The second quarter of 2023 was an important period for the young US online gambling industry, as many companies are reporting that their online operations turned profitable for the first time. For years, even the biggest operators had been outspending their revenues, creating impatience among investors and contributing to the slump most gaming stocks experienced last year.
CEOs promised that profitability was coming, and now it seems that those assurances were warranted.
However, there are still some questions about the industry and its future:
- Where do we go from here?
- Has this been a real turning point for the industry?
- Or are there more ups and downs to come?
Leading Operators Post Profitable Quarter Results
Q2 2023 provided the best results across the industry. Market share leaders BetMGM, FanDuel, DraftKings, Caesars, and BetRivers have all achieved profitability. For most, that marked the first time they were profitable.
Notable second quarter results include:
- DraftKings generated $885 million in revenue, up by 88%, and $73 million in earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA).
- Caesars Digital had $216 million in revenue, up by 42.1%, and $11 million in adjusted EBITDA).
- BetMGM reported $944 million in revenue for H1 (implying $468 million for Q2), up by 25%. The company added that it had achieved positive adjusted EBITDA but did not release an exact number.
- FanDuel recorded $100 million in adjusted EBITDA for the first half of 2023.
- In Q2, BetRivers’ parent company, Rush Street Interactive (RSI), reported $165.1 million in revenue and $1.2 million in adjusted EBITDA.
Most Operators Expect a Strong Year End
While Q2 and H1 results were positive, operators expect an even better close to 2023. That’s primarily due to sports and football, in particular. The NFL and college football seasons kick off in the fall, which marks some of the busiest months for sportsbooks.
More states will have legal sports betting for this football season than in 2022. Kentucky is set to launch online sports betting on Sept. 28, while Massachusetts went live in March. Ohio also launched in January just before the NFL playoffs. So there could be a boost there.
Additionally, if 2023 trends similarly to 2022, online casinos will collect about 52% of their yearly revenue in H2.
That’s why operators are bullish about the rest of the year’s performance. For example, BetMGM expects to be self-sustaining in H2 and maintain positive adjusted EBITDA. Meanwhile, DraftKings’ guidance includes $120 million to $150 million in adjusted EBITDA in Q4.
Upcoming Launches Could Further Boost Profits
Operators’ revenue and potential profits can further increase with the launch of sports betting in additional markets in the near future. As mentioned, Kentucky is scheduled to go live on Sept. 28. (Sept. 7 for retail sportsbooks.)
Meanwhile, Vermont and Maine should launch at some point in early 2024.
The biggest prize is North Carolina. The Tar Heel State is expected to launch sports betting in the first half of 2024. North Carolina would be the fifth most populous state to offer legal sports betting. In addition, a large part of the South Carolina population lives close to North Carolina’s borders, while Atlanta is less than three hours away. So those residents may travel to bet in North Carolina.
Meanwhile, only Rhode Island is set to launch online casinos in 2024. While it will be a tiny market with a monopoly by Bally’s Corporation, it may help raise awareness and acceptance of iGaming.
Age and Acceptance in the Future of Online Gambling
As the number of states with legal online gambling options increase, so does the public’s overall acceptance of gambling. Younger generations which have grown up with technology are also becoming a major part of the consumer base, which could significantly help the industry’s future.
According to a study by Seton Hall University, 54% of respondents say sports betting should be legal, while only 22% say it shouldn’t. That’s an increase of 7% from 2022. The survey also found that 34% of respondents have placed a bet, a rise of 6% from 2022.
An interesting question found that respondents feel the chances to win from sports betting and iGaming are similar. About 35% said they have better chances of winning from sports betting, while 33% believed online casinos provide a better opportunity.
The opinion also differs based on age. According to the Pew Research Center, 34% of US adults view sports betting as a bad thing. When looking at age, the number is even lower for those under 50, about 27%.
Age Will Play a Major Role
Age is becoming more critical as demographics change. According to research agency Ipsos, 39% of sports bettors are under 35, and another 31% are between 35 and 54. The study also found that sports bettors seem wealthier, with 41% making over $100,000 a year, implying that many bettors have disposable income.
The trend is similar with online and retail casinos. According to a 2021 study by the National Council on Problem Gambling (NCPG), the average age of online gamblers is 34. Unsurprisingly, that’s why younger players are the most desired online players by operators. An increasing number of developers are creating games with younger players in mind.
The demographic change is also evident on the retail side, specifically in Las Vegas casinos. According to the Las Vegas Convention and Visitors Authority, 60% of visitors are Millennials and Generation Z, while the average age is 40.7 (down from 46.2 in 2019.)