Coronavirus has hit the global sports and sports betting industry hard and The economic impact of this is colossal with casinos closed and the cancellation of sports events around the world.
The NCAA Men’s Basketball Tournament was called off; an event in which $13 billion was staked last year. This shows that the legal sports betting industry has been grievously affected by the viral outbreak. The future of the gambling industry is unknown as the sportsbook, casinos and stock values have all been bleeding. The only hope is a federal bailout. The gambling industry awaits some good news just as the sports franchises that support the lines they post.
Kentucky Derby also rescheduled its slot from May to September 2020. Most of the professional leagues have postponed their lined up events. Even Euro 2020 soccer tournament has been rescheduled to 2021. The other leagues loom in the dark as of now.
The much-awaited Summer Olympics that were to be held in Tokyo has been pushed back to 2021. Also, the NFL season in the US has been postponed. Donald Trump, the American President said in a press conference on Tuesday that the situation is quite bad and it might affect the nation widely. He added that it’s only the people but the sports events that can’t be spared the quarantine.
The entire sports betting industry has been closed down and that bad news for both the sports industry and the sports betting industry as there’s nothing left to gamble on. In his statement to Gambling.com, Victor Matheson, an economics professor at the College of Holy Cross said that this problem is like a grain of sand in the sea of the sports economy in whole.
The way the shutdown has impacted the entities has its own dismaying story.
With players from the NBA league falling sick, shut down was imperative. NHL also closed down as they were sharing venues with the NBA. The March Madness that was to be held also got cancelled with venues closing. Moreover, there was unexpected trouble as at the last minute the universities denied housing the athletes on their campuses that were closed. With NCCA, Major League Soccer was closed down and as Matheson emphasized this was a concern as they didn’t make money on the television rather made more from the fans who marched into the stadiums to watch them.
The final show is at stake and as the Commercial Development Head of 888 Holdings, Yaniv Sherman puts it, “this sports betting fiscal year has been formulated”. He expressed that the first year in the handle should have been “lapped”. He referred to the $13 billion staked by the US in 2018 (as reported by the American Gaming Association) stating that this would be a good time for reflecting as the sports season looks parched as of now. With March Madness and NBA cancelled, fans could probably expect the Super Bowl to start from where it ended.
Sherman says that gaming companies should look at alternatives. These include the licenses required to operate the online gaming business such as casino and poker. All the companies that have multiple business options will now attempt to persuade their sports bettors into their online gambling business offerings, provided the states allow it.
Sherman mentioned Pennsylvania, Delaware, New Jersey and Nevada as having good online sports betting base. He added that these states offered a blend of sports betting and casino games on their platforms which could be explored as help to offset the losses incurred in their revenue at a time when the casino establishments across the states had been shut down. Sherman hinted at Michigan’s and West Virginia’s legalized online casino status that would see the casinos go online later this year.
According to Gov. Phil Murphy of New Jersey, online gaming continued as usual in the state even after the mandate to close down schools, restaurants and gyms were rolled out on last Tuesday. He shared his concern about this alarming situation stating that they had never seen anything like this before. Sherman stated that the gaming world that is not just about sports but entertainment has now become “both the cause and the effect”.
How the global sports economy has been impacted
It isn’t as simple to assess the value of the global sports economy. There are different franchises in different leagues and so much undercover at each level. Although NFL teams are said to be valued at around $2 billion, the actual figures other than its record sale of Carolina Panthers valued at $2.275-billion is not known.
The value of media rights contracts is central to the league’s life and health. These deals speak a lot about the properties of the team and its positioning in the global sports market. According to the latest studies, the top 7 professional leagues in the world are capable of generating $85 billion and more in the media rights value by the next 4 years. These stats were however based on the predictions made before the pandemic hit the sector.
As Matheson says, it’s just the revenue directly earned by the leagues and their member teams and not that collected from the sports bar or other indirect sources that cater to fans. The NBA shut down on Wednesday has killed the spirit of thousands of fans.
The sportsbook malady post virus outbreak
With Rudy Gobert, NBA player Utaz Jazz testing positive for COVID-19, there’s wasn’t much to contain for the team than to cancel its forthcoming event. This signalled severe damage to the global sports economy as the sportsbook witnessed the betting markets crash from their boards.
