The release of the annual survey by the American Gaming Association (AGA) into the health of the commercial casino industry is always a much-anticipated affair.
However, this wasn’t just any old year. It was the AGA’s first State of the States report covering the period following the US Supreme Court repealing PASPA. This was the 1992 federal law that restricted unfettered sports wagering to Nevada.
The 116-page report revealed total industry-wide gross revenue from sports betting grew to $430.2 million in 2018. It’s a 64% jump over the $261.3 million in revenue generated during the whole of 2017.
Some key numbers from the AGA’s 2018 survey
To put that into some context, the 465 commercial casinos operating across 24 states generated a record total gross revenue of $41.7 billion in 2018. That was an increase of 3.5% in 2017.
In other words, sports betting accounted for just 1.03% of the industry’s total win. While this may seem a fairly insignificant percentage on face value, it’s important to remember single-game sports betting outside of Nevada didn’t get underway until June last year, cutting off a full half of 2018.
That’s when, just 22 days after PASPA’s demise, Delaware Gov. John Carney placed a $10 bet at Dover Downs on the Philadelphia Phillies to beat the Chicago Cubs.
Now let’s see if the $430.2 million in revenue across the board for 2018 was above or below expectations?
Sports betting rollout a marathon, not a sprint
“Sportsbook revenues are trending well,” said Keith McDonnell, an Orlando-based gambling industry veteran and CEO of consultancy KMiGaming.
“Establishing a new vertical is always somewhat of a slow burn, but as new consumer behavior establishes itself and casinos start to understand the holistic contributions sports betting makes to overall revenues, it’s likely a more exponential growth curve is not too far ahead.”
Meanwhile, Sean Hurley, a gambling consultant and former head of sportsbook for DraftKings, suggests it’s unfair to criticize the pace at which legal sports betting rolled out in 2018 and beyond.
“In reality, launching regulated gambling in the states where there is no real prior infrastructure is a huge lift, especially when access to experienced professionals is so scarce. Personally, I am very impressed with the number of operators that have managed to get online and get their infrastructure in place over the last year.”
However, Hurley believes that over the coming months and years as more states come online and operators become truly multi-state, the numbers being reported and the marketing dollars being spent will “accelerate aggressively.”
As legal betting spreads, it will combat offshore sites
The proliferation of regulated wagering options will go some way to combatting the illegal market. Prior to PASPA’s demise, the AGA estimated that US citizens were betting on sports with underground bookmakers and offshore sites to the tune of $150 billion a year.
By the end of 2019, McDonnell anticipates that between 20 and 25 states will have regulated sports betting. In the last few months, there has already been a wave of states new that legalized sports wagering, including Indiana and online sports betting in Tennessee.
“Given the likely identity of some of those states, they could inject a bit of gasoline into things. But it will take a further year again to truly establish the channel, allow for mobile to take hold across most of these states, which really is required to deliver genuine growth and for further understanding by decision making executives.”
Mobile legislation is critical to the growth of sports betting
The lack of mobile and online betting in some states has severely hampered the growth of betting and, of course, revenue.
In states like New York is bound to severely stifle the market and deprive state coffers of millions in tax dollars. Until this situation is rectified, New Yorkers will continue to venture across the Hudson River into New Jersey to place in-person and mobile wagers.
Indeed, New Jersey is likely to soon overtake Nevada in terms of handle. Unsurprisingly, this is due partly to the popularity and accessibility of mobile betting via 14 NJ sports betting apps live today.
In May, approximately 81% of bets, amounting to more than $253 million, were placed on mobile devices in the Garden State.
Gene Johnson, EVP at Victor Strategies, said, “Some of this may be New Yorkers driving across the bridge, but obviously for a high-volatile, low-margin product like sports betting, volume is important. The only way you are going to get volume is through mobile.
“I think Nevada’s results have been hampered by the lack of a robust mobile platform, but they are starting to remedy this, and you are seeing Nevada increase, too.”
The AGA’s report showed New Jersey sportsbooks achieved a combined betting handle of $1.2 billion in 2018. This translated into $94 million in total gross revenue.
So far, since sports betting launched in New Jersey last June (the first app was released in August), a total of around $3 billion has been wagered. The books have collected combined revenue of some $194 million.
Attracting crowds for big sporting events
While just one in five sports bets in New Jersey are placed in physical sportsbooks, casinos having betting facilities helps drive sports fans to the properties to hang out and soak up the atmosphere during headline events.
Hence why casinos have wasted little time installing lavish sportsbooks. These patrons are likely to spend money on meals and drinks, as well as possible stay at the property and try their luck on the casino floor.
Furthermore, sports betting attracts a different breed of customer, and this can vary again depending on the event. Johnson highlights Westgate SuperBook in Las Vegas, touted as the world’s largest sportsbook, as an example.
What sports betting also provides is excitement; a casino is supposed to be an exciting place. Often if you walk through a slot floor it isn’t, so just like having a craps game on the floor, a sportsbook brings in a lot of exciting ambiance to the casino.”
Interestingly, AGA’s research showed that almost 90% of Americans think gambling is an acceptable form of entertainment, while 35% visited a casino in the past year.
Land-based and mobile betting working in harmony
With sports betting bringing in revenue and new customers, is there any truth to the notion that online and mobile sports betting leads to the cannibalization of offline betting? Or is this been debunked as an outdated falsehood?
After all, Golden Nugget revealed two years ago that less than 10% of its online casino players were customers of its Atlantic City property. Indeed, McDonnell describes cannibalization as a “very old-school mentality.”
“It has been proven inaccurate everywhere around the world that has seen brick-and-mortar extend into online operations. It’s fear of the unknown and, so, lobbyists against online hide behind ‘protectionism’ mandates when, in reality, they could be growing their overall business so much by embracing what online brings to the table.”
Picking up the pace on new sports betting markets
In the 12 months following the Supreme Court’s ruling, the AGA said $7.9 billion was wagered legally, $3 billion of which was bet in new markets. And, according to Regulus Partners, more than 1 in 10 US adults has gained in-state access to regulated sports betting in some form.
Widespread legal wagering was never going to arrive overnight once PASPA fell. But it’s going to start gaining real traction in the second half of 2019 as casinos look to cash in on the upcoming football season.
From there, exponential growth is likely as sports wagering sweeps the nation. Eilers & Krejcik Gaming projects sports betting to generate $6 billion a year in revenue by 2023 if 32 states regulate the activity.
Although we are a few years off of this possibility, next year’s State of the States report is going to make for interesting reading as we see how sports betting contributed to commercial casinos’ total revenue in 2019, which cover a first full year of betting in a post-PASPA era.