Morgan Stanley predicts the growth of the U.S. sports betting industry $ 12.8 billion per 2025. Pennsylvania would explain $ 701 million in annual gross gaming revenue with New York leading all states with $ 1.7 billion in revenue in 2025. It would represent a massive $ 400 million increase in 2018 driven by widespread legalization. In 2021sports betting revenue was $ 4.3 billion.
FanDuel (30%) and DraftKings (23%) are expected to be market share leaders by 2025.
In the “First 3.0 Sports Betting and US Online Betting” released in May, Morgan Stanley analysts delved into the sports betting and iGaming industries and predicted the future.
iGaming in 2025
Today, iGaming is legal and alive seven states including Pennsylvania and New Jersey. Morgan Stanley analysts only believe four more states will unite because of “less public and industry support and stronger industry opponents.”
Analysts expect the US iGaming market to grow to $ 7.8 billion by 2025.
Top 4 states of 2025 for iGaming revenue
- Michigan: $ 1.495 billion
- New Jersey: $ 1.490 billion
- Pennsylvania: $ 1.46 billion
- Illinois: $ 1.336 billion
New York was not included in the report. During the iGaming Next conference last week, State Senator Josep Addabbo said:
“iGaming is the next step for New York. It’s not a question of whether, but when. Neighboring states are doing very well.”
Which states will lead sports betting revenue in 2025?
Prior to the repeal by the U.S. Supreme Court of the Professional and Amateur Sports Protection Act (PASPA), which banned sports betting outside of Nevada, the American Gaming Association (AGA) ruled that $ 150 billion per year was bet illegally about sports. The U.S. Casino Business Group suggested it could be a $ 7.5 to $ 15 billion annual revenue market with a 5-10% gross profit margin.
May 14 marked four years since the repeal of PASPA. Currently, there are 30 states, including Washington DC, where sports betting is legal. Five more have been legalized but are not yet operational.
Morgan Stanley analysts expect it to be in 2025 42 states with legalized sports betting.
Top 5 states of 2025 for gross revenue from sports betting games
(Texas was not included in the report. California is expected to be marketed only in 2023.)
- New York: $ 1.7 billion
- Illinois: $ 852 million
- New Jersey: $ 784 million
- Florida: $ 755 million
- Pennsylvania: $ 701 million
Analysts based their long-term predictions on the U.S. sports betting market on more mature European and Australian markets. In addition, a survey conducted in 2021 by Morning Consult showed that around 20-25% of Americans opt for sports compared to 45% in the UK.
According to current trends, most (85%) bets will be placed online over the next few years. From the beginning of online sports betting in Pennsylvania about 92% all bets have been placed online.
What is the best sports betting?
Through research, Morgan Stanley considered FanDuel Sportsbook the best in its class for the following four reasons:
- A large technical team of 4,000 employees
- A first leader in product development
- Greater depth of the betting markets
- More competitive odds
Morgan Stanley analysts said:
“In the US, FanDuel led the development of the Same Game Parlay (SGP) product, which allows you to bet on multiple correlated events within a single game for customers, while offering more margins for FanDuel. SGPs are very popular among customers with more than 50% place an SGP during the 2020/21 NFL season.With greater market depth, pricing, and SGP availability, FanDuel saw significant gains in market share from app downloads on first half of 21, while generating higher gross profit rates compared to competitors. “
Brand awareness and struggle for future market share
Companies that have their roots daily fantasy sports they are the leaders by far when it comes brand awareness. FanDuel and DraftKings took the top spot for “spontaneous brand awareness” with 54%. Bet365 and BetMGM were a distant third with 11%. Morgan Stanley expects DraftKings and FanDuel (Flutter Entertainment) to remain market share leaders in 2025, with the top 5 sports holding 85% market share.
(graphic by Morgan Stanley)
Sports betting and iGaming prospects
The “First 3.0 U.S. Sports Betting and Online Betting” ended with a look at sports betting and casino actions.
He pointed out that sports betting is not different other high-growth early-stage industries. Amazon and Netflix experienced similar “complicated transitions” from earnings to profits, but after quarters in which they had a significant return on margins, they returned 96% the following year, on average.
Analysts believe that stocks could follow a rebound in performance once sports betting / iGaming operators start showing profits in early states.
The EBITDA margins of international online gambling / sports betting operators range from 15% to 40%, and Flutter (FanDuel) has the highest margins. Flutter benefited from a customer acquisition cost advantage upon acquisition The Star Groupthat has ~ 65% online poker market share with PokerStars, and then cross-selling to other verticals.
Morgan Stanley Forecast:
- US Sports / iGaming betting will offer 25% long-term margins
- DraftKings achieved 24% EBITDA margins in 2025, positive but 200-1,200 bp below international offsets given the higher cost of sales and marketing spending as% of NGR.
- Promotional spending / marketing to normalize over time. It’s already happening in Pennsylvania, where DraftKings has GGR’s second highest share of sports betting while reducing promotional spending as a% of revenue.
- DraftKings revenue in 2025 will be higher than comps.
- Sales and marketing have the highest cost, but for scaled players to gain economies of scale over time
- Operators target positive recovery periods of 1 to 3 years.
- DraftKings expects positive contribution benefits to states 2-3 years after release and FanDuel 12-24 months after release.
Interview with an analyst about the future of sports betting
Wayne Kimmelmanaging partner of Conshohocken, PA Seventy-six Capital welcomed Morgan Stanley analyst Thomas Allen a la Sports leadership show. Allen was one of the analysts who contributed to the “First 3.0 U.S. Sports Betting and Online Betting.”
There is a reason why “2025” is used to predict online sports betting and iGaming.
“We value online sports betting completely differently than we value physical casinos. With online sports betting and online gambling, given the speed with which things are growing, we value it by the cash flow of the 2025 “.
The conversations Allen has had with investors over the past 12-18 months now revolve around customer cost acquisition, long-term player value, and marketing spending. And soon companies can be profitable.
“It has attracted a new crowd of investors. Now I’m talking to a lot of investors on the Internet, media investors who see it as an attractive growth market.”
Faster legalization and higher-than-expected revenue
The 36-minute interview covers a wide range of topics on sports betting and iGaming. Here are three of them Play in Pennsylvania Kimmel’s favorite questions with Allen’s answers.
Were you surprised by the display of sports betting?
“When we first published our estimates of our sports betting in 2018 we thought it would be a $ 5 billion market. We now believe it will be a $ 13 billion market. Per capita spending is much higher than that was expected and legalization has been much faster. “
There are rumors of big brands entering the industry such as Apple, Amazon and Google. How will they play in the future?
“It simply came to our notice then. What we feel is good about our coverage (of games) is that it is a highly regulated industry, and while the opportunity is great for the companies we cover, it is not very great for a gaming company. ‘between $ 1 trillion and regulations are tough. . We don’t think these big internet companies are coming. “
How do you see physical casinos and sports betting and betting coming together in the future?
“These things feed into each other. MGM, Caesars and Penn National have given great metrics behind their omnichannel approach and the benefits of legacy databases. What they’re doing is expanding the TAM. There’s a certain “Cannabis bricks and mortar revenue when you legalize online casinos. But only seven states have been legalized and we only think 11 will. Legalizing sports betting is a much bigger opportunity for these companies.”
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