Climate Change: The 2019 New Jersey Sports Betting Revenue Forecast

On the eve of learning the January sports betting handle and revenue numbers, we can follow the clues to project what 2019 will look like.
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$1.25 billion. That’s the number to beat. Or double. Or triple. Or maybe even quadruple.

In the first partial year of legal sports betting in New Jersey — spanning 6½ months, just five of which featured mobile/online wagering — the total amount risked by customers was $1.25 billion.

It seems a no-brainer that the number will double in 2019, with a full 12 months of regulated betting. Tripling or quadrupling? That’s a little harder to project and depends on several factors.

With the New Jersey Division of Gaming Enforcement’s revenue report for the first month of 2019 coming out on Wednesday, this is a perfect time to look into the crystal ball and speculate about what’ll learn tomorrow, what we’ll learn a month from now, and where the Garden State’s sports gambling industry will stand in a year.

Hot January, cold February

After the Super Bowl, the NJ DGE reported that the game drew $34.9 million of betting action across the 10 active brick-and-mortar sportsbooks and 11 online books in NJ, and they collectively took a bath, with a negative-13.11% hold and a loss of almost $4.6 mm.

This gives us some useful clues as to what to expect in the revenue/handle reports for January and February.

Handle for February should be just fine, despite there being only 28 days in the month. Even if the industry was expecting a higher number than $34.9 mm on the Super Bowl, it should be a solid month, action-wise. And consider: With so many big winners on Super Bowl Sunday, there was a lot of money for bettors to quickly reinvest in other sporting events.

But that $4.6 mm revenue hole is a deep one. Sports betting generated profits of $20.8 mm in December, $21.2 mm in November, $11.7 mm in October, and $24 mm in September — so the recent trend of eight-figure wins suggests operators can dig out of a one-day, seven-figure ditch and finish the month comfortably in the black. Just don’t expect profits to be over that $20 million line.

February’s losses (or relatively small gains), however, are January’s wins. From Jan. 20 until the end of the month, people were firing Super Bowl bets that wouldn’t pay out until Feb. 3. That means hold percentage and revenue for January will look deceptively high. You don’t need the predictive powers of Tony Romo to anticipate some very healthy numbers in tomorrow’s report, but be forewarned: The news for New Jersey sportsbooks will not be as good as it appears.

More books = more handle

The mobile sportsbook craze started with one, DraftKings Sportsbook, last August. Every few weeks, another book or two began taking wagers, right up through Hard Rock and Resorts going live in January, and Bet America launching just ahead of the Super Bowl. There are now a dozen options, and more on the way, including Golden Nugget, Bally’s, Harrah’s, and TheScore.

It’s fair to guess that the Garden State could have 20 online operators by the end of 2019. And with online accounting for a larger and larger slice of the pie each month — it hit 75.5% in December, and we’re projecting about 80% during another “why leave your house?” weather month in January — handle could start hitting a half-billion bucks per month by football season.

That said, revenue is unlikely to grow at the same rate. With each new online sportsbook comes new bonuses and freebies to attract customers, and less profit per book. FanDuel Sportsbook paid out on Alabama to win the NCAA football national championship even though Alabama most definitely did not win that championship. PointsBet is constantly paying out NBA moneyline bets at halftime.

The more sportsbooks, the hotter the competition, the more books taking a short-term loss. For 2018 as a whole, hold percentage (inflated a bit by futures bets) was about 7.5%. Expect a lower percentage win for casinos, especially the online ones, in 2019.

The Pennsylvania pilfer is coming

The fact that there are six brick-and-mortar sportsbooks in operation in neighboring PA, with more on the way, probably isn’t affecting NJ’s bottom line much. But when mobile sports betting arrives in the Keystone State — insiders are generally projecting late spring — New Jersey will feel it a bit.

FanDuel estimated in November that 4% of its Jersey customers come from Pennsylvania, and 9% come from New York. That 9% isn’t going away anytime soon. But the 4% is.

Most of the online sportsbooks that have a presence in New Jersey will have one in Pennsylvania as well, so the companies won’t be impacted. But the NJ-specific handle and revenue figures will.

Summer at the shore

Brick-and-mortar betting handle in Jersey has gotten fairly flat — in fact, it dropped slightly from November to December. And as we learned with the disparity in Super Bowl handle between Nevada and New Jersey, the Atlantic City casinos aren’t shaping up to be a sports betting event destination the way Vegas is.

In other words, don’t expect some massive bump in in-person betting for March Madness.

But business should pick up in June, July, and August. Summer is the season that brings out-of-towners to the Jersey shore, and even though it’s a relatively slow stretch for sports, the baseball, golf, and tennis action will give locals and tourists alike something to put a few bucks on. There are always NFL futures bets too. If ever the sportsbooks at Borgata, Ocean, Resorts, Golden Nugget, and so on are going to cut into the handle advantage of their online counterparts, it will be over the summer.

Total handle prediction for 2019

So let’s break it all down. 2018 ended with consecutive months exceeding $300 mm in sports betting handle. That’s our baseline for now.

The conclusions of college and pro football will lead to a dip (no offense, AAF). But those will be offset by new online/mobile sportsbook launches, as well as by creative March Madness contests and season-long NFL contests online. Then again, for the second half of the year, Pennsylvania figures to take about a 4% chunk out of Jersey’s action.

Add it all up, and we’re going with a handle prediction of $4.2 billion for 2019 — not quite enough to beat Nevada, which hit the $5 billion mark in 2018, but pretty darned close.

And we’ll further predict a hold of about 6% for the year, which means revenue of just over $250 million.

Since this is sports betting we’re talking about, we have to finish with this question: Are you going over or under?

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