Analysis: Why sports is the saving grace for operators amid a second lockdown

By Iqbal Johal

When UK Prime Minister Boris Johnson announced that England was heading into a second lockdown on 5 November, it must have seemed like a sense of Déjà vu for the gambling industry.

The measures saw all 5,681 betting shops in the country along with casinos and bingo halls close until at least 2 December, aimed to curb the rate of coronavirus infections. Currently, many countries in Europe have reintroduced lockdown restrictions, again halting the retail business in the industry.

However, the announcement by Johnson, incidentally made on Halloween, wasn’t quite as scary for operators as the first lockdown implemented in March in the majority of European countries, that led to a suspension in all major sporting leagues and competitions.

It’s no secret to how much the closures of betting shops and the halt in live sport affected operators worldwide, particularly in Europe. In August William Hill said it expected 119 of its High Street betting shops to close permanently as a result of the pandemic, while the Racing Post was forced to cease publication of its newspaper from 25 March until 1 June, on the basis there wasn’t enough relevant content to justify its price.

The impact on live sport led to figures in July from gambling data specialists H2 Gambling Capital, forecasting betting sector gross gaming revenue (GGR), made up of horse and dog racing, sports betting among other verticals, to drop to $60bn for 2020, a 21% downgrade from the $75bn predicted at the start of the year. That figure would also represent a 15% year-on-year fall.

But the return of Europe’s biggest leagues from May, starting with the German Bundesliga and followed by the English Premier League a month later, demonstrated how important and popular sports betting is to operators. This is particularly evident when taking a closer inspection at several Q2 and Q3 financial results from major sports betting operators.

GVC was one of the biggest operators to feel the pinch of a lack of sports betting offered. Its net gaming revenue (NGR) fell 11% year-on-year for Q2, with its sports NGR decreasing by 6%. However, a return of the aforementioned major football leagues in May and June, followed by a summer-style UEFA Champions League knock-out tournament in August, led to an upturn in fortunes with NGR from its sports segment increasing 24% for Q3, compared to the same period in 2019. Overall NGR was up 12% from last year.

For Kindred, the operator’s sports betting GGR plummeted 45% quarter-on-quarter for Q2, but for Q3, it was 11% higher than in 2019 increasing to £120.9m ($160.6m), a stark rise on £67.5m posted in Q2.

When looking at Kambi, the sports betting supplier’s Q2 revenue fell 32% from 2019 to €14.8m ($17.6m), but the return of live sport allowed it to post a 22% yearly increase in Q3 revenue up to €28.1m.

Flutter also saw an increase in total revenue for Q3, which was up 27% from 2019 on a pro forma basis to £1.33bn. In terms of its sports betting revenue, that rose 32% from 2019, to £798m.

Perhaps the return to a near full helping in the sporting calendar means it’s no real surprise that the Great British market finally posted an online growth for September. After two months of declines, online gambling revenue in GB rose 3% month-on-month for September up to £420m, with sports betting gross gambling yield (GGY) from the biggest operators representing 80% of the online market, rising 15% to £189.7m, according to Gambling Commission data.

Despite other verticals such as esports and virtual sports proving credible substitutes while sports betting was incapacitated on the sidelines earlier this year, all the aforementioned financial data points to the significance sports betting has, on both customers and operators throughout the industry.

While the first lockdown spelled a period of gloom for the industry who had to turn elsewhere to make up lost revenue, this time around should be different. Instead, operators will be a lot more hopeful of quarterly revenue increases, with the continuation of live sport showing there is very much light at the end of the tunnel.

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