NJ Sports Betting Licensees Report “Stunning” September Handle, Revenue

New Jersey

The New Jersey Division of Gaming Enforcement reported that the state’s 8 licensed sportsbooks took in a “stunning” (depending on who you ask) $183.9 million in bets during the month of September, nearly double (+92%) the amount wagered in August; the start of the NFL season ($90 million wagered on league games) and the launch of several new mobile sportsbooks (see: Caesers/Bally’s, Paddy Power/FanDuel, SugarHouse/Golden Nugget) are responsible for driving the growth. Online/mobile wagering has already surpassed the state’s retail business, as 56.5% ($104 million) of all sports bets placed were made through those channels. The $23.9 million (+166% MoM) held by the state’s bookmakers, after bets were paid out (except for futures), represented just shy of 8% of the total handle. The state was entitled to keep $2.6 million in tax revenue from sports betting operations.

Howie Long-Short: DraftKings and FanDuel sportsbooks are taking in 2/3 of all New Jersey sports betting revenue and nearly 90% of all the revenue generated from online/mobile applications. Resorts Digital (DraftKings’ license holder, privately held) reported 35% ($8.5 million) of the state’s Sept. revenue, while competitor Paddy Power (FanDuel’s license holder, PDYPY) posted 30% ($7.2 million); no other licensee did more than 10.5%. It’s worth noting that while most DraftKings revenue comes from its online/mobile applications, just 39% ($2.8 million) of FanDuel’s comes from those channels; the majority of their revenue ($4.4 million) comes from their Meadowlands retail location.

As for the state’s other retail locations, The Borgata (a MGM Resorts International property) reported the most sports betting revenue ($2.39 million) amongst all land based casinos; while the William Hill (WIMHY) sportsbook at Monmouth Park racetrack kept $2.2 million, up from $900K in August (+144%).

Fan Marino: Expect October’s handle to exceed September’s strong result. In addition to a full slate of NFL and CFB games (as we had in September), the MLB postseason began on October 1st, the NHL season started on October 3rd and the NBA season will get started this evening.

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Sports Betting Could Grow NFL Revenues by $2.3 Billion Annually

NFL 200x200

Nielsen projects (based on a fan survey) that a fully mature (i.e. nationwide) U.S. sports gambling market could be worth up to $2.3 billion annually in new revenue to NFL teams. The report (commissioned by the American Gaming Association) assumes media rights fees continue to rise (projected: +18%) because of increased fan interest/engagement, that sponsorship (think: team-casino partnerships) and ancillary advertising revenues will grow (projected: +7%) and that the league will be successful in striking “official data partnerships” with sports betting operators (projected: worth $30 million/year); it’s also assumes ticket sales will increase (projected: +6%). It’s important to point out that “integrity fees” were not included the projections.

Howie Long-Short: The American Gaming Association has called the $2.3 billion projection “conservative” and they’re not the only ones who believe that. Morgan Stanley analyst Ben Swinburne pegged the potential for new advertising and sponsorship revenue alone at nearly $2 billion.

While it’s fun to talk about a nationwide, legal sports betting market, the reality is that we’re years away from realizing it; if ever. As it stands today, just NV, NJ, DE, WV and MS are taking bets on individual sporting events. Even the most aggressive of estimates have just 35 states legalizing sports betting within 3 years.

Regardless which of those 35 states NFL fans reside in, it’s likely they’ll have the opportunity to place a bet at a William Hill (WIMHY) sportsbook; the company already operates in NJ, MS & WV and maintains 31% of the Nevada sports betting market share. It’s now being reported that the company has established a partnership with Eldorado Resorts (ERI) and two have plans for an online JV. The deal gives William Hill distribution in the 13 states where ERI maintains brick and mortar casinos, in exchange for 20% off WIMHY’s U.S. business; ERI will also receive $64.5 million in restricted stock (vests over 5 years) in the U.K. based parent company. WIMHY shares rose 6% on Wednesday, closing at $13.70; ERI was up 1% (to $47.35).

