The month in US sports betting: Covid-19 accelerates esports and sports sims betting

Since Covid-19 shuttered all major sports leagues in mid-March, US sports betting revenue has fallen off a cliff. Total US revenue in March – excluding New Hampshire and tribal operations – was just $34m, down 60% month over month. Further, recent industry channel checks and initial April results from select states suggest that total US revenue is likely to fall by an eye-watering 60%-80% month over month in April.

But some relief – after nearly two months of lockdown – appears to be on the horizon, as several top US sports leagues – including the NHL and MLB – have announced plans to resume behind-closed-doors competition in the next 60-90 days. Assuming the leagues restart as scheduled, our current thinking is that in terms of total US sports betting revenue:
– April will likely represent a bottom
– May and June will likely see an incremental lift as NASCAR, UFC, MLS, and the PGA resume (those sports represent roughly 9% of annual revenue in a typical state-regulated market, per channel checks)
– July will likely see a more pronounced lift as the NHL and MLB resume (those sports represent roughly 23% of revenue in a typical state-regulated market, per checks)

Our pre-Covid-19 US forecast called for total 2020 revenue of $1.6bn, but we now think $650m-$950m is more likely, based on crude adjustments that we made to historical Nevada data and then bluntly applied to our original forecast. Of note, our estimate – which, given the abundance of known unknowns, should be treated as low-confidence/back-of-napkin – for now assumes that the NFL football regular season commences on September 10 and runs as normal.

Esports in the spotlight

In the broader absence of major sports, industry channel checks, our survey of US sports betting apps and websites, and recent data from Kambi show that US sports betting operators are now relying more heavily on esports events – such as eNASCAR’s iRacing Pro Series – that two months ago would charitably have been called “non-core.”

Given that the Covid-19 pandemic has the potential to disrupt traditional US sports – especially close-contact sports – for some time to come, we expect that operators will more seriously consider their esports strategies.

Our forthcoming survey of esports betting industry stakeholders, which we conducted just prior to the Covid-19 outbreak, indicates that average spend per esports bettor is increasing relative to 2019, and that the first-person shooter Counter Strike: Global Offensive (CS:GO)remains the undisputed center of the esports betting universe.

Top offshore books turn to sports sims

Amid the Covid-19 sports shutdown, a standout performer in the offshore sports betting world, we hear, has been sports sims, or CPU versus CPU contests that are generated within popular sports video games like Madden NFL 20.

Leading offshore betting sites such as bookmaker.eu and sportsbook.ag now feature ‘sports sims’ menu tabs and offer wagering on a variety of sims (Bovada is even promoting ‘NFL Sims’ in its Twitter bio). We understand that sims, on a daily basis, are generating about the same amount of handle that a typical Nevada sportsbook would generate from a single NBA game during the regular season.

But will the sailing for sports sims betting, which appears to have been smooth so far, remain so? After all, Twitch – through which some offshore sportsbooks are streaming sports sims, and which in 2016 cracked down on CS:GO skins gambling – could begin removing sports sims content that is clearly tied to those sportsbooks.

However, judging by the whack-a-mole issues that Twitch has been encountering in policing shady casino streaming channels – and by the low-profile approach some offshore books are taking on Twitch – we suspect that 1) sims betting channels may be hard for Twitch to identify (of note, no such channels immediately show up in Twitch’s search engine) and 2) any sims betting channels that are removed would quickly relaunch under a new brand.

Washington state crosses the finish line

Washington Governor Jay Inslee recently signed into law HB 2638, authorizing retail and on-premise mobile sports betting at the state’s 29 tribal casinos. Washington is the third state in which tribes are the exclusive operators, behind North Carolina and New Mexico, and by far the largest market of the three.

Regulators and tribes have reportedly already begun work on implementation processes, even amid the Covid-19-related turmoil, but implementation could be delayed if Washington commercial gaming executive Eric Persson makes good on his promise to sue over the law’s emergency clause that allowed it to bypass a voter referendum. It is worth noting that legal challenges in both Montana and DC included injunctions that lengthened the sports betting implementation process.

States eye up fiscal stabilization post-Covid

Populous Ohio recently became the first state to formally consider a post-Covid-19 legislative agenda. One of Ohio’s top goals – stabilizing state finances – is sure to be replicated across the US, where widespread business shutdowns and consumer uncertainty has led to free-falling state tax revenues.

In a post-Covid-19 setting, we see potential for Ohio – and other states – to push sports betting and online casino concurrently, as such a legislative package could generate a quick, meaningful injection of cash (in the form of upfront license fees) at a time when fiscal stimulus will be sorely needed.

Eilers & Krejcik Gaming LLC is an independent research and consulting firm with branches in Orange County, California and Las Vegas, Nevada. The firm’s focus is on product, market, and policy analysis related to the global regulated gambling market. Clients include operators, suppliers, private equity and venture capital firms, institutional investors, and state governments. To learn more about the firm, visit www.ekgamingllc.com.