Ed Birkin, senior consultant at iGB's principal data partner H2 Gambling Capital, kicked off Thursday’s content at iGB Live! Online with by looking at the impact of novel coronavirus (Covid-19) on the sports betting sector.
The session compared revenues in 2019, to pre-pandemic forecasts for 2020, as well as showing the true impact of the Covid-19 pandemic on 2020’s revenue, with adjusted forecasts for the future.
Market overview prior to the covid-19 pandemic
In 2019, including horse and dog racing, the betting sector generated gross win of $71bn, and sports betting (excluding racing) represented 55% of this, or just under $40bn
To put this into context, the $71bn total betting industry is 16% of the total global gambling market, but that does include lotteries, so it remains a meaningful sector.
In terms of the regional split, just under half of sports betting comes from Asia, the majority of which comes from Japan and China. This data is for the white and grey markets only, and doesn’t include any Asian black market activity. Europe accounts for almost 47% of betting gross win, with the nascent North American market accounting for just 6% of GGR.
How has the Covid pandemic affected the global betting market?
H2 now forecasts total betting gross win for 2020 of $60bn, a 15% fall year-on-year compared to 2019. However, compared to what was forecast for 2020 at the start of the year, which was around $75bn, that’s a downgrade of over 20% for the year, Birkin said.
The downgrades are partly due to the suspension and cancellation of major sporting events, but also due to the closure of physical betting locations, so the impact on the land-based and online segments are very different, he explained.
For the online segment, interactive betting GGR is down 10%, compared to H2's forecast at the start of the year. Land based betting GGR is down almost 30%, due to the closure of physical premises.
Birkin noted that there is a significant difference between sports betting and horse racing activity. Some form of horse racing activity continued throughout the lockdown, often behind closed doors, and therefore interactive racing GGR is only down 4% compared to H2’s initial forecast, whereas interactive sports betting GGR is down 16%.
Impact of the pandemic on the US sports betting market
The scale of the downgrades has been similar across all states, when looking at at year-on-year growth, Birkin said. North America is still forecast to return strong growth, due to the opening and ongoing expansion of the US sports betting market.
There was a big impact on March figures due to the cancellation of March Madness basketball. However, since then the pandemic has taken place over the quieter sports betting periods of April, May, June and July which means the impact has been a lot lower than it otherwise might have been.
When the National Football League (NFL) season kicks off in September, H2 still expects there to be some impact from the pandemic, as the size and scale of the market is constantly changing as state after state regulates the vertical, this will still allow for strong year-on-year growth.
Another impact of the pandemic is the growth of minor sports and events. In April and May 2019, over 75% of the market was made up of baseball and basketball, with less than a quarter of the market being generated from other sports.
However, in the same period in 2020, less than 20% of handle came from baseball, basketball or American football, with over 80% coming from minor sports. The majority action was around table tennis, mixed martial arts, minor soccer leagues, darts and motor racing.
In Europe, there was been a similar pattern of activity, Birkin said, where the traditional major betting activities have been replaced by minor sports such as table tennis and minor soccer leagues.
Virtuals and esports
Esports has benefitted from significant media attention throughout the pandemic, owing to the lack of action in most traditional sports. In 2020, H2 predicts that esports betting will grow by 35% year-on-year, however this only equates to around 1.3% of the overall sports betting market. In terms of the online-only betting market, it equates to around 3%.
It may come as a surprise that virtual betting has seen no growth during this time. However, given that a large proportion of virtual betting takes place in retail betting venues, the long-term closure of such premise created a headwind compared to the strong growth of the vertical online, H2 explained.
Future of the market
The proportion of betting activity moving online has accelerated, and H2 now forecasts the proportion to be 3% higher than previously thought, meaning online gambling will account for around 50% of the market by 2024.
The impact on professional sports of covid-related restrictions has yet to be seen – initial analysis of the German Bundesliga, for example, suggests that the advantage of playing at home has been wiped out, Birkin noted. Questions remain of how operators will take this into account in their pricing, as well as its impact on customer activity.
Following high levels of recent legislative activity, and the widespread need to increase tax revenue, there has been an increase in regulatory risk in the past few months. Birkin picked out Kenya as an example of the negative impact of overly strict regulation, after the government was forced to reverse its stance and get the market back on shore after significantly increasing taxes in 2019.
Birkin ended the session with a cautionary note. The big threat or opportunity for gaming now is how it can legitimately address regulators’ concerns, take advantage of the need for tax revenue and convince regulators that if they take too much of an aggressive stance, it will be to the detriment of the legal market.
iGB Live! Online is now finished, but all sessions are available to watch on demand. Register here to see contributions from speakers such as SEO titan Neil Patel, SKS365 chief Alexander Martin and Parimatch marketing lead Ivan Liashenko.
The physical event is also coming up, taking place at the RAI in Amsterdam over 22 to 25 September.