The English bookmaker’s aggressive approach to entering the U.S. market has been motivated by a government crackdown on gambling in the U.K. New regulations on FOBTs (fixed odds betting terminals) has resulted in company shares treading water over the last 12 months. GVC Holdings (another U.K. company, owns Ladbrokes) announced a similar partnership with MGM back in late July. U.S. gaming companies with brick and mortar properties in multiple states, which offer the access and reach new players to the space require, are well positioned in the current sports betting market.

Fan Marino: The NFL has reversed a long-standing ban on casino advertising, opening the door for teams to ink deals with local casinos (it’s unclear if casino partners be required to purchase the league’s official data). Don’t expect to hear of team-casino partnerships spreading across the league this season though, New Jersey remains the only state home to NFL teams and with legalized sports betting legislation on the books. Expect both the Jets and Giants to take advantage of this newfound revenue stream before the end of the ’18 season.

That’s not to say fans in the NYC market are going to be bombarded with casino advertisements when watching the home teams play. While the league will now allow its teams to take gambling money, regulations are in place to limit casino advertising to pre-and post-game programming; sports gambling ads are also prohibited.

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West Virginia Set to Become 5th State to Offer Legalized Sports Betting

WV

West Virginia will become the 5th state (NV, DE, NJ, MS) to offer legalized sports betting when the sportsbook at Hollywood Casino at Charles Town Races open on September 1st. It appears as if Hollywood Casino at Charles Town Races will be the only sportsbook in operation for the start of college football season (Sept. 1); The Greenbrier, Mardi Gras Casino and Wheeling Island Casino have yet to announce when their sportsbooks will open. Interestingly, the WV sports betting bill became law without the Governor’s signature; Jim Justice insisted the law include an integrity fee for the leagues, 2 of which hold training camps at his family’s The Greenbrier property.

Howie Long-Short: Hollywood Casino is owned and operated by Penn National (PENN), William Hill (WIMHY) will set to run the sportsbook there. As noted, The Greenbrier is family owned; FanDuel (PDYPY) will run their sportsbook operations. Those 2 venues expect to do well with fans from “Virginia, Maryland and Washington D.C.” all likely to make the short drive without legalized sports betting closer to home.

Mardi Gras Casino (Charleston) and Wheeling Island Casino (Wheeling) are under the control of privately-held Delaware North. Wheeling’s location puts it in position to pull out of state clientele from Pennsylvania and Ohio.

Fan Marino: The Action Network CEO Noah Szubski made headlines late last week for proclaiming his company was sitting on a billion-dollar business model, saying, “if I have 8 million qualified users spread around the country and each one can legally bet through a book and there’s an affiliate fee and a percentage of lifetime money, that’s the billion-dollar business.” Sure, except The Action Network’s value proposition is providing content that, in theory, makes bettors more likely to cash in. Why would a casino pay an affiliate fee to acquire a +$ bettor? Szubski may also want to “see the international online gambling market for a clearer sense of how operators define [lifetime] when it comes to affiliate revenue share (spoiler: it’s not lifetime).” – Chris Grove –  gambling industry analyst, Eilers & Krejcik Gaming.

There’s another issue with Szubski’s theory. Sportsbooks in Europe have been refusing to take bets from intelligent bettors and are placing betting limits on others. Once a gambler starts winning, the sportsbook shuts them down; that practice won’t help The Action Network subscriber retention rates and if U.S. sportsbooks are going to use betting limits on heavily restrict sharp money, The Action Network is going to be taking its percentage from a much smaller pie.

Wondering which book has the worst reputation among sports bettors for refusing to take bets? William Hill. One pro sports bettor interviewed by ESPN (among 20 U.S. gamblers banned by the company) said, “they’re by far the worst”. That would be music to my ears, if I’m a William Hill shareholder. It’s worth mentioning that most states do not have laws preventing a casino from turning away a skilled bettor.

