Online gambling in the US is growing exponentially, and the marketplace will continue to see consolidation by operators.
Those are two of the findings of a new study released Monday by Morgan Stanley Research.
The study noted the growth of online gambling – and operator consolidation – is a trend seen all over the world. In the last five years, combined revenue for the top five global operators has tripled from $5.4 billion to $16.4 billion.
“While this change has been partly driven by market growth (about 70% in this timeframe), the majority has come from M&A, as operators have sought to diversify their revenues and achieve scale benefits in the face of rising tax and regulatory headwinds in core markets,” the study’s authors write. “With the prospect of further headwinds in the coming years (particularly in Europe), this trend appears set to continue.”
Morgan Stanley Research foresees the US market exploding from less than $1 billion in total revenue in 2018 to $15 billion in 2025. They noted the pace of legalization of gambling by states has accelerated, and revenue estimates have generally beaten expectations.
While large US casino operators have traditionally focused on brick-and-mortar opportunities, given the explosive growth of US online gaming, the authors said these operators are looking for ways to “best position themselves for the new market reality,” such as Wynn’s merger with BetBull.
“As evidenced by the Caesars-William Hill transaction and (the rejected) MGM-Entain offer, M&A appears likely to continue to play a role as companies position themselves to develop appropriate product, technology and operational capacity to succeed in the market, as well as the right ownership structure to see this recognized in stock valuations,” the study says.
The forthcoming sale of William Hill's non-US assets “could significantly alter the competitive landscape,” the study adds, as William Hill is the fifth-largest operator globally by online revenue, “and could therefore concentrate share for a large operator or vault a smaller operator into a significantly larger scale position.”
Morgan Stanley believes William Hill's online and retail divisions could be split into as many as five different parts.