Despite weak global economic trends, the American Gaming Association (AGA) released a State of the States 2022 report showing that the sports betting industry will generate $4.3bn in revenue in 2021, up 179% from 2020. In 2022, sports betting revenue will surpass $6bn, with New Jersey leading the way with $816m. With ten more states preparing to join over 30 states that have legalized sports wagering, VIXIO Gambling Compliance predicts the total sports wagering market in the US will grow to $18bn by 2025.
Since the opening of regulated sports wagering following the US Supreme Court’s 2018 PASPA ruling, we’re talking about $143trn in handle, $10bn in revenue and $1.5bn in taxes to regulated sports betting jurisdictions. Currently, the best generalized regulatory model involves legalizing mobile betting in a competitive market throughout the state. This general model does not apply to state-run monopolies such as Oregon, Rhode Island and the District of Columbia.
The Economic Impact of Sports Wagering Growth
The booming growth of regulated US sports betting markets doesn’t just benefit sports wagering in a vacuum – it boosts other areas of the US national economy in several ways. Businesses proximal to sports wagering, such as racetracks, casinos, and online wagering operations, are obvious direct beneficiaries. Advertising, which is helping drive this massive growth, also benefits directly. With these core businesses driving industry growth, in the last three years, sports wagering has driven over $700m in tax revenue and added $22.4bn to the US gross domestic product.
Sports wagering has already created 200,000 new jobs and increased direct employee wage earnings by $11bn. Oxford Economics, a renowned think tank, estimates that legalized sports betting could add about $8bn to the US economy every year in direct and indirect labor.
Sports Wagering Partnerships with Major Sports Leagues
Unprecedented in the decades before the expansion of US sports wagering, partnerships between sports leagues and sportsbook operators are now a significant element of both parties' marketing strategies.
Fanduel and the NHL
The NHL has announced that it will partner with FanDuel to increase engagement for daily fantasy and sports betting in the US. The companies plan to use the NHL’s most popular camera assets, such as NHL tentpole events and the Stanley Cup Playoffs, to drive engagement for their new venture. BetMGM is excited to continue its relationship with the NHL and is partnering with prominent sports figures, including Edmonton Oilers captain Connor McDavid.
The partnership will continue through the 2022 season, with the two companies extending their agreement to include the Canadian market. The NHL and BetMGM will also partner on category designations and signage in NHL arenas. Additionally, the companies offer premium hospitality solutions throughout the NHL season. Fans can place wagers on their favorite NHL teams without compromising the integrity of the game. The NHL and FanDuel will continue to grow their relationship, and the companies will access customized content from the league across its controlled media channels.
MGM Resorts International and the NBA
A multi-year partnership between MGM Resorts International and the NBA is underway. MGM Resorts will be the official gaming partner of the NBA and WNBA through the agreement. The partnership will also use official NBA and WNBA data and branding for MGM Resorts’ sportsbook operations. Both entities will continue to promote the NBA and WNBA to fans and potential patrons. More details are expected to emerge later.
NBA-MGM Resorts International’s partnership is notable for several reasons. The first is that MGM Resorts will use official data from the NBA and WNBA to provide a new platform for sports betting. MGM Resorts will also work with the NBA to protect the integrity of the sport and anonymize data when sharing it. The deal also represents the first major league initiative following the landmark ruling by the US Supreme Court in May of 2018 that relaxed sports betting laws.
Westgate Resorts and FC Cincinnati
The MLS team FC Cincinnati recently announced that it had entered a sports wagering partnership with SuperBook Sports, a company that operates one of the largest sportsbooks in the world at the Westgate Resorts Hotel. The partnership will also provide FC Cincinnati fans access to a new mobile betting app.
Other news for the MLS franchise is that the Columbus Crew, dating back to 1994, has partnered with sports wagering site Tipico. The Columbus Crew is home to the Memorial Tournament and Jack Nicklaus. The two teams currently sit sixth and seventh in the Eastern Conference standings. In addition, the MLB’s oldest team, the Cleveland Indians, has partnered with Underdog Sports Wagering. Located in Brooklyn, Underdog is better known for its fantasy sports platform.
Caesars Entertainment and Basketball
Two prominent basketball teams, the Cleveland Cavaliers and the Philadelphia 76ers, have entered into a multi-year partnership with Caesars Entertainment. The partnership will involve marketing the casino’s sportsbook and mobile app during games. Additionally, the casino will rebrand the 76ers’ Prudential Center restaurant and bar as the Caesars Club. Fans who attend games can also enter a contest to win free stays in Caesars’ New Jersey properties.
The proximity of the two teams’ fanbases was an apparent factor in the deal since Caesars operates four casino properties within 150 miles of the Prudential Center and Wells Fargo Center. However, a more significant factor in the agreement was the international reach of the 76ers, who have a large fan base in Asia and China, in particular. In addition, the 76ers recently played two preseason games in China.
Promotional Spend Driving Sports Wagering Growth
Opening new legal sports betting markets in the United States drove a land grab mentality among sports book operators. Despite the restrictions on gambling advertising, sports book companies are still spending big on their favorite marketing weapon: promotions.
According to industry data, the most prominent sportsbook companies spent $2.3bn on marketing in 2018 alone, increasing by 193% in the past two years. This increased spending is primarily attributable to new markets in Louisiana and New York.
Newly legalized online sports betting has led sports book operators to spend vast amounts of money to lure customers. The gaming industry spent $488m on advertising between November 2020 and November 2021, with $336m going to television and fantasy sports companies like FanDuel and DraftKings. Other companies that have invested heavily in marketing and advertising include Caesars Entertainment, BetMGM and bet365.
In the first nine months of 2021, DraftKings spent $703m on promotional marketing. That was up 132% from the same period last year. Another sports book, FanDuel, spent $398m in the first six months of 2021. The companies’ marketing investments ranged from traditional television and digital advertising to out-of-home displays and sponsorship agreements with sports properties. Its marketing investments also include sponsorship agreements with other brands, editorial partnerships with news organizations, and offers for new customers.
Focusing on Caesars Entertainment for a moment, its sportsbook marketing strategies are designed to build loyalty among a targeted audience and increase its share of wallet. Unlike its competitors, they also expect non-targeted customers to participate in games, thus changing their profitability. The company has established itself as the leader in New York, with a market share of 40%. DraftKings and FanDuel are following, each having a quarter of the market share.
The sports betting business represents a significant part of Caesars Entertainment’s digital business, including iGaming and sportsbook offerings. The company reported an Adjusted EBITDA loss of $554m in the first quarter of 2017 and hopes that the cutbacks in its marketing will drive the company to profitability. Caesars has launched sportsbooks in New York and Louisiana in Q1 2021 and has not seen a decline in its sports betting handle share.
This high promotional spending is not sustainable, and the buffet of bonuses will eventually be pulled back to more traditionally competitive levels. Still, as new markets continue to emerge, the push to capture market share within these new sports gambling states should continue to extend high promotional spending regionally for several years.