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Mississippi Becomes 4th State to Offer Legalized Sports Betting, William Hill Partners with 11 MS Casinos

Seal of Mississippi

Mississippi became the 4th state (NV, NJ, DE) to offer legalized sports betting on Wednesday August 1st, with the opening of sportsbooks at the Beau Rivage Casino in Biloxi and Gold Strike Casino in Tunica; properties owned by MGM Resorts International. The newly passed legislation allows for sports fans in the state to place bets on individual sporting events at land or water-based “legal gambling establishments” (i.e. casinos). MS sports bettors who wish to place in-game bets will be forced to visit their local casino as mobile betting will be restricted to those on the casino’s physical premises.

Howie Long-Short: Mississippi Rep. Richard Bennett believes legalized gambling will be a boon to the state’s tourism business declaring, “Mississippi welcomes you. We hope you’ll come, wager on sports betting and see what we have to offer in the Hospitality State”; and he just might be on to something. No other state in the deep South offers legalized sports betting and neighboring Alabama is responsible for more illegal college football bets per capita than any state. Wondering how long will this advantage last? According to Dustin Gouker of LegalSportsReport.com, Mississippi’s advantage (see: no competition) is likely to last “at least a year and feasibly longer”; with Louisiana, Tennessee and Kentucky the states most likely to join the party first.

In addition to MGM, Boyd Gaming (BYD) and Caesars Entertainment (CZR) both own gaming properties in MS. Speaking of BYD, just 2 days after the company announced a market access agreement with MGM Resorts International (MGM), BYD revealed it had aligned with FanDuel Group (PDYPY) to run online and mobile sportsbook operations in the U.S. FanDuel technology will power Boyd Gaming branded online and mobile sportsbook operations, while FanDuel Group will leverage BYD’s 15 state licenses (36% of population) to operate FanDuel branded online and mobile sports betting services in those states; the deal extends to MGM properties in states where mobile sports betting is authorized.

Fan MarinoMGM got out of the gate first in MS, but William Hill has made the greatest inroads, announcing partnership agreements with 11 MS casinos (and another West Virginia). WIMHY, which now operates in all 4 states that offer legalized sports betting, has no intentions of slowing down either; in fact, they recently stated their intentions to add gaming partners in 14 more states, Rhode Island being one of them. The company will offer “operational expertise, risk management and trading data” to support IGT, should their bid be selected in the Ocean State; IGT was the only company to submit a bid to provide sports betting within RI.

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NJ Sportsbooks Post $1.2 Million in June Profits, Meadowlands Sportsbook Opens Tomorrow

FanDuel

The Division of Gaming Enforcement reported that New Jersey sportsbooks took in more than $16.4 million in bets between June 14th-30th, realizing +/- $1.2 million in “clean revenue” (+/-$3.5 million total) over the 17-day span; an impressive figure considering the limited rollout (see Howie below), no mobile/online wagering (due to start July 11th) and just over 2 weeks of operations. The remainder of the +/-$3.5 million revenue total ($2.25 million) accounts for futures bets that have yet to be paid out and winning tickets unclaimed as of June 30th. For comparison purposes, NJ took in over 2x as much money in bets as Delaware ($7 million) did in June – in 3 fewer days.

Howie Long-Short: +/-$1.2 million in “clean revenue” equates to a 7.8% hold, higher than the 5.5% Nevada has averaged dating back to ’92, but significantly below the 14% Delaware reported in June. As Dustin Gouker, Managing Editor of Legal Sports Report, told us earlier in the week, “it’s too early to read too much into the hold. It’s a small sample size and it may simply be lots of bettors that are not terribly savvy, trying to figure out wagering.”

Monmouth Park, operated by William Hill (WIMHY), was responsible for 65% ($2.279 million) of the revenue generated at N.J. sports books in June. The Borgata in Atlantic City brought in just shy of $1 million in profits (28.5%), while Ocean City Resort ($192,000) earned the balance in just 3 days.

