Analyst Carlo Santarelli of Deutsche Bank authored another report tempering the expectations of investors who think sports betting in the U.S. is a $15 billion to $20 billion market. He points out that assessments overestimate spending per customer by focusing on gross revenues instead of net, and making flawed comparisons to other markets.
For example, promotional activity accounted for 34 percent of Pennsylvania sports betting revenues, Santarelli said.
Another sticking point involves comparisons to the U.K. Soccer In the U.K. has a revenue margin of 9.2 percent while U.S. football comes in at 5.5 percent. Nevada, with decades of sports betting history, has a 5.6 percent overall revenue margin, he said.
Then there’s New Jersey with $51 per capita win, lower if you include promotional spending. Over the past 12 months, New Jersey really produced $37 per capita of net win, and that falls to $28 factoring out New Yorkers coming into the state to wager, Santarelli said.
To reach the vaunted $15 billion market, the per capita revenue would need to be $63, and $83 to surpass $20 billion.
So assume each state legalizes sports betting and promotions account for 22 percent of revenues, EBITDA for DraftKings is $366 million, for the MGM JV with GVC $209 million, and for Penn National $177 million, Santarelli said.