By Yaniv Sherman, Head of Commercial Development at 888 Holdings
In late April, Morgan Stanley issued an analyst note, which ratified their consistent estimations and expectations from the legal online sports betting market in the United States. Online gaming and digital products, the message carried, will bring growth to what has long been considered a mature, if not stagnant, brick-and-mortar casino market through 2025.
In comes COVID-19, and it is 2025, five years early.
The physical casino business, which proliferated intensively in the United States over the past three decades, has long turned into an uber-competitive, capital-intensive and low-margin business, in which scale is critical. Consolidation quickly followed, with market behemoths such as Caesars, MGM, and others racing for both size and footprint across the nation.
Meanwhile, the online iGaming and sport sector was undergoing similar trends across the pond, spurred by regulation and evolution of multi-market operators. Those trajectories started converging in 2013, when Nevada, New Jersey and Delaware legalized iGaming, and then was immensely accelerated in May 2018 with the repeal of the Professional and Amateur Sports Protection Act (PASPA) by the Supreme Court.
The rapid regulation of sports betting in individual states – now legal in over 20 and anticipated to reach 40 states over the next two years – has seen traditional casino operators meet this opportunity with various degrees of aggression and conviction. Some were happy to hand out their gaming licenses to give online operators access to different states, including U.S.-based companies, DraftKings and FanDuel, and global companies such as 888 and PointsBet. Others were more bullish and decided to establish themselves as online brands, like Caesars, since acquired by Eldorado, and Penn National.
New Jersey has proven to be an effective playground for many operators, with the market enjoying a consistent growth trajectory over the past seven years, reaching over $100M in monthly sport and iGaming revenues. Since then, states such as Pennsylvania, Indiana, Colorado and Illinois have joined the spree, posting impressive online betting figures. The United States has positioned itself as the prime online gaming destination of choice, which was a must in forward-looking investment plans for most online operators.
This trajectory was based on a growth curve which saw operators on route to become the future sports betting and iGaming backbone of the United States gambling market in about 5 to 10 years. Yet when COVID-19 hit, the gaming world was affected and divided in a way never seen before.
From March through May the forced lockdowns of physical properties saw traditional casino operators’ revenues crash 85% to 100%, with most of their employees, tens of thousands for the major operators, furloughed. Sport brands also suffered from the complete halt in sporting events, which saw the number of events to bet on dwindle and include esoteric sports such as Ukrainian table tennis and Taiwanese baseball.
Meanwhile, those who managed to build well-rounded and diversified online propositions were able to quickly adapt, adjust their cost base – mostly their marketing expenditures – and offer customers other betting alternatives, like online poker and casino games. They were also able to move 100% of the staff to work from home without losing much traction. Now with COVID-19 looking to lap a full year of effect and potentially into 2021, with the NFL season looming and College Football in limbo, it is even more clear that agility and cost-effective solutions are key in the near and mid-term.
States are continuing to push their efforts to legalize sports betting and iGaming, such as Michigan and Illinois, as they look to claw back players and tax revenues from the flourishing black market. Regulated online betting also allows the states to work with the operators and ensure that games and events are offered in a responsible and safe manner, to curtail and treat gambling addiction and other potential effects.
E-commerce has long been synonymous with growth potential, driven by lower fixed cost and a scalable business model. That trend was unbelievably accelerated over the past nine months, with Amazon, Robin Hood and Zoom, demonstrating incredible growth and achieving fantastic shareholder value through product innovation and adaptability. Online sports betting and iGaming has always lived on the shoulders of the broader e-commerce sector. The recent foray of casino and sport operators, such as DraftKings and Golden Nugget, into Nasdaq, has only reaffirmed the notion and perception – if you’re looking for gaming growth in the foreseeable future, just turn on your iPhone.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.