How the Sportsbook investor or analyst can take advantage of the HoldCrunch platform
Example 1: Identifying high performing Sportsbooks early
Here’s a scenario of what HoldCrunch data would show for a high performing Sportsbook:
- Sportsbook A has a market leading HoldCrunch Percentage of 3% (the closer to 0% the better the prices offered to customers). This means it is offering better odds than competitors almost all of the time on the lines and markets where customers put their money and as a result it has a positive outlook for handle share growth relative to peers
- HoldCrunch data also shows that Sportsbook A has a stronger margin performance than implied by state reports. Several other books are reported to have higher NGR and GGR margins, but their true margin is actually lower than Sportsbook A because uncompetitive prices are contributing to their margin performance, and that fact is revealed by the HoldCrunch Percentage. Reported NGR/GGR minus the HoldCrunch Percentage shows true underlying profitability because it is margin after taking the cost of competing on price into account. It is what we call ‘NGR+’ or ‘GGR+’
Action: Positively adjust the stock forecasting model for this Sportsbook because we can reasonably expect profitability and handle share growth in upcoming financial statements
Example 2: The Sportsbook preserving margin by not competing on price
What the HoldCrunch data shows:
- Sportsbook B regularly has a 10% higher HoldCrunch Percentage on major US sports than competitors. This means it is not competing on price
- It has a slightly falling handle share but relatively high NGR and GGR margins compared to peers
Insight: There may be a lack of confidence in risk management capabilities, otherwise margin could be sacrificed to increase handle share and grow revenues overall. This insight tallies with the Sportsbook’s own public statements around investing in better risk management expertise
Action: HoldCrunch data will indicate whether risk management improvements are effective. For example, if the HoldCrunch Percentage reduces to a level equal to or better than the leaders and at the same time margins continue to be strong then new risk management capabilities can be deemed a success and the outlook for this Sportsbook can be adjusted up accordingly
Example 3: The Sportsbook sacrificing margin to compete on price in order to maintain handle share
What the HoldCrunch data shows:
- Sportsbook C has a relatively low HoldCrunch Percentage of 5%. This means it is often competing on price
- The reported handle data shows its handle market share is stable
- The reported NGR and GGR data indicates poor margins that are lower than competitors
Insight: This Sportsbook is sacrificing margin to compete on price in order to maintain handle share. One of three things is likely to happen:
1. Current data trends continue and it remains a low margin Sportsbook in order to maintain handle share, a poor outlook for profitability
2. It will try to grow short-term revenues by becoming less competitive on price which could put handle share at risk. A higher HoldCrunch would indicate this straightaway
3. It will achieve higher margins while continuing to compete on price, a result probably of risk management improvements. A low HoldCrunch with higher NGR+ and GGR+ margins would indicate this
Action: Monitor the HoldCrunch data to understand which scenario plays out and adjust the outlook accordingly
Example 4: Predicting the market share of new entrants
HoldCrunch data can be used in exactly the same way as these examples to assess the market share prospects of new entrants
- Is new entrant X displaying the price+margin performance characteristics of the Sportsbook in example 1, 2 or 3?
- Our data indicates that a low HoldCrunch Percentage coupled with leading NGR+ margins are prerequisites for achieving >10% market share because those two metrics, more than any others, are evidence of operational excellence in the core of what a Sportsbook does; offering competitive prices while retaining margin