Igaming Focus: Numbers make the case for online betting and gaming By Jake Pollard, CDC Gaming Reports November 23, 2020 at 12:42 pm Mobile has helped generate most of the headlines for online sports betting in the U.S. But as momentum for regulation continues to build, online casino is also growing strongly. Numbers don’t lie and 2020 has proved the old saying correct in numerous and different ways — from the huge impact the COVID-19 pandemic has had on the online betting and gaming vertical in the U.S. (and around the globe generally) to the dramatic hit the land-based sector has endured since lockdowns were imposed in March. On the regulatory front, momentum for U.S. igaming has been building up steadily since the PASPA repeal of 2018; the pandemic has made it even more urgent for both states and consumers. The former need to generate business and tax revenues for their budgets, the latter need to be able to play safely on regulated sites. As an industry, online betting and gaming has become one of the strongest performing verticals in the world. Illustrating this point, the World Trade Organisation has predicted a decline in world trade of between 13% and 32%, but has included igaming with other high-performing industries like logistics, telecoms, tech and media in its projections. Online 20% of GGW While the global gambling sector’s revenues have dropped 26% and are predicted to hit $350bn in 2020, a level not seen since 2010, data consultancy H2 Gambling Capital says land-based global revenues have dropped 39%, but just 7% for online compared with 2019. The redirect of consumers and players toward online platforms as the COVID-19 pandemic rages is no surprise and the scale and pace at which it has happened maybe more so. As David Henwood, Director at H2 Gambling Capital, says: “The sector has gone back in value to 2010 levels in terms of gross gambling revenues, but we believe it will bounce back, primarily because of the phenomenal rise in the percentage share of online (shown by the red line graph below), which in the space of a few months has jumped from 13% of all gambling revenues pre-COVID to 19% — possibly reaching 20% by the end of the year.” Indeed, in 2010, online accounted for around 10% of all global gambling gross win. Just before the start of the pandemic, the percentage had risen to around 13%. By early September, it was 18%, by November 19%, and it’s likely to reach 20% of global GGR by the end of the year. Is the U.S., H2 forecasts the sports betting market will reach $1.4bn-$1.5bn in gross win in 2020 and remote betting will account for two-thirds of that total, up from just under 50% in 2019. That share of activity is expected to be sustained and normalised in the next three to five years, even with retail facilities fully opening. The main reason for this is the prevalence of mobile. Of the 19 states that have regulated betting so far, only four haven’t allowed mobile and one of those (New York) has accepted that it should have. The pandemic has emphasized this shift to mobile and it seems highly unlikely that players will stop using their phones to wager, even if they are free to travel and play on casino premises. The rearranged sporting calendar has also meant high-quality and plentiful content to bet on. September’s $2.5bn handle, which included the final stages of the 2019/20 NBA season and the start of the new NFL season, represented a 75% jump on September 2019. However, we can also note that operators’ revenues were actually down 3% annually, meaning a 5.8% hold compared to 10% last year and an industry average of 6.7% to date. This drop in revenues can also be explained by the fact that marketing costs, promotions and free bets are going through the roof as operators compete for players. Positive future A number of factors lead to optimism for both online betting and gaming in the U.S. Live betting is not as widespread as it is in Europe and the pointspread is still the dominant betting product. However, the fact that the competition is so intense, allied to the partnerships so many betting brands have with major media outlets and sports leagues, means further innovations with which to increase margins and new product developments are inevitable. And while much of the focus has been on sports betting, thanks to the entertainment value and the high profile of sports stars, online gaming has also been experiencing major growth. Sticky content Pennsylvania’s October figures show that it recorded just shy of $60m in igaming revenues, while in New Jersey, online casino and poker generated $152m in revenues, which represented around 45% of the state’s entire gaming revenues. This happened despite land-based casinos re-opening and experiencing just under a 10% drop in retail activity compared with October 2019 figures. In other words, online gambling is sticky and, when combined with an effective cross-sell strategy from sports into gaming and vice versa, plays a major role in increasing lifetime values and revenues for operators. David Henwood says: “The evidence around the world and now in states like New Jersey and Pennsylvania is that increasingly, igaming and sports betting are product partners, not separate verticals, especially with the increase in mobile wagering. The significance is that even if you just consider the six states that have confirmed igaming legislation and the six that have proposed legislation (Connecticut, Kentucky, Massachusetts, Nebraska [poker only], New York, and Virginia), potential totals a further $8.6bn of value to the U.S. economy by 2030 – or a $18.5bn combined market. Add a further eight states (including California, Illinois and New Hampshire), which we believe could follow suit, and very quickly you get to a combined market north of $25bn ($26.1bn).” For Henwood, regulated U.S. sports betting is a “piggy-back” opportunity for the igaming vertical. “America is a sports-mad country, yes, but deep down, it’s also a gaming-led nation”. As the United States looks to navigate a path out of lockdown and a return to economic growth, all options will surely be studied, so that online betting and gaming can play a role in helping with the economic recovery.