Fourth Brain Estimates That Bookmakers' Seasonal Promotions Are Easing in 2022

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Though sports-betting promotions spiked at the start of the football season, crimping 3Q hold rates and widening book Ebitda losses for Caesars, BetMGM, Penn's Barstool, and DraftKings, costs should ebb and margins recover in 2022 as platforms build customer bases and rival WynnBet cuts promotions, costs should ebb and margins recover in 2022 as platforms build customer bases and rival WynnBet cuts promotions. Caesars, MGM, and Barstool all increased their Pennsylvania freebies in September.

It's not unexpected that multiple gaming organizations noted poor sports-book hold rates as a result of online-book promotions connected to the start of football season, as bet platforms employ such incentives to entice new gamblers, especially when new applications are released or significant playing seasons begin. In previous years, online sportsbook promotions peaked as a proportion of total gaming income in four important betting states from February and September. Those months coincide with the Super Bowl and the start of the NFL football season, which happens every year.

The figure below shows a time series of promotions/gross receipts in four states (Pennsylvania, Colorado, Michigan, and Virginia) that reveal market share.

The growing dilutive effect on net receipts of promotional offers is shown in sports handle and win statistics in Pennsylvania, the oldest of betting markets that discloses both gross win and promotions. Though sports-book hold rates, which are calculated by dividing gross gaming income by wagering handle, have reduced slightly since 2019, as markets have matured, hold rates based on net gaming revenue (after promotions) have plummeted much more dramatically. In marketplaces where numerous platforms compete, this tendency shows that promotions take a growing amount of handle.

The margin between hold rate based on gross vs. net win has expanded as bettor promotions have increased, and it has now reached its greatest point.

Lower-than-average sports-bet hold, due to promotions and negative game outcomes, were highlighted by six online operators as contributors crimping 3Q Ebitda. Rivals Caesars and Churchill's TwinSpires both increased their marketing efforts. The lower-than-normal hold percentage was ascribed to unfavorable game outcomes, such as the majority of "over" bets hitting and favored teams prevailing. Wynn Interactive, which operates WynnBet, intends to cut user acquisition expenditures.

According to our research of state-reported data, when the 2021-22 NFL season began in September, Penn, Caesars, BetMGM, and Churchill presented promotions that were a significant percentage of sports gross gaming revenue (GGR) — either in an absolute sense or compared to September 2020 levels. Penn had 66 percent GGR sports-wager promotions in September at Barstool's book, which was run in conjunction with Penn's Hollywood license at Penn National Race Course. BetMGM had a 93 percent promotions/GGR ratio via the Hollywood Morgantown license (thanks to a market-access contract with Penn). Harrah's Philadelphia, which is owned by Caesars, reported promotions at 117 percent of total revenue, which is much higher than the September.

Jonathan Mann
Founder & CEO

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