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Betsson’s financial report for Q4 2023 revealed the ongoing challenge of historically low sports betting margins. 

While the company reported a robust 14% revenue rise to €251.9m, a cloud of uncertainty loomed over the sportsbook division.

Sportsbook revenue witnessed a 5.2% decrease and, more concerning, a sportsbook margin of 6.2%, which represented the “lowest reading for a single quarter in the past two years,” according to Betsson AB CEO Pontus Lindwall.

Lindwall pointed to a combination of factors, including a tough comparative period due to the FIFA World Cup and favourable football outcomes for punters.

Not just a Q3 problem

This narrative of slipping margins isn’t novel. Back in Q3 2023, Betsson, alongside its industry peers, grappled with a slew of bettor-friendly sports results that ate into profits. 

During that quarter, Betsson’s sportsbook margin nosedived by 12% year-on-year to 7.3%.

Lindwall pinned the blame squarely on the prevalence of favoured teams clinching victories and the avalanche of high-scoring matches as European football leagues kicked off.

The saga of fan-friendly outcomes persisted into Q4 2023 and even bled into Q1 2024, exacerbating the decline in sportsbook margins. 

During the conference call, Lindwall fielded a probing question about the widening gap between top-tier teams and their less successful counterparts in major leagues, and whether this trend could potentially threaten margins on football moving forward.

Lindwall replied: “That’s a very interesting question. Almost a philosophical one. I’ve been thinking about that. You know, some teams have become so professional, and some other teams can’t really cope with that development. 

“But you can still see some strong teams losing when they are not expected to. So we believe that the sports betting model will be able to adapt to any kind of development within the sports going forward.”

An October bloodbath 

Another gaming executive, who recently spoke to NEXT.io on the condition of anonymity, described October as a “bloodbath” due to customer-friendly sports betting results.

He mentioned that the last three weeks of October were particularly tough for many bookies, with many favoured football teams winning across Europe’s top five leagues.

“We experience a downturn of this magnitude every three to five years,” he said.

He added that although November and December showed a slight improvement from an operator’s viewpoint, “you never fully recover from it. That’s just the way it goes.”

“This situation also leads to a snowball effect, as customers have more money in their accounts and tend to bet more.

“While in the long run, you could argue that it is positive for customer experience and retention, the reality is you never recoup all the losses because people withdraw funds. They may reinvest some, but rarely the full amount.”

A similar picture in the US

The challenge extends beyond Europe. 

In Q4 2023, Flutter noted that while there was growth in US revenue, this was tempered by a decline in sportsbook net revenue margin to 7%. 

This decline was attributed to customer-friendly sports outcomes and a 4.2% rise in promotional expenditure. 

The unfavourable sporting results led to a £343m negative impact in the quarter, resulting in US net revenue falling nearly £150m below the Q3 guidance. Consequently, adjusted EBITDA suffered approximately a 35% negative impact.

Flutter CEO Peter Jackson said: “While sports results were very customer friendly, particularly on the NFL in November, the underlying momentum in the business remains very strong heading into 2024.”

Betsson, meanwhile, is grappling with further sportsbook challenges as it seeks to sign its first B2B client in the US. The Betsafe sportsbook is live on Colorado, but the company is yet to secure an external partner.

“We still have our B2B offering in North America, but we haven’t concluded any deals yet on the sportsbook,” Lindwall said.

“We have not left North America. I think we can say that we have put more effort into developing our B2C offering in Latin America than the B2B side in North America,” he added.

In an exclusive interview with NEXT.io, Lindwall emphasised that was the correct decision strategically when based on the Q4 2023 results.

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