H2: US potential "biggest buzz since PartyGaming IPO"

18 January 2019

H2 Gambling Capital has raised its prediction on the global igaming market's growth trajectory for the next three years by almost 5%.

In the latest dashboard published jointly by H2 and iGamingBusiness.com, the consultancy predicted that interactive igaming gross win will rise to €59.2bn by 2022, up from the €56.5bn it predicted by the same year last January.

Simon Holliday, founder at H2, said the repeal of PASPA in May 2018 had created a lot of hype around the market, adding: “the sector has not had as big a buzz since the PartyGaming IPO in 2005”.

Despite the excitement about the potential of the US sports betting market, Holliday said China was likely to remain the world’s largest market for the vertical.

He also pointed to the legalisation of sports betting in the Argentinean capital Buenos Aires and in Brazil at the end of last year as significant developments.

According to the latest dashboard, igaming accounts for just 6.8% of gambling gross win in Latin America and the Caribbean, compared with 23.4% in Europe. The ‘white market’ percentage of this is just 19.4%, compared with 74% in heavily-regulated Europe.

Given the popularity of both sports and gambling in Latin America, it’s likely the market has plenty of growth potential as more countries begin to regulate online gambling and sports betting.

“The recent developments in LatAm are expected to lead to more both in that region and in Africa,” said Holliday.

In Europe, however, H2 sees growth potential slowing.

“Even with dot.country launches in Sweden and (hopefully) the Netherlands expected in 2019, H2 expects Europe to have the slowest growth of any region in 2019 at less than 7% for interactive,” Holiday explained. “And that is best case scenario as we are still considering the impacts of headwinds in Italy, Belgium and reland.

“Globally the average growth rate will be closer to 9%, with the Americas and Africa expected to fare the best.”

Sports betting the star performer
Holliday said the World Cup had demonstrated just how exponential the growth in sports betting had been in recent years, with Russia 2018’s handle nearly 2.8 times higher than amounts wagered on Brazil 2014.

In the US, however, he said mobile would be a key driver of growth; states that allow mobile wagering will fare better than those that do not allow the channel. H2 research last year found that in the states expected to regulate by 2030, the market would be as much as 50% larger if mobile was permitted across all jurisdictions.

Holliday also predicted that sports betting will have a positive impact on US igaming revenue.

“European markets have demonstrated that these two complementary parts of the sector work best together,” he said. “With increased confidence in the sector when sports betting is legalised, we expect igaming to be increasingly on the agenda.

“DraftKings recently ramping up its igaming offering in New Jersey and increased igaming revenue in the States post-sports betting launch is an early sign.”

Mobile takes centre stage
In the latest mobile dashboard, H2 predicts that mobile as a percentage of global igaming gross win will rise from 43.6% this year to 52.6% by 2023. It estimates total global mobile gross win will grow to €32.7bn by the same year.

Holliday said there has been a significant shift in the perception of mobile over the past year.

“Mobile is no longer viewed as an emerging interactive channel, and the two terms have become almost interchangeable.”

He also predicts further changes in technology as more Millennials are employed by igaming companies.

“There will be an increasing emergence of virtual reality and artificial intelligence technology – particularly in gaming – as Millennials at last become the majority in company tech departments.”

The change in demographic won’t be positive for land-based gaming, however, which he noted is struggling to attract Millennials.

Holliday also warned that the industry was facing increased regulatory scrutiny, especially in established regulated markets.

“In more mature markets such as Italy, Australia, Belgium and the UK, regulators and governments have been tightening up in areas like advertising and problem gambling, as well as increasing taxation of the sector,” he explained.

The sector could prepare itself for these challenges by collaborating with its peers, he suggested. By speaking with one, coordinated political voice, operators would be better-placed to “articulate the positive arguments of the industry and fend off further regulatory tightening and taxation increases”.