Scott Longley: 2021… Chasing up the Big Mo’
Providing further year-end perspectives, SBC has enlisted the help of Scott Longley of the Wagers.com Earnings+ More Substack to summarise the M&A, IPOs and boardroom shake-ups that have reformed gambling’s playing field make-up…
When the Earnings+More newsletter (as it was then) launched in April, it was partly as a response to the expansion of the US-listed betting and gaming sector and the newsflow being generated by the rise of state-by-state sports betting.
Just keeping in touch with how the US sports-betting and igaming market is expanding is exhausting, particularly for UK-based correspondents.
With the large US-listed gaming entities now more fully engaged in the sports-betting opportunity, and with the emergence of newly listed entities such as DraftKings, Rush Street Interactive, Sportradar and many others, it means that we do not lack for either commentary or financial results.
The earnings calls, the investor presentations, the broker conferences and the fireside chats; the opportunities for company management teams to explain, pronounce or indeed dissemble on the state of the market are legion.
It produces a running commentary and hence the emergence of a newsletter designed to give an overview of who is saying what about which numbers and in whatever context.
But enough about me…
So, what have we learned this year? That there is such a thing as a meme stock. That the ambitions of the market leaders in US sports betting is pretty much endless. That M&A activity will be driving the market for a while yet. That estimates for the eventual size of the US market vary enormously. That people involved in the market can’t help but describe the sector as being “still in an early innings” phase.
This is despite the sector piling on the pounds at least in terms of handle. A Bloomberg article in mid-0Demceber displayed an enlightening graphic on how sports betting has expanded since the overturning of PASPA in May 2018.
US sports-betting handle since 2018
With the help of the artificial chokehold of the original Covid lockdown in March and April 2020, this squeezed tube of toothpaste is illustrative of the pent-up demand for sports betting.
With each news state – to a greater or lesser degree – adding extra volume and with evident growth in each new state post-launch, we can see how betting handle has exploded to over $7bn in October 2021.
That will expand further next year with New York representing the most significant new opening as online sports betting finally becomes available.
Arguments will no doubt continue to rage about the GGR tax rate of 51% that will be applicable and whether that ultimately makes the state unprofitable. But such fears clearly weren’t enough to detract from the attractiveness of operating in the single biggest satte to open up so far going by the names of the operators that succeeded (and those that failed) to gain a license.
No one is getting off this train
Many have made the argument that a top-line opportunity that does nothing for the bottom line is no opportunity at all. But the opposite argument is also persuasive; that anything that gets to advance the prospect of licensed sports betting being a truly nationwide activity barring a small handful of states is a good thing.
It is why names such as Disney, Fanatics, DAZN and FTX have all been linked with sports betting in recent months. The lure of a ‘new market’ that will soon be measured in the billions of dollars in revenue terms – actual revenues – is significant.
Setbacks are of course part of this picture. The debacle in Florida is evidence enough that though the general direction of travel remains positive, there will be some odd detours along the way. Anyone who has watched the debate progress in California will know how treacherous the politics in tribal states can be. Nothing can be certain in such states where the tortuousness of the negotiations is only matched by the unknowingness of the outcome.
On top of this, issues around the cause and effect of wall-to-wall gambling advertising are beginning to make themselves felt. This year’s NFL season kicked off a marketing battle like no other, such that even those liberal paragons in the New Jersey Department of Gaming Enforcement felt it necessary to comment that if the operators found it impossible to adhere to some level of self-restraint, then the regulators might feel it necessary to intervene.
It was a shot across the bows. As much as those working in the US market have likely heard enough from European industry types forecasting doom and gloom, the examples from the UK, Spain and other markets is that nothing should be taken for granted once regulation is in place.
How much this will act as a restraint on those intent on grabbing market share is debatable. The gaming industry in the US, land-based and online, sports betting and gaming, has been on a tear foremost of 2021 and that is sure to continue into 2022, albeit with omicron variant fears as a side dish.
With more states, more significant industry players and more revenue being generated, it is understandable why the enthusiasm for what might be around the corner for the betting and gaming sector is palpable.
Momentum, after all, is a heady drug…..
Anyone wanting to stay in touch with all betting and gaming industry developments can sign-up to the Wagers.com Earnings+More newsletter here: https://wagersearningsmore.substack.com/about