Sports Betting and iGaming Industry | Overview
Learn more about our Sports Betting ETF
The Global Gaming Industry may be
of interest to some investors due to its above average revenue growth, margins
and ROI. Past performance is not a guide for future returns.
We believe that the gaming
segment is Sports Betting and iGaming is positioned well for future growth. In
particular, the US is expected to grow 23x from $2b in 2020 to $53b in 2033,
according to analysts at Goldman Sachs. Morgan Stanley also agrees:
“We see legalized US sports
betting and iGaming as a once in a generation shift in what was a mature gaming
industry” said Thomas Allen, Morgan Stanley.
The key catalyst for growth in
the US has been regulatory change. PASPA was overturned in May 2018, allowing
individual US states the right to legalize sports betting through legalization
or constitutional amendments. Until then, sports betting was only legal in
Nevada. Now, sports betting has rapidly become legal in 24 states and on its
way to 39 states by 2023, according to various analysts. iGaming is also
rapidly expanding from the current six states to an expected 11 states in 2023.
Other potential growth drivers may
include: wider social acceptance of sports betting as an entertainment
activity; sports betting support from leagues, teams and media companies;
spending conversion from illegal to legal markets; technological improvements
that allows of an enhanced online experience; and greater time spent on mobile
devices.
The industry has generated positive
financial returns (as illustrated through several charts and data references
throughout this paper), with expected EBITDA margins of between 30-35%. Larger
players that are able to leverage marketing spend (the key non-tax operating
expense) across a wider range of products and physical properties are expected
to generate above average margins. Relatively moderate capex also drives above
average Free Cash Flow and ROI metrics.
The companies selected in our
Index include B2C online-focused brands that have exposure to a wide range of
online gaming products; omnichannel companies that have bricks and mortar
casinos with an increasing emphasis to online; and service provides to B2C
companies that include technology platform, sports data providers, media and
affiliate marketing companies.
The index our Sports Betting ETF tracks is diversified across
company type, size and regional exposure. It includes larger and more
established companies alongside a number of small to medium size companies that
specialise in one aspect of the value chain that can grow inline, or at a
faster pace than the industry.
To learn more about our Sports Betting ETF, please visit our fund page here.