As the American sports betting industry boom continues, it is fascinating to keep an eye out for what is to come in an ever-changing industry. Since 2019 there has been an eight-fold increase in yearly nationwide revenue and the data suggests this figure will increase over the next decade. However, we also want to look at this from the sponsorship revenue perspective. Due to the early nature of this industry and how quickly legalization has swept the U.S., it is maybe even more important to understand that the gold mine in these sponsorships may not last forever. We will touch on that more in the latter half of this blog.

In 33 states along with Washington D.C., sports betting is now legal, and bets can be placed in person and/or online. Within the remaining 17 states, there are four where sports betting has been legalized but bets are not being placed yet and in the other 13 sports betting is not yet legal, including the “Big Three” powerhouses – California, Texas, and Florida – which make up nearly 30% of the U.S. population. However, that should soon change as Florida prepares to launch (or re-launch) after the Florida courts reached a verdict and approved a return for sports betting to their state.

As sports betting continues to become more mainstream, Navigate revisited some of our work from 2021 with Alacria. That project sought to use Australia’s decades-long head start with legalized sports betting as a crystal ball for the future of wagering in the U.S.

As the industry continues to mature through its adoption curve – two major questions plague sports industry leaders:

  1. What do the next 5 years of sports betting look like from a monetization perspective?
  2. How do I stay on the cutting edge of this unique fan engagement experience?
Revenue projection:

Nationwide sports betting revenue is projected to grow to from $7.3 billion in 2022 to $16.3 billion in 2026, and $23.2 billion by 2030. Revenue growth will most likely slow down after 2030 once most states have legalized sports betting and sportsbooks cut back on marketing investments, but we still have nearly a decade of continued high growth ahead of us. It is not yet clear what the ceiling is for sports betting’s popularity. In 2019, Morgan Stanley and a group of casino executives forecasted the size of the American sports wagering industry to be between $7B – $8B by 2025. That range was already surpassed in 2022, which cued analysts to revise their forecast by nearly +50%! It is projected that 43% of this growth will come from states that have not yet legalized sports betting, with the aforementioned “Big Three” spearheading this growth. To give an idea of how much volume the “Big Three” will produce – it is projected that sports wagering in Florida alone could reach $8 to $12 billion annually.

Sponsorship:

With the projected tripling of nationwide sports betting revenue between now and 2030, we believe sponsorship will continue to drive countless customer engagement opportunities for major sports betting brands and be a key piece of teams/properties partnership revenue for years to come. As we look at market share today, we see the sports betting industry is dominated by FanDuel and DraftKings who share two-thirds of the total market share. BetMGM has been a consistent major player with a market share around 10% and Caesar’s Entertainment has garnered a share of 8% since opening its sportsbook 2021. Additional smaller sportsbooks make up the remaining market share.

As teams and properties, especially those in recently legalized states, are considering the idea of partnering with sports betting companies, it is interesting to look at which sports betting companies are the most active in pursuing partnerships. We compared the industry’s market share leaders below. It’s worth noting that while DraftKings and FanDuel command the most market share, the average annual value of their team partnerships is lower than some of their competitors.

 

 

As mentioned above, there are signs that the market for sponsorships in this space is in decline, as platforms balance the desire to gain market share with need to improve profitability. Newly signed deals have been notably larger than deals than renewals, in terms of average annual value. Across all five major leagues, the average total value of new partnerships is $6.1 million compared to $3.4 million for renewed deals.  All five major professional sports leagues in the U.S. have seen teams create partnerships with sports betting companies over the last five years. The NFL and MLB have seen the highest total value of deals between their teams and sports betting companies at $281 million and $235 million respectively. Despite the size of the initial market, it is important for teams and properties to think of their future as many brands use sponsorship as an initial marketing tool and may not see the same value in sustaining deals at that price point.

 

On the horizon…

Even now, major swings have occurred in the sports betting industry including the emergence of potentially impactful players. In late June of 2023, Fanatics acquired PointsBet’s U.S. assets for $225 million and opened a state-of-the-art sportsbook at the Washington Commanders’ home at FedEx Field. They then opened a second venue adjacent to the Columbus Blue Jackets’ home arena at the end of August. Even more recently, ESPN and Penn Entertainment struck a deal to create ESPN BET, aligning Penn’s betting interests with the powerful ESPN brand. Penn agreed to pay ESPN $1.5B in cash over 10 years, as well as negotiating out of their previous arrangement with Barstool Sports. Fanatics and ESPN have everything it takes to become the next powerhouse in the sports betting industry and competitors should be wary as they look to gain market share in the coming months.

What About iGaming? To be Continued…

Despite all of the change we’ve seen, this may all be the first phase of a much larger ecosystem for many gambling platforms. Sports betting platforms, especially with effective sponsorship placement, celebrity endorsers, and significant marketing spend can bring users to the platform, but there’s a chance that iGaming emerges as a much more profitable enterprise. Sports betting as an avenue into igaming is a narrative that is in its early stages but could be where the real prize sits. According to the AGA, sports betting generated $7.3B in 2022 revenue across 33 states and Washington D.C. while iGaming did $5B in seven states – none of which rank into the top 5 in state GDP. As iGaming continues adoption Navigate will keep an eye on whether or not it surpasses sports betting in the sponsorship ecosystem.

Final Thoughts:

While we do believe the sponsorship gold rush within the sports betting industry has softened, deals will continue to close across the major leagues, especially as additional states move forward with legalization. If brands like DraftKings and FanDuel decide to cut back on spending, then we could see a dip in the overall market, but new players like Fanatics and ESPN could reignite a bidding war.

At Navigate we continue to support teams, leagues, and brands in their sponsorship endeavors and we aim to provide the most up to date, useful data for clients to be able to get the most out of sponsorship deals.

Sources used in this article include: GWI, Alacria, Action Network, H2 Gambling Forecast, Global Data. Thank you as well to Navigate’s Charlie Adams for assisting on research and analysis.

 

Have any questions? Feel free to email Greg@NVGT.com