The State of New Jersey took in less than $300,000 in taxes, with a land-based casino tax rate of 8.5%; prorated that’s $7.2 million/year. While that figure sounds low (some lawmakers have estimated the state would generate $100 million/annually), consider that just 3 of the state’s 12 potential licensees (9 casinos, 3 horse tracks) are currently operating. Furthermore, licensed operators will soon be able to offer mobile/online betting. It’s expected that “as the market matures”, most of the revenue will come those channels; the state is entitled to a 14.25% tax on those profits.

Fan Marino: The FanDuel Sportsbook at Victory Sports Bar & Club, located at the Meadowlands Racetrack, is holding a soft launch tomorrow morning (July 14th, at 11a). The property should quickly become the state’s most profitable sportsbook, with 15 million people living within 20 miles of the venue and no real competition expected before the end of March Madness ‘19. Remember, Irish bookmaker Paddy Power Betfair (PDYPYacquired majority ownership (61%, grows to 100% in 5 years) in FanDuel back in May; the deal closed earlier this week.

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Delaware Realizes $1 Million+ From June Sports Bets

Delaware

The State of Delaware took in more than $7 million in sports bets between June 5th-24th, realizing $1,000,247 in revenue over the 20-day span. Delaware sports fans placed +/- 70,000 wagers at the state’s land-based racinos (i.e. no mobile), with the average bet worth $100. 75% of the dollars placed were on baseball games, with the World Cup (10%) and NBA Finals (8%) also drawing heavy action. The First State became the 1st state (besides Nevada) to offer single game sports wagering following SCOTUS’ May ruling to overturn PASPA.

Howie Long-Short: +/-$1 million in revenue equates to a 14% hold, far higher than the 5.5% Nevada has averaged dating back to ’92. Those results were “pleasantly surprising” to DE Lottery Director Vernon Kirk, who acknowledged that he’d “be surprised if it (the handle) stayed that strong.”

I asked Dustin Gouker, Managing Editor of Legal Sports Report why he thought the handle was so high; he said, “it’s too early to read too much into the hold. It’s a small sample size and it may simply be lots of bettors that are not terribly savvy, trying to figure out wagering.”

Just one of DE’s land-based racinos is publicly traded, Dover Downs Hotel & Casino, a subsidiary of Dover Downs Gaming & Entertainment (DDE); the company netted $57,293 in June from sports bets. However, all 3 of the state’s sports betting contractors are publicly listed. Scientific Games (SGMS), William Hill (WIMHY) and StadiumTech (a subsidiary of GVC Holdings, OTC: GMVHF) combined to take in $125,000 (12.5% of gross revenue) in DE sports gambling revenue for the 3-week period ending on June 24th (fiscal month).

Fan Marino: A recent white paper from GamblingCompliance projected the U.S. legal sports betting market would be “worth between $3.1-$5.2 billion in annual revenue by 2023.” The report also predicted that 25-37 states will “have lawful wagering within 5 years”, that New York would become the largest sports betting market (generating $700 million/year in annual gross gaming revenue) and that NY would become the “first state to grant leagues a cut of betting handle and require use of their data.” While those last 2 prognostications may be true, they likely won’t come to fruition before 2019; state legislators failed to pass a bill before adjourning the session. Governor Cuomo is on record doubting that a sports betting bill would pass this year.

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NJ Becomes 3rd State to Legalize Sports Betting, Betfair U.S. Partners with Meadowlands Racetrack

Paddy-Betfair 200X200

Governor Phil Murphy signed legislation that will allow New Jersey’s 9 casinos and 3 racetracks to take wagers on individual sporting events beginning this Thursday. Gamblers 21 and over will be able to place wagers on a variety of professional and college sporting events, though betting on games involving local college teams (think: Seton Hall, Rutgers) and college games played within the state is prohibited. Initially, wagers will have to be placed in person; though, mobile betting is covered by the bill and will commence in the future (requires licensees to wait 30 days). The William Hill (WIMHY) sportsbook at Monmouth Park Racetrack will begin taking bets at 10:30a on Thursday, just in time for the start of the World Cup later that afternoon. New Jersey becomes just the third state to offer legalized sports betting, following Nevada and Delaware.

