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We have now reached the anniversary when the COVID-19 pandemic changed everything for us – both for our society and for the US gaming industry, writes Scot McClintic, SVP iGaming Product & Strategy at Paysafe.
Scot McClintic, Paysafe
It is a milestone that makes us reflect on the rocky road that led us to where we are today. It is also a milestone to keep us optimistic about the future and the renewed strength that the gambling sector has shown over the past 12 months, especially in the online space.
The retail sports betting industry came to a relative standstill when the pandemic peaked in March 2020 and many of the betting world’s marquee events were postponed or canceled as a result. From March Madness to the Olympics and the UEFA European Football Championship, it has been relentless.
Even when the sport returned, empty stadiums and social distancing measures meant the vibe was new and unfamiliar compared to the energetic atmosphere we’ve long known as fans.
Despite the uncertainty COVID-19 originally had for live sports and the sports betting market, there has been a silver lining for the industry. For example, table tennis has become an important sports market and is still a weather favorite today. Who saw this a year ago?
In a broader sense, the online casino showed a significant strength as a complementary product offering to protect against sports content, as consumers were looking for new forms of entertainment. This was predictable, but customer engagement and cross-selling metrics from sports betting to iCasino were stronger than expected.
COVID-19 was and is a shock for the industry. Yet we see the resilience of the market and the need of gamers to find new and engaging forms of entertainment.
The pandemic has shed light on the joy of combining digital forms of entertainment like sports betting with the live sporting events we love. This shift from physical to digital already took place before COVID, but was accelerated permanently by the pandemic.
A rapid decline in sales followed by an even stronger resurgence
The decline in sports betting revenue in markets like New Jersey from March to May 2020 was steep. Total gaming revenue for the Garden State in May was down 65.4% year over year Game Enforcement Department.
In retrospect, it is surprising that the handle did not decrease any more. That relative overperformance during a Black Swan event, however, indicated what was to come – an upswing for the ages that should be bullish for the industry.
2020 was a V-shaped rebound for sports betting, with the second half of the year beating every metric and breaking records. The next logical question for an online operator is: is the second wind of sports betting sustainable or will it return to a pre-COVID equilibrium?
What does that mean for the future?
COVID-19 has changed things. Retail sports bettors, who typically account for around a fifth of the US regulated market, turned to online platforms as they grappled with retail sports betting and land-based casino shutdowns. Casual sports fans who may have been discussing opening an online gaming account prior to COVID have opted for a new form of entertainment.
Many factors that played a role during the pandemic contributed to this digital transformation. From the perspective of customer acquisition, the momentum is still strong. But that was during COVID. What about the transition to a post-pandemic world now?
As of December 2020, we have over 2,000 US sports bettors with online sports betting accounts in eight states for our annual ‘All the ways players pay‘ Report. The aim was to find out more about user preferences in online betting – and the effects of the pandemic were clear.
Over two-thirds (68%) of gamblers said they are now more comfortable with online sports betting – and this was directly because online betting was the only option available during the pandemic. Additionally, two-thirds (65%) of gamers said they plan to do all of their sports bets online.
In addition to this increased convenience compared to placing bets online, the frequency is also taken into account. We know from our latest research that a majority of sports bettors (61%) are already planning to bet more this year than they did in 2020, indicating a continuation of the strong user-centric performance for sports betting through 2021.
From a holistic point of view, the digitization of US sports betting, a broader target market for gamers and the pent-up demand have been catalyzed by COVID-19. Against the backdrop of newly regulated state markets like Michigan and Virginia – with others likely on the horizon – the opportunities for American industry become even more compelling.
COVID-19 and government regulation of online sports betting
With nationwide closings and entry restrictions for land-based casinos, operators have been forced to balance a high fixed cost base with no revenue coming in the door. Lawmakers in states like Virginia, which regulated online sports betting in September 2020 and launched their market in January of this year, have likely recognized the vulnerability of the land-based sector in the wake of the pandemic and were influenced by these regulatory factors, among other things, online sports betting and casino industries.
As a result, land-based operators can monetize online games directly or at least indirectly. This leads us to three factors: first, to hedge against pandemic effects; Second, more of the data points indicating online games are incremental rather than cannibalic for retail casino activity. and third, the neighboring states that legalize online gaming, thereby depleting the addressable tax revenue market for states that are not yet legal.
A combination of these factors makes the regulatory momentum likely to continue through 2021 and beyond. COVID-19 almost certainly accelerated legalization, but now the fundamentals and value creation opportunities for sports betting are too big to ignore.
Despite the 2020 war of attrition, there are real reasons to be optimistic this year. Gaming products, business strategies, balance sheets and legalization momentum are stronger due to the pandemic. If the sports betting and online gaming industries can weather the worst of times, what about the best of times? In both cases we now have table tennis.
This article was written by Scot McClintic, who oversees Paysafe’s product and strategy development for online gambling and sports betting – both in the US and worldwide.