The month in US sports betting: Is this it for retail in New Jersey?

The regulated US sports betting market generated handle of $758.7m for the month of August, which was up 30.7% on July’s total of $580.4m. The significant month-on-month increase was mainly attributable to two factors.

The first was the return of NFL football (the pre-season ran the entire month of August) and NCAA football (the regular season started in late August).

And the second was growth in Pennsylvania’s nascent online sports betting market, where online handle jumped 113% month-on-month to $83.2m.

In August, as in previous months, Nevada and New Jersey accounted for the lion’s share – or about 77% – of total regulated US sports betting handle. Notably, New Jersey, where online sports betting accounted for 85% of total statewide handle in August, generated approximately 38% of total regulated US sports betting handle in August.

New Jersey and Nevada’s revenues for September grew significantly, driven chiefly by the return of the NFL’s regular season.

Shifting shares

Up until now, New Jersey has largely been a winner-take-most market, or one in which a small handful of hypermotivated operators – namely FanDuel and DraftKings – have deployed significantly more marketing and promotional resources than the remainder of the market.

But the entrance of Fox Bet, theScore and bet365, and an expected uptick in marketing and promotional spending by MGM-GVC, William Hill, and Golden Nugget (among others), have us thinking that New Jersey will soon shift to a winner-take-some market, or one in which multiple brands are willing to operate at low-ish margins and can successfully segment different portions of the New Jersey betting population.

In the next 12-24 months, and under our projected winner-take-some scenario, we expect that the New Jersey market be dominated by a top tier of two or three operators (that tier will likely include FanDuel and DraftKings). We further expect that a second tier of tightly packed operators will all command material share, while a smaller third tier of operators will struggle to gain any viable share.

Destinational appeal a boon for US retail?

Borgata opened its Moneyline destination sportsbook in Atlantic City in late June, and its maiden set of monthly results showed some signs of promise. Borgata’s July retail revenue was $696k, or 140% of its average revenue during the trailing 12-month period that ended on July 31, 2019.

In contrast, statewide retail revenue in July was $3.9m, or 83% of average statewide revenue during that same trailing 12- month period. Way too early to call, of course, but we wonder whether the relative success of Borgata’s retail relaunch will spur other Atlantic City casinos to follow suit.

Borgata’s performance was a bright spot in an otherwise disappointing month for New Jersey’s retail sports betting market. July handle fell 6% year-on-year, despite the fact that last July five fewer retail sportsbooks were operational.

That year-on-year comp, we think, does suggest that the Garden State’s retail market may already be finding its ceiling.

Playing nicely together

A core takeaway from our ongoing conversations with industry stakeholders: sports betting appears to complement traditional casino gaming.

On the online side, New Jersey is clearly showing that online sports betting boosts the performance of online casino; in fact, we’ve consistently heard from market participants that online sports betting cross-sell is lifting online casino revenue by anywhere between 15% and 45%.

On the retail side, we’re hearing more and more that sports betting is increasing casino visitation, boosting food and beverage sales and lifting property EBITDA.

Caesars trumpeted those very benefits in a recent press release. So did executives from Penn National, Boyd Gaming and MGM on recent quarterly earnings conference calls.

The synergistic relationship between sports betting and casino should only help accelerate the spread of sports betting in states – like Ohio and Massachusetts – with politically powerful casino industries.

Fall push afoot in Ohio?

In Ohio, the rumor mill is abuzz with sports betting gossip. The latest hot takes:

• House Speaker Larry Householder was apparently interested in scheduling sports betting hearings for late September/early October
• Representative Dave Greenspan, sponsor of sports betting bill H 194, may be taken off of that measure (the rationale for the rumored move remains unclear)
• Penn National – the influential operator of four of the state’s 11 commercial casinos – is rumored to be supportive of legislation that would authorize a multiple-skin model for online sports betting

Downturn-driven decisions

Delaware insiders say that the Delaware Lottery, in light of the recent (and marked) downturn in retail handle, is considering whether to pull the trigger on online sports betting.

We hear that talks between the Lottery and its sports betting partners (SciGames /William Hill) are ongoing, but that no plan or timeline for online sports betting expansion has been established.

Of note, Lottery director Vern Kirk recently said that online sports betting wouldn’t be introduced this year.

Eilers & Krejcik Gaming LLC is an independent research and consulting firm with branches in Orange County, California and Las Vegas, Nevada. The firm’s focus is on product, market and policy analysis related to the global regulated gambling market. Clients include operators, suppliers, private equity and venture capital firms, institutional investors and state governments. To learn more about the firm, visit http://www.ekgamingllc.com.