Howie Long-Short: Another one of New Jersey’s racetracks, the Meadowlands Racetrack, has found a sports betting partner in Betfair U.S. (subsidiary of Paddy Power Betfair, PDYPY). PDYPY revealed it has signed “long-term agreements for retail and online/mobile sports betting” with the North Jersey track (and Tioga Downs in New York); they plan to begin taking bets later this summer. The news comes just two weeks after the company announced it would be acquiring FanDuel, with the intention of converting their 1.3 million DFS players into true sports bettors. It’s expected that Betfair will brand their U.S. sportsbooks as FanDuel sportsbooks. PDYPY shares are up 11% (to $58.35) since word of the deal first broke on May 15th.

Fan Marino: Monmouth Park officials aren’t satisfied with SCOTUS’ decision to overturn PASPA, they’re now pursuing remuneration for damages caused by the pro sports leagues and the NCAA. The New Jersey Thoroughbred Horsemen’s Association (leases Monmouth Park) claims “the leagues acted in bad faith” fighting them in court, while simultaneously profiting from DFS and authorizing the relocation of several franchises to Las Vegas (nullifying the integrity argument). They’re pursuing +/- $150 million in “revenues we would have had” (from sports betting), between the period of October 2014 – June 2018, had the leagues not opposed their efforts. It must be noted that neither Delaware nor New Jersey included an integrity fee for the leagues in their sports betting legislation.

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Paddy Power Betfair Close to Acquiring FanDuel, Seeks U.S. Sports Betting Market Share

PaddyPowerBetfair BANNER

Legal Sports Report has reported that Irish bookmaker Paddy Power Betfair (PPB) is close to acquiring FanDuel. Little is known about the deal’s terms, but “it (the price point) appears likely to be below the $1 billion valuation” that the company held in July 2015. PPB acquired FanDuel competitor DRAFT for +/- $50 million in May 2017, so should the deal go through PDYPY would own the 2nd and 3rd most popular DFS apps. The news comes just one day after the SCOTUS struck down PASPA, the federal ban preventing individual states (save Nevada) from offering betting on the outcome of a single sporting event; FanDuel CEO Matt King indicated earlier this month, that his company would “get into sports betting” if the courts voted in New Jersey’s favor (as they did).

Howie Long-Short: Paddy Power Betfair isn’t collecting DFS companies for sport, they’re using M&A to take market share in a sports betting arms race. FanDuel has a database that contains 6 million DFS users (not all active) and PPB believes they’ll be able to convert many of those individuals into true sports bettors. The FanDuel brand also brings PPB some value, as the popular gaming operator (in Ireland and U.K.) lacks U.S. name recognition; though it does own California based horseracing betting business and digital broadcaster TVG and the NJ online gaming site Betfair Casino.

FanDuel raised $430 million in venture funding, but has struggled to raise additional capital since Q3 ‘15; so, investors were pushing to either pursue a sale or public offering. In March, we reported FanDuel was considering a reverse merger as a means of capitalization. Those talks would appear to be on hold. While that means you won’t be able to purchase shares of FanDuel on the NASDAQ (as Platinum Eagle had planned), you can buy stake in Paddy Power Betfair. The company trades OTC under the symbol PDYPY. Shares are up 7% since the SCOTUS decision, but declined 4.5% on Tuesday following the Legal Sports Report’s report.

Fan Marino: DraftKings maintains the No. 1 position among DFS companies, claiming more than 10 million users. Interestingly, their fastest growing game (+59%) isn’t tied to the NFL, NBA or MLB, but to League of Legends; where users construct rosters (with a salary cap) of professional gamers. It’s not just DFS players getting into esports though, global wagering (includes legal and illegal) on esports is expected to top $6.7 billion in 2018 and hit $13 billion by 2020. Looking to get in on the action? Pinnacle Entertainment (PNK) and William Hill (WIMHY) both take bets and offer odds on esports, as does Unikrn; a website that allows for legal esports betting using their own virtual token (Unikoin Gold, UKG) or cash. Unikrn has raised $41.4 million to date, including $31.5 million in a H2 ‘17 ICO; Mark Cuban participated and has a seat on the company’s advisory board.

