This is the first in a two-part series examining what can help sports betting and online casinos succeed in Pennsylvania — but also what could hold them back. Be sure to check out the conclusion.
Just over a year ago, the world of legalized gambling in America changed.
The US Supreme Court struck down PASPA, clearing the way for states to sanction and regulate sports betting. Pennsylvania entered the new world prepared, having passed a 2017 gambling expansion law to legalize sports betting and online casinos.
Few states went into summer 2018 with as high expectations as Pennsylvania. Some analysts and industry watchers pegged Pennsylvania to not just thrive but crush within the online gambling world.
Why? Its substantial and dense population, for one. Not to mention the state’s strong fan bases. Even experience reigns, as certainly many Pennsylvanians whet their appetites in the nearby New Jersey sports betting industry. Now with PA betting apps beginning to roll out and the soon-to-launch online casinos, Pennsylvania has the potential to quickly grow and succeed.
Wait over for online gambling in PA
At long last, a year and a half after the expansion law, Pennsylvania got its first taste of online gambling.
SugarHouse Sportsbook debuted its PlaySugarHouse.com Pennsylvania online sportsbook in late–May. More similar products await testing but will surely be close behind SugarHouse. And this summer, the state’s first online casinos will roll out in earnest.
Jennifer Roberts, the associate director at the International Center for Gaming Regulation at UNLV, said such moves to mobile can help the Keystone State become the gold standard nationwide.
“As the shift in sports betting continues to go to a mobile product, even in Nevada where it is exceeding more than 50% of the market, I expect Pennsylvania to have a robust mobile betting market.”
The online side of things is the key to success. It worked in New Jersey, where online sports betting has accounted for 80% of all wagers made, which amounts to nearly $1.9 billion. Online casinos have grown into a titan. In each of the past four months, online casinos in the Garden State have totaled more than $30 million after more than five years of falling short.
A few hiccups are to be expected during the early days, and they were prevalent for SugarHouse initially. Certainly, Apple has not helped, as new guidelines make it more difficult for operators to offer their online products in the Apple Store. To remove iPhone users from the marketplace is a serious issue that needs resolving quickly.
Nonetheless, embracing mobile usage is vital for operators. Those in Pennsylvania are certainly doing that. Embracing mobile usage is vital for operators, though. Those in Pennsylvania are certainly doing that.
Booming population leads to more firepower
Marginal business + high tax rates…
Sports betting is a business with slim profit margins. Simply look at recent history as an example.
When Tiger Woods stormed to victory at the Masters, it forced the wallets of bookmakers to dump winnings into the pockets of bettors. Then there was March Madness, a chalk-flooded tournament that also had teams that were popular picks for championship futures fall short of the title.
In Pennsylvania, an additional risk could have scared off, and did for a while, sports betting operators looking to enter the market. A $10 million licensing fee and a 36% tax on revenue will have the effect.
But large population outweighs risks
Yet most of those concerns are overshadowed by the potential rewards of Pennsylvania wagering, particularly when it comes to the state’s dense population. Pennsylvania boasts more than 12 million residents to stand as the fifth-most populous state in the country. That size is by no means lost on operators.
Kevin Hennessy, a spokesman for FanDuel Sportsbook, certainly takes notice, noting that “12.1 million people in PA compared to 8.9 (million) in NJ is a big opportunity.”
New Jersey has blossomed, developing into a booming regulated wagering industry. Simple reasoning indicates Pennsylvania and its vast population could cash in even more.
“When you look at casino gaming overall, Pennsylvania is one of the largest states,” David Forman, senior director of research for the American Gaming Association, told the Morning Call in May. “In terms of gaming, Pennsylvania collects more tax revenue [from gambling] than any other state. The appetite for a legal sports betting market there is huge.”
Population and income are also pluses
It’s not just about how many people reside in Pennsylvania. It’s also about the state’s financial standing.
