Led by strong results from NFL betting in which heavy favorites have lost, a Wall Street analyst points to “sizable increases” in revenue at U.S. sportsbooks so far in November.
The analysis from Barry Jonas with Truist Securities released Monday morning follows reports from states across the U.S. showing October gross gaming revenue for sports betting dipped slightly from September. That decline occurred despite increased betting handle in October with college and pro football, the MLB playoffs, and the start of the NHL and NBA seasons.
“November is indicating sizable (gross-gaming-revenue) increases month over month thus far, given early weekly data, as we believe NFL results have proven more favorable for sportsbooks,” Jonas said. “In addition, igaming results continue to impress as a record-setting September was topped by a new high in October.”
Jonas said NFL outcomes suggest a strong November for sportsbooks, which profit when strong favorites lose.
“Seven money-line upsets (23% of 30 games) lead us to believe sportsbooks will reap the benefits of a multitude of losing parlays and, thus, higher hold,” Jonas said. “We note results include Thursday Night Football (on 11/18), but exclude the rest of this past NFL weekend (11/21-22). Given the majority of sports wagering is on football and we note weekly November results are not very detailed in terms of hold by sport, overall hold is significantly higher to date versus October.”
Weekly November data show more than 100% gains in gaming revenue, with early numbers from New York showing gross gaming revenue up 158% despite a 12% decline in handle from October, Jonas said. In Montana, revenue rose 135% in the first two weeks with handle up 43%.
Jonas said October sports betting gross gaming revenue reported so far is down, despite a higher handle. Revenue fell about 5%, while handle was 33% higher with about 60% of gross gaming revenue reported.
“Each state reported has shown a +29% month-over-month or greater increase in handle, though gross gaming revenue results are mixed.”
Oregon rose 140% on 50% more handle. Iowa rose 15% on 33% more handle. New Jersey rose 2% on 29% more handle. Montana rose 1% on 46% more handle, Jonas said.
October gross gaming revenue declined from September in Michigan, down 1%, despite a 29% increase in handle. Arkansas fell 1% with a 36% increase in handle. Tennessee fell 9%, despite a 46% increase in handle. Pennsylvania fell 12%, despite a 34% increase in handle. Indiana fell 16% with a 30% increase in handle. New York fell 46% with a 47% increase in handle. Washington, D.C., fell 60% with a 27% increase in handle.
Jonas said calculations for September sports gaming revenue show it rose 87% to $407 million, with handle up 69%. Betting data by sport disclosed in Nevada, New Jersey, Illinois, Mississippi, Colorado, South Dakota, Oregon, Wyoming, Indiana, and Montana indicate that $1.5 billion was wagered on football. There was $62 million in gross gaming revenue, excluding Indiana and Montana.
In states where handle and gaming revenue data is disclosed by operator, DraftKings and FanDuel led at 28% and 25%, respectively in October. DraftKings led market share in Sept at 36%, versus FanDuel’s 27%. Penn National’s Barstool Sportsbook has gained share and vaulted into third place at 12% of handle share (vs. 7% in Aug. and 8% in Sept.), ahead of Caesars Entertainment and BetMGM at 8% and 7%, respectively, Jonas said.
The U.S. set an igaming revenue record in September with $329 million, up from $312 million in March, but that was topped in October with $348 million, Jonas said. “Igaming continues to show its strength and ability to create new revenue streams into a market.”
Truist cited a report from Global Market Advisors noting that any suggestion that igaming has cannibalized land-based operations has not been proven to date.
“It turns out that igaming serves as an added amenity to the market,” the report said. “Challenges still remain in some of these states that impose higher than operational tax rates that make it difficult for operators to make a profit, especially in a competitive market. Connecticut just recently launched and will provide another source from which to glean, but the numbers will not paint a full picture because of tribal interests in the states. However, it does show the opportunity that exists and may lend credence to other tribal jurisdictions looking to explore igaming, should the tribes feel it is right not only for their community, but also for their home state.”
