.
These results position DraftKings favorably as the football season starting in late August approaches. Analysts also suggest that if betting profit margins continue to increase, the operator could gain more market share. DraftKings has proven it can adapt to dynamic market conditions and should at least be able to maintain its position.
The timing of these gains was when DraftKings revoked its introduction of the winning bet surcharge. Many analysts believe that if implemented, this would have harmed DraftKings' market share as customers would turn to companies like FanDuel, which, despite rising costs, took a firm stance against such charges.
Other Major Players Also Achieve Success
The sentiment among the analyst community remains optimistic, with many currently maintaining six-figure target prices for DraftKings and Flutter Entertainment. JMP Securities analyst Jordan Bender highlighted Flutter Entertainment's strong performance in the US, noting an 8% revenue growth from the first quarter to the second quarter of 2024. The operator benefits from a sustained high profit margin of 12.7%.
According to Bender, Flutter enjoys ongoing growth opportunities as the operator hopes to reinvest in its player base before the major sports season and possibly expand through acquisitions in emerging markets such as Brazil, Latin America, and Eastern Europe. Its FanDuel brand remains one of the leading brands in the US and should continue to deliver sustained value.
Other industry participants also saw gains at the start of the third quarter. For example, BetMGM's market share increased from 5.3% in the second quarter to 6.7%, marking the fourth consecutive month of reported accelerated growth. These results highlight the fierce competition in the US online sports betting industry as operators hone their strategies ahead of the upcoming market season.
