Part 1: The UK – Covid-19 compounds contraction
To the survivors the spoils
The good news for the major UK operators is the
assumption that once sport is back on the agenda
in any meaningful sense – particularly major
football and horseracing, even if these are played
behind closed doors – then the sports betting
business will come roaring back.
“Once sporting content is back online, we
suspect the recovery would be evident fairly
immediately,” said RBC. “This is because, for the
most part, placing a bet is a small ticket item
which can be done as a solitary activity. As such,
demand is likely to pick up again quickly once
there is supply (i.e., sporting content).”
Ivor Jones, analyst at Peel Hunt, agrees with
this premise. “Sport and racing will revive,” he said
at the end of April. “Generally the message from
online gambling operators is that sports betting
has declined less than expected during Covid-19
and that gaming revenue growth has accelerated.
Nevertheless, we expect the restoration of
some mainstream sporting fixtures to engender
confidence that mass-market interest in sports
betting will bounce back.”
RBC’s sporting assumptions for 2020:
Three months of closures in retail estates
– offset by government stimulus packages
(business rates holiday and employee
furloughing in the UK)
No meaningful football or other sporting
content until the end of summer, and the
cancellation of the Euros
new NFL season in September
All horseracing cancelled for three months
The US comes back online just in time for the
Marketing is the key mitigating lever that
companies have to pull, in particular around
the US expansion businesses
The gaming upside
The trading evidence from the gaming side in
the UK is much more positive compared with
sports betting, but it comes with its own pitfalls,
particularly around the regulatory reaction.
On the plus side, trading has more than held
Sport and racing will revive.
Generally the message from
online gambling operators
is that sports betting has declined
less than expected during Covid-19
and that gaming revenue growth has
Ivor Jones, Peel Hunt
up. As 888 put it when it released a trading
statement at the start of April: “There is currently
evidence of increased customer activity in the
group’s casino and poker products that might, in
part, compensate for the sports betting disruption
for a period of time.”
This is significant: according to 888, the sports
betting vertical contributed 16% of revenues in 2019.
Others in the sector have benefited even more.
Analysts at Numis point to Gamesys, which, as
the team points out, has no sports exposure and
hence has seen the upside in the switch from
sports betting to gaming.
Nevertheless, all of the multi-product brand
leaders will to a greater or lesser degree have
seen some mitigation. Rank’s Grosvenor Casino
and Mecca Bingo online operations saw revenues
rise 27% and 20%, respectively, in the company’s
third quarter, growth trends which, the company
said, continued into the early lockdown period.
Flutter said gaming revenue since the shutdown
was up 15%, partly offsetting the 65% fall in sports
betting revenues since 25 March.
Positive trends, perhaps, but they cannot make
up for the sports betting shortfall and neither
can they be relied upon to continue. As 888 also
outlined, should the current disruption continue for
a prolonged period, “it is possible that consumer
spending across the group’s online gaming product
verticals may also become impacted”.
As has been proven previously, notably in
the wake of the global financial crisis, while
gaming might be more recession-resistant than
other sectors, it is not immune to the impact of
economic downturns on consumers.
iGB Market Monitor • The UK and Sweden • May 2020 4