US iGaming and sports betting revenue increased from $81 million to $249 million from Jan 2020 to Jan 2021

Apples And Oranges: Why The US Online Gambling Industry’s Pandemic Gains Have Proven So Durable

Gambling products are not interchangeable. That’s a good thing when it comes to the online gambling industry’s chances of retaining the gains it has seen during the COVID-19 pandemic.

Retail casinos, sports betting, iGaming and poker all attract different users. While there’s some customer crossover, the specialization means many of the internet-based gamers will likely remain app users after casinos return to full capacity.

That’s true even for retail casino customers who only moved online because land-based casinos were shut down. Initially, they may have done so to find the closest alternative. Those who did so, however, will have found an entirely different way to gamble, with its own advantages and disadvantages.

The pandemic’s impact on the gaming industry

This month marks the one-year anniversary of mandatory pandemic stay-at-home orders in most states in the US. Over that year, sports betting and especially iGaming have experienced spectacular growth. iGaming’s $1.6 billion revenue in 2020 represented nearly three times that of 2019. Legal sports betting revenue reached $1.5 billion, up 69% over the previous year.

These increases came even as the overall gaming industry saw a 31% revenue decline, year-over-year.

Naturally, it’s traditional land-based casino gaming that took the brunt of that hit.

According to the American Gaming Association, there are 989 casinos in the US, all of which were closed at one point last spring. 650,000 gaming employees found themselves on furlough or otherwise out of work.

Why online gamblers multiplied during the pandemic

Much has been made of the idea that lockdown caused Americans to turn to online gambling out of boredom. While there may be an element of truth to the entertainment theory, it is at most just one of several factors.

iGaming and online sports betting are becoming legal in state after state. For example, about 75% of states have either legalized or introduced bills to legalize sports betting, according to the Legal Sports Report. Many of those new markets only came on online in 2020, or were still in the process of reaching maturity.

Looking just at online sports betting in the past two years:

  • Pennsylvania, launched in May 2019;
  • Arkansas, legalized in July 2019 (casino property only);
  • Iowa, launched in August 2019;
  • West Virginia relaunched in August 2019 after a false start;
  • Indiana, launched in October 2019;
  • Oregon, launched in October 2019;
  • Colorado, launched in May 2020;
  • Illinois, began in June 2020;
  • Michigan, started in January 2021

Of these, Pennsylvania, Michigan and West Virginia all have legal online casinos as well.

Just how much have new forms of gambling grown?

Although casinos only closed in March, some COVID-related measures were already in effect in February. Going back a month further, to January 2020, gives us the best point of reference. In that month, across the US, gambling operators produced:

  • $81.2 million in total US online casino and poker revenue
  • $77.2 million in online casino revenue, also from New Jersey, Delaware, Pennsylvania, Michigan and West Virginia
  • $4 million in online poker revenue
  • $74.3 million in sports betting

Compare those numbers to January 2021 revenue:

  • $248.6 million from overall iGaming (+206%)
  • $242.2 million from online casino (+214%)
  • $6.4 million from online poker (+60%)
  • $135.8 million from sports betting (+83%)

The growth here is evident and sustained. Most casinos reopened after just a few months, and pandemic restrictions have been gradually easing. And yet, the new online customers are showing how much they enjoy that channel because they’re sticking around.

Online casinos have clearly benefited the most. Poker enjoyed similar gains at first, hitting a peak of $10.5 million in revenue in April 2020. Somewhat surprisingly, though, it has come back down to a much larger degree.

Sports betting has followed the opposite trend, rebounding after a temporary collapse. Its low point also came in April 2020, when sportsbooks made a meager $6 million. During that time, much of the sports world shut down for the safety of players and fans alike, and so there was very little to bet on.

New Jersey: the Benchmark State

New Jersey is the grandfather of US online gambling. Its legal online gambling market started in 2013, years before any other state adopted full-featured, private sector iGaming. By the same token, NJ online casinos and poker rooms had seven years to settle into stable operations before the pandemic’s effects changed things.

During the New Jersey Division of Gaming Enforcement (DGE)‘s first revenue reports in November 2013, online poker generated $326,740. Online casino players brought in $653,425 during that time.

New Jersey’s online poker revenue has fluctuated between $1.5 and $3 million a month ever since, save for a brief spike early in the pandemic. From March to July 2020, monthly online poker revenue exceeded normal levels, peaking at $5.1 million. The lack of live poker and WSOP‘s online ring and bracelet events both drove that boom, yet traffic and revenue came back down shortly thereafter.

Online casino users, by contrast, seem much more likely to stick around. Revenue for that vertical has been growing steadily since the market’s inception. Online casino revenue has also remained high throughout the pandemic, even as poker was returned to more ordinary levels.

In July, New Jersey’s online casino revenue hit an early peak of $82.7 million, declined slightly, then surged to a new high of $101 million in January 2021.

Sports betting enthusiasts in New Jersey reduced their betting activity when the pandemic shut down most professional sports. Revenue crashed from $53.6 million  in January 2020 to just $2.6 million in April. By January 2021, however, New Jersey’s sports betting revenue had attained a historic high of $82.6 million.

