As Super Bowl LVI draws near, Genius Sports is pleased with the first season of its landmark partnership with the NFL, as evidenced by metrics that show that about 97% of the U.S. market is ingesting NFL official data feeds supplied by the sports betting provider.
On Thursday at the company’s first-ever virtual Investor Day presentation, Genius Sports executives described the multi-year, exclusive NFL partnership as the backbone of its comprehensive league rights model. Over the 18-week regular season, in-play betting on NFL contests made up about 25% of the overall handle for the sport, in line with company expectations.
By comparison, in-play betting worldwide represents approximately 75% of the overall handle for sportsbook operators in mature markets. While Genius projects that U.S. in-play betting activity will represent a larger slice of the revenue pie as the market continues to mature, the company’s assumptions remain “very conservative,” CEO Mark Locke said in Thursday’s presentation.
Courtesy: Genius Sports
During the regular season, in-play win margins and in-play betting volume as a percentage of gross gaming revenue (GGR) came in at rates lower than expected, Locke noted. Moving forward, Genius projects in-play betting activity to represent 13% of the NFL GGR in 2022, unchanged from rates for this season. The figure is projected to tick up two percentage points to 15% by 2023, before stepping up to 20% in 2024, according to company estimates.
In that year, Genius expects to attain profitability with its U.S. segment, according to Locke. London-headquartered Genius Sports was formed in 2016, two years before the Supreme Court’s historic PASPA decision.
“From that point (2024) on, Genius believes its U.S. segment will begin to scale and look more like our original business,” Locke said during the webinar. “The NFL is key to the company’s long-term success as the market matures.”
Last spring, Genius outbid rival Sportradar for exclusive rights to the distribution of the NFL’s official data feed to U.S. sportsbooks. Genius supplies NFL official betting data to top U.S. sportsbook operators, including DraftKings, BetMGM, Caesars, PointsBet, WynnBET, and Barstool Sportsbook.
Digging deeper into in-play betting
Genius went to great lengths at Thursday’s presentation to explain why the company’s bottom line improves as in-play betting becomes more popular across the U.S. market. For one, Genius receives a cut of around 1.5% from a partnering sportsbook’s pre-game gross gaming revenue, compared with a take rate of about 5% on in-play wagers. Under a scenario in which a sportsbook handles about $1 million in wagers, Genius will receive about $1,065 from the revenue-sharing agreement, the company explained.
The aforementioned scenario is illustrative of “emerging market flow” from a nascent market, according to the presentation. The scenario assumes a 4% win rate for in-play wagers and a 6% win rate for pre-match bets. In addition, Genius operates under the assumption that in-game wagers in an emerging market will represent about 15% of the overall handle.
Conversely, in a mature market, Genius assumes that in-play wagering will hover near 50% of the overall handle. As operators become more adept at setting lines on the live market, the model assumes that the in-play win rate will rise to 10%. As a result, the scenario projects that Genius’ revenue will increase by a factor of around 3.
Courtesy: Genius Sports
Genius fielded numerous questions Thursday on why the in-play margin for NFL wagering has failed to meet the company’s expectations. For sports such as soccer and tennis, the in-play models have been battle-tested and have performed well, said Jack Davison, who serves as the company’s chief commercial officer. At the moment, in-play modeling for the NFL has proven to be more challenging. Over time, operators can achieve higher margins by refining the product around the edges, Davison explained, by introducing markets such as in-game player props and in-play same-game parlays.
“Our firm belief is that it will trend favorably in our direction over time,” Davison said.
"So in mature European markets, where lots of betting, more betting is in play… the models have been really bow-hardened and tested very, very well. And in the NFL, it's a pretty tough sport to model in play and operators are finding that harder than they do in other sports."🧐 https://t.co/Fva6Jq9cUc
— Alfonso Straffon 🇨🇷🇺🇸🇲🇽 (@astraffon) January 28, 2022
Other highlights from Investor Day
- Genius offered full-year 2022 guidance of $340 million in group revenue and $15 million in group-adjusted EBITDA. By 2023, Genius expects the figures to increase to a range of $430-$440 million in revenue and a range of $40-50 million in adjusted EBITDA.
- Over the past year, two prominent sports business executives have joined the Genius Sports team. In March, the company appointed former Turner President David Levy as chairman of the Genius Sports board. Months later, Genius hired former NFL Network and ESPN CEO Steve Bornstein as president of its North American business. During a fireside chat, Levy told Bornstein that in-game betting will “keep games alive” in the waning moments of lopsided contests when fans usually change the channel. Levy envisions the creation of “second screen content” for betting specifically, using as an example a scenario where a network will air footage of Sergio Garcia in a major even when the Spaniard is far out of contention. Bornstein noted that the nexus between “content and gamification” will drive engagement in the years to come.
- Genius is closely monitoring betting activity in New York, which went live with mobile sports betting on Jan. 8. During the first nine days of online sports wagering in New York, the handle in the Empire State eclipsed $600 million. From a revenue-sharing perspective, Genius performs well in jurisdictions with high betting volume.
- Genius also pointed to its advertising capabilities through various content widgets as a key growth driver. The company counts top brands such as FanDuel, DraftKings, Pringles, 7-Eleven, Hennessy, and Heineken as commercial partners. For instance, a FanDuel commercial promoting a risk-free bet promotion may be produced with input from Genius on how the offer appeals to the sportsbook’s customer base. One analyst questioned why Genius is investing so heavily in its “ad tech” business when it appears that the sports betting customer acquisition window will only remain open for a limited period of time. “We’re helping operators acquire customers already, but we’re also helping them retain customers,” said Josh Linforth, the company’s managing director of media and engagement. Genius has a load of technology on player retention, utilizing personalized betting offers based on player wagering behavior as a customer retention tool, he remarked.
Genius closed on Thursday at $5.85 a share, down 6% on the session. Genius shares have slumped 70% over the last five months, in line with sports betting-related stocks in general. Stocks across the industry are trading near 12-month lows amid historic levels of inflation.