The game offerings were also reduced. Even the Turkish soccer and the Russian hockey postponed its playoff. Gobert’s COVID-19 positive status changed things at Michigan and Illinois as well. With nothing to bet on, the sports betting industry is expected to experience a complete loss of the source of revenue. As Matheson says, this would be a bigger problem for the casino establishments.
Most casinos have shut down. Some had done it voluntarily while others had to abide by the government mandate. The Centre for Disease Control and Prevention has passed on regulations to restrict communal gatherings. The number was limited to 10 last Tuesday. In February, in Macau, the casinos were shut down for 15 days.
As one of the world’s largest gambling hubs, this shutdown was ordered soon after the virus hit mainland China. Wynn also recorded a daily loss of $2.5 million.
As per the American Gaming Association’s latest updates, the gaming industry in America is anticipating aid that would stimulate its capital structure and working capital. This is expected to come as direct grant assistance and in the form of loan guarantees and refundable tax credits.
It didn’t take long for the casino industry in the US to enter a stagnant phase from a thriving one.
The commercial gambling establishments and the tribal brick-and-mortar casinos that are entering the standstill phase have been increasing. This has also impacted almost 55% of casino employees. As the President of AGA, Bill Miller expressed in is a statement to Gambling.com that the closing down of casinos at large will have dire consequences across all the 43 states they operate in. He added that as the state governments consider closing the casinos in response to the urgent public health emergency caused by COVID-19, it is the responsibility of the elected representatives to support the workers and operators who will be affected the most. In his statement, Bill said, “Our immediate priorities are actions that provide liquidity to allow us to support employees.”
According to Spectrum Gaming, the casino industry of America generates $41.7 billion in revenue annually and the viral outbreak has heavily crashed the land gambling business.
Corona and gaming stocks
The stocks of gaming companies show a fall in the US market. Ever since the pandemic paralyzed most parts of the world, the share prices have dipped. Even in the UK, sports betting and horse racing activities have taken a back seat with halting of every event. With the postponement of the European soccer and cancellation of horse racing, a $184.6 million fall in the total earnings from shareholdings is expected. GVC Holdings communicated to their shareholders that they could expect a fall in their earnings.
The sportsbook that was earlier thriving had hit a significant low. A few sportsbooks are likely to shed nearly 25% of the market capital. None of this was foreseen and so it is hitting hard. Sherman told Gambling.com that only the agile, well-managed and regulated sportsbook will probably survive this phase. This will determine their business continuity and might require a lot of significant decisions to be made through this journey. At the end it all depends on the people is what he indicated.
Paddy Power, Bet Fair and FanDuel’s owner Flutter Entertainment also revised its revenue projections which showed a negative trend recording $136.7 million this week. Flutter Entertainment is one of the most prominent operators in the American gambling and betting world. Following this was William Hill which recorded a downfall in its revenue by at least $122 million. In 2019, the operator had recorded 53% of revenue sourced from sports betting.
As Matheson observed, he says that for casino establishments the loss incurred from their sportsbook is insignificant as compared to the overall loss. He pointed out that the casinos where a considerable footfall was recorded last week couldn’t be a better place to spread COVID-19.
Matheson spoke about the horrific times that the US witnessed post 9/11. The downturn caused by the COVID-19 outbreak might hit harder as this time he says the country will have to battle the recession that’s already set in. He recalled how October after 9/11 was profitable for the automation industry. Indeed it worked well in pulling the economy out of the recession then. Although the current crisis that the operators and sportsbooks are going through needs people to come out and help, it doesn’t seem feasible or sensible to do so as that would create more challenges with the virus spreading like wildfire.
In 2019 Stars Group recorded 62% of overall revenue from their gaming and online poker business but with COVID-19 it could weather off. Sherman said that there have been cross-sales offering the sports bettors several gaming products. This so far worked as a backup. What started last year and peaked around NBA finals, this tailback plan might need a longer stretch.
The timing of COVID-19 has been detrimental to the betting season. Super Bowl, known to be one of the largest single-day betting events scheduled this year is crushed. It was ideated in February and with March Madness also being postponed now along with the NFL rescheduled for August, chances of recovery for the sector is bleak.
Even if the NFL is played in August and other football events rolled out, there’s no guarantee that everything would be fine by then. Until a vaccine to protect oneself from the virus is available, who knows how the actual scenario on the ground will be. Matheson calls this as “a little scary, as that’ll make it another year from the fall”.