H2 Director David Henwood took to the stage at both Betting on Sports 2018 in London and G2E 2018 in Las Vegas this autumn. The US sports betting market was very much the focus of both sessions – the former looking at the knock-on effect of the SCOTUS Decision on further M&A activity within the sector, the latter on the likely follow-on impact of US sports betting on US iGaming.
Speaking on M&A at BOSWEEK, David Henwood said: “The US is opening up never before seen partnership opportunity, but activity to date has been largely JV first - we’re still a way off M, yet alone A – both horizontally and/or vertically. That said there is lots of jockeying for position at the moment, with all the Big 6 UK/European operators putting down roots with the major US brands.”
H2 does a lot of work of due diligence work as part of its H2 Premium service, speaking at investor round table series in NY and London, plus as a GLG partner firm. The number one ask tends to be where is the operating model that is a bit different - the next big thing? Conjecture is this may yet come from outside the sector – either via Silicon Valley or the US media giants. The attractiveness of the opportunity is there to see in H2’s sports betting forecasts. Investors are normally looking for sustainable market share that brings RoI of a minimum 4% over 3 years. Globally, H2 estimates a sports betting market CAGR of 5.4% to 2023 (7.9% online). In the US, the equivalent numbers are 65.7% (96% online).
Turning to iGaming at G2E, David Henwood said: “The DoJ interpretation of the Wire Act in 2011 effectively ‘opened the door’ for iGaming in the US, but for understandable reasons the states have been largely slow to walk through it – other than NJ and PA. Both are good examples though of the potential - NJ has seen 25% YoY growth in particular, and iGaming actually increased 19% in August – the month sports betting launched. The crossover is there – they are like ‘peanut butter and jelly’.”
One of the interesting highlights of the roll-out of US sports betting so far has been the ‘straight to mobile’ approach of many of the operators. Clearly, this is paving the way for a new demographic of gambling consumer in the US in what (it needs to be remembered) is a sports-mad, but still ultimately, a gaming-led country.
The session also touched on the huge size of the current illegal market which H2 deep dived at $196.2bn handle ($10.4bn GGR) in 2017. This demonstrates both a high existing demand, but also a challenge for law enforcers to convert – though H2 forecasts US sports betting will move from ’10 to 5 in 5’ – a $10bn GGR illegal offshore market to a $5.5bn legal onshore one within 5 years – by 2023’.
More details on all H2’s US sports betting numbers can be found in the Subscriber Area or by contacting David Henwood direct at david.henwood@h2gc.com.