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SCOTUS Strikes Down PASPA in Historic Ruling, Legalized Sports Betting to Spread Nationwide

Scotus

In a historic announcement, the SCOTUS ruled (6-3) to strike down PASPA; the national law preventing individual states (save Nevada) from offering betting on the outcome of a single sporting event. Justice Samuel Alito wrote, “Congress can regulate sports directly, but if it elects not to do so, each state is free to act on its own. Our job is to interpret the law Congress has enacted and decide whether it is consistent with the Constitution. PASPA is not.” The ruling effectively places the decision to authorize sports betting in the hands of the individual states. Several have already passed legislation (NJ + PA, CT, WV & MS), with upwards of 27 others expected to offer wagering on sporting events within 5 years. It’s important to note that federal law prohibits wagering across state lines, so gamblers will have to be physically located in a state that has passed sports betting regulation to legally place a bet on a game; even with online and mobile betting available elsewhere in the country.

Howie Long-Short: A fall ’17 study by Eilers & Krejcik estimated that if sports betting were to be legalized on a nationwide basis, it would generate $7.1 billion annually in new revenue at casinos & racetracks. That figure grows to $16 billion per year, when you count the revenue generated from gaming websites and mobile apps; so, it’s easy to understand the enthusiasm surrounding the announcement. Interestingly, English bookmakers William Hill (WIMHY, +14.39% to $17.73) and Paddy Power Betfair (PDYPY, +12.56% to $55.20) were Monday’s biggest winners; though, Scientific Games Corp. (SGMS, +11.15%), Stars Group, Inc. (TSG, +8.97%), Caesars Entertainment Corporation (CZR, +5.46%), Churchill Downs, Inc. (CHDN, +4.87%), Penn National Gaming (PENN, +4.68%), Boyd Gaming (BYD, +3.06%), Pinnacle Entertainment (PNK, +1.88%) and MGM Resorts International (MGM, +1.64%) all finished up on the day as well.

We’re not surprised that William Hill (WIMHY) had the biggest pop among the companies listed above, as we told you on April 24th that no European gaming company was better positioned to capitalize on legalized sports betting, in the United States, than they are. Back in ’13, the company bought the rights to run the sportsbook (and split profits 50/50) at Monmouth Park (NJ), if ever permitted by law, for $1 million; a remarkably shrewd investment considering the minimal capital investment required and the potential payoff they’ll now realize (+/-$750 million/year in sports betting revenue). The company has since announced plans to add a 2nd $5 million sportsbook on the premises. WIMHY will be the first sports book in NJ to accept bets, with Monmouth Park expecting to open its doors within 2 weeks; though residents in Mississippi, Delaware and West Virginia can all expect to be able to place bets at their local casinos by the first Sunday of the NFL season.

Fan Marino: MLB put out a statement saying the decision would have “profound effects” on the sport, but no one is more bullish on legalized sports betting than Dallas Mavericks owner Mark Cuban. Cuban believes that “everybody who owns a top-four professional sports team just basically saw the value of their team double at least.”

I asked SportsHandle.com Editor-in-Chief Brett Smiley for his thoughts on Cuban’s remarks?

Brett: Cuban’s guesstimate strikes me as a bit of an exaggeration, but there’s wide recognition amongst the leagues and owners that legal sports betting will increase ratings, increase revenue and create more opportunities. Sports bettors are more engaged and for longer periods of time. There will be other opportunities to sell data, partnerships, sponsorships and so forth.

It sounds like an exaggeration to me too, but if $300 billion were to be wagered annually and the leagues got their 1% “integrity fee” on a nationwide level (highly unlikely); they would be splitting $3 billion annually. Divvy up that newfound revenue between +/- 120 pro sports franchises and you’re adding $25 million in profit to each team’s bottom line. The Mavericks only generated $21 million in operating income last season. Sure, that’s a bunch of “ifs”, but once you add in all the other revenue streams that Brett referenced, Cuban may not end up being too far off.

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