A new Wall Street report is painting an even more bullish picture than previously projected for U.S. igaming and sports betting revenues by 2025.
The report, authored by J.P. Morgan gaming analyst Joseph Greff, updated gross gaming revenue projections for 2025 from $12.2 billion to $19.3 billion, a jump of more than a third. It also provided a stronger take on 2021, given the launch of Connecticut sports betting (online and retail) and igaming on Oct. 7.
The new projections for 2025 break down to sports betting revenues of $11.5 billion, up from the previous estimate of $7.6 billion, and 2025 igaming revenues of $7.8 billion, up from $4.6 billion previously, Greff said. The market reflects 27 legal sports betting jurisdictions today, with the recent addition of Connecticut, Arizona, Wyoming, and Maryland, and a total of 35 by 2025.
With the addition of Connecticut, Greff said the new 2021 estimate for sports betting and igaming revenue is $8.3 billion, up from $6.6 billion projected previously. That breaks down to $4.4 billion for sports betting, up from $2 billion, and $3.9 billion for igaming, up from $2.1 billion.
Greff said the update was necessary, given the accelerated consolidation in the online sports betting and igaming space. He said as competition escalates in the marketplace, there’s the likelihood of even more consolidation in the industry.
In August, DraftKings moved to acquire Golden Nugget Online Gaming and last week made a $22 billion bid to acquire British gaming company Entain, which is currently in a joint venture with MGM Resorts International in the U.S. That’s on top of Caesars Entertainment taking over William Hill.
“Overall, we have a favorable view, given near-term positive trends related to seasonality (with the NFL and college football seasons) and likely continued consolidation, which may involve more than just land-based casino operators with digital strategies and daily fantasy-based sports-originated business models,” Greff said.
Greff said he came away from this analysis with a greater appreciation for the higher margin in icasino business, even though it’s live in just five states (New Jersey, Michigan, Pennsylvania, West Virginia, and Delaware).
That compares with $1.75 billion of sports betting revenues across a total of 18 states, Greff said. He added that DFS operators FanDuel and DraftKings had a head start, but are now seeing increased competition from BetMGM, Caesars, and Rush Street, which are gaining market share.
Overall, when combining online sports betting and igaming market share, Greff said that during the second quarter, FanDuel had 23%, BetMGM 19%, and DraftKings 17%. In the three largest states with two-thirds of the U.S. market, BetMGM had 25% in the second quarter, followed by FanDuel with 20% and DraftKings with 15%. Rush Street Interactive, comprising the BetRivers and SugarHouse brands, had a 9% share, followed by Caesars at 7% and Penn National at 3%.
“We expect Caesars’ share to grow with the recent launch of the Caesars Sportsbook and higher marketing spend,” Greff said.
Breaking down igaming, BetMGM is the clear market leader; industry-wide revenue stands at $1.7 billion across five states during the first half of 2021, Greff said. He compared how close that is to the $1.76 billion in revenue from sports betting across 20 states. BetMGM had a 30% share of igaming in the second quarter, followed by DraftKings at 14%, and FanDuel at 11%.
“BetMGM has gained market share year to date at the expense of DraftKings and FanDuel, which have been bleeding igaming share,” Greff said. “Caesars has about 5% igaming market share, while Barstool and WynnBET each have about 2%.”
In the sports betting space, FanDuel and DraftKings lead, but BetMGM and Caesars are gaining share, Greff said. So far in 2021, FanDuel has a 31% market share, followed by DraftKings at 20%, Caesars at 9%, and BetMGM at 8%.
The seven top operators accounted for 75% market share in recent months and in the three largest states for online sports betting, Greff said FanDuel has a 45% share, followed by DraftKings at 19% and BetMGM at 12%.
“We note that in recent months, BetMGM and Caesars have been gaining share, at the expense of Penn and FanDuel,” Greff said. “We look for shifts in market share as operators increase promotions in efforts to acquire players ahead of the NFL and NCAA seasons.”
In the two states that break down promotional spending, Pennsylvania and Michigan, BetMGM and Caesars have increased to about 5% of handle in July and August, compared to the 3% across the second quarter, Greff said.
“We expect promotional spend to increase this fall with the start of the NFL and NCAA football season, new state legalizations, and Caesars Sportsbook launch,” Greff said.
Several partnerships have already been struck up with the launch of sports betting and igaming in Connecticut: Foxwoods with DraftKings; Mohegan Sun with FanDuel; and Connecticut Lottery with Rush Street Interactive. Sportech will operate up to 15 retail venues, which must be located 25 miles from casinos, Greff said
As for cannibalization of land-based casinos by online gaming, Greff said it’s too early to tell, given COVID-19 disruptions at land-based properties.
Markets such as Michigan, New Jersey, and Pennsylvania, which have both online and retail sports betting and casinos, “observed strong online revenues, though COVID-19 disruption impacted land-based results in the first quarter of 2021,” Greff said.
Looking at online penetration (sports betting and igaming gross gaming revenue as a percentage of total gross gaming revenue), online penetration has been greatest in Michigan and New Jersey, though the removal of in-person restrictions has resulted in land-based gross gaming revenue recovering at a faster rate, Greff said.