Pennsylvania: a maturing market

The Pennsylvania online casino market is 18 months old. Its story is complicated because it was still in a phase of rapid early growth when the pandemic hit.

The market debuted in July 2019 with an online casino revenue of just $1.4 million. By January 2020, it had already grown by a factor of ten, to $13.7 million.

Move ahead another year, to January 2021, and Pennsylvania’s online casinos were generating $105.8 million, almost another order of magnitude increase.

Online poker only entered the mix in November 2019. That vertical, which still consists of only a single site, has been comparatively stable. January 2020’s $2.2 million compares increased only modestly to $2.7 million the following year.

Conversely, sports betting got an earlier start, in May 2019. This meant that vertical had more time to mature by January 2020, when it realized $26.7 million in revenue. One year later, that had increased to $45.3 million in revenue, despite an early pandemic low of $3.2 million.

Michigan: fast out of the gates

Though its first full month of online gambling revenue was only 28 days long, Michigan saw nearly $80 million in gross gaming revenue in February 2021.

Online casino revenue decreased from the first few days of betting by 3% to an average of $2.85 million a day in February. This slight drop after a strong start is common, as the first days of a state’s legalized online gambling pull in a lot of curious but casual players, as well as those looking to capitalize on signup bonuses.

West Virginia: a prototype for smaller markets

West Virginia holds the distinction of being by far the smallest state with a full-featured private sector gambling industry. With a population of just 1.8 million, in is about one-fifth the size of the next smallest, New Jersey.

It’s also unusual in that its two online casinos, DraftKings and BetMGM, launched mid-pandemic. They brought in just over $3 million in January 2021, but there’s no year-on-year comparison possible. On the other hand, sports betting had gotten underway by January 2020, though revenue for that month was shy of $1 million. It has since tripled to $3.1 million in Jan. 2021, despite hitting a low of just $124,415 in April 2020.

Brick and mortar casinos are on the road to recovery

Land-based casino revenue is still down by double digit percentages at the moment. Nonetheless, one in three Americans plans to visit a casino in 2021, according to research released in January 2021 by the American Gaming Association.

That same research also looked at the safety measures casino representatives are taking in order to reopen safely. About 70% of 2020 casino visitors were happy with safety measures in place then. And 80% of Americans planning to visit casinos in 2021 are pleased with the safety precautions now, according to the research.

So it appears as though gamblers who prefer land-based options will be returning to them within the calendar year.

Gamblers specialize and online gambling is a preference

When online gambling first became a topic of discussion, many feared it would cannibalize brick and mortar casino revenues. That never happened, because online and retail casino games are two different classes of product. By the same token, the pandemic gains for US online casinos shouldn’t disappear entirely even when retail casinos are back in full swing.

Nor has the pandemic had quite the same effect on online gambling in places where it isn’t a novelty. For instance, pandemic lockdowns didn’t impact the volume of play for Swedish online casino players who were already playing online before the disease struck.

In Italy, the “vast majority” of exclusively land-based casino gamblers simply abstained during the quarantine, according to research released in January 2021. Despite widespread availability of online gambling options, for which revenue has grown more than 35% during the past three years, the gamblers in the study didn’t switch channels.

The research provided three possible explanations:

“Their preferred game may not have been interchangeable for them, they may have low skills with technology and, at the same time, family control may be greater during this period.”

Compared to these results, it seems that the bulk of the increase in the US came neither from players looking for a temporary replacement for retail gaming, nor from existing players upping their volume. Rather, it looks as if the absence of retail gaming encouraged new customers to try online gambling for the first time. That’s an effect that won’t be reversed no matter what happens next.

US online gambling revenue growth through the pandemic

Here is what the growth of the overall US online gambling market looks like through the past year.

 CasinoPokeriGaming TotalSportsGrand Total
Jan '20 $77.2M $4.0M $81.2M $74.3M $155.5M
Feb '20 $80.2M $3.7M $83.9M $27.4M $111.3M
Mar '20 $104.M $6.8M $111.0M $22.3M $133.3M
Apr '20 $153.8M $10.5M $164.3M $6.0M $170.3M
May '20 $177.9M $9.2M $187.1M $16.6M $203.7M
Jun '20 $165.1M $6.8M $172.0M $21.5M $193.5M
Jul '20 $169.2M $7.9M $177.1M $40.1M $217.2M
Aug '20$169.3M $5.8M $175.1M $60.3M $235.4M
Sep '20 $170.2M $5.0M $175.2M $54.7M $230.0M
Oct '20 $182.2M $5.0M $187.2M $99.2M $286.4M
Nov '20 $176.6M $4.8M $181.4M $88.5M $270.0M
Dec '20 $222.3M $5.8M $228.1M $105.3M $333.4M
Jan '20 $213.8M $5.5M $248.6M $135.8M $384.5M
- Heather Fletcher is the lead writer with OnlinePokerReport. She's a career journalist, with bylines in The New York Times, Adweek and other publications. Reach her at [email protected]
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