According to Statista, the United States per capita disposable income in 2018 stood at $47,451. Pennsylvania ranked 16th with $49,042, while New Jersey was fourth at $58,760.
Sure, the Garden State boasts more disposable income per capita. But Pennsylvania still sits above the national average. With PA being 43% larger than its neighbor in terms of population, and its proximity to New York (fifth in per capita disposable income), that definitely creates a rosy outlook for operators and pundits alike.
“Pennsylvania has a significant population and two major sports towns,” Roberts said, “so I expect sports betting to be quite successful.”
PA sports betting taps into avid fan bases
The fandom of Pennsylvania residents comes up frequently with sports betting operators. Dive down the rabbit hole that is the internet to locate the “most rabid” or “most fun” or “best” sports cities in America. Almost always in the top five: Philadelphia and Pittsburgh.
Unsurprisingly, these two areas have become the focal points of PA sports betting. The greater Philly area alone hosts six of the state’s eight sportsbooks currently operational.
“What we’ve seen so far is that interest in our brick-and-mortar sports betting product has been tremendous,” said Evan Davis, vice president and general counsel at SugarHouse Casino in Philadelphia.
“That has stemmed from a few different channels. One of them is a passionate Philadelphia fan base. That was not surprising to us or really to anyone who’s spent time in this city. … They’ve turned out in droves once sports betting became legalized. That was a big component of it.”
Davis pointed to the tail end of the NFL season, just after SugarHouse Sportsbook opened its retail sportsbook in mid-December. During the last few weeks of the regular season and over the first two playoff games, Davis said, SugarHouse “saw unbelievable interest in those games from our customer base, particularly wagering on the Eagles.”
Even non-Philly games draw action in PA
Davis said, during those Eagles games, between 80% and 90% of wagers went toward the hometown team.
“So I do think there’s something to be said for the passion of our local sports fans driving increased handle on sports wagering generally on the games those teams participate in specifically,” Davis said. “Passionate sports fans, who may just want to have additional interest in a game they don’t have as much interest in, is a significant one.”
Even in games not involving Philly teams, sports betting interest still loomed largely. During Game 6 of the Western Conference Semifinals between the Portland Trail Blazers and Denver Nuggets proved as much to Davis. Despite taking place on the West Coast, that game still drew ample interest. This all just shows how sports-centric Pennsylvania has become. That, to an extent, it puts operators at ease.
“You don’t necessarily have to wager a ton of money on a game to have a rooting interest,” he said. “So if someone has $20 on a team to win or cover the spread, you have a rooting interest. It provides a new sense of entertainment for you instead of just watching a terrific NBA game.”
“We know how passionate Pennsylvania sports fans are, and a small group has been crossing over to NJ to use our product, so they know what we can offer.”
PA sports betting gets NJ flavor
Granted, FanDuel Sportsbook got a head start among most other NJ sports betting competitors, opening its retail sportsbook at Meadowlands Racetrack a month after New Jersey officially legalized wagering.
Since its debut, FanDuel has totaled $26,385,182 in revenue, equating to roughly 47% of the state’s total take. While the retail space, in northern New Jersey, caters mostly to NJ residents and bettors traveling from New York City, it is far from easily accessible for Pennsylvanians. Enter FanDuel’s online sportsbook.
The company’s betting app, launched in September, has helped Meadowlands rack up $49,785,576 in revenue, less than $4 million behind industry leader DraftKings Sportsbook, which hit the market a month earlier.
Hennessy said FanDuel’s exposure and success in New Jersey set up the group for a similar experience in Pennsylvania.
“FanDuel is well positioned in the state from a brand perspective,” Hennessy said. “Many customers are familiar with our brand, heard about our success, play our DFS, and trust that our goal is to always do right by the customer.”
The experience puts Pennsylvania sports betting farther down the road, allowing its industry to get off to a running start rather than begin with a crawl.
NJ experience sets up success in PA
That crossover, from New Jersey to Pennsylvania, is a common thread among operators in the Keystone State. FanDuel, for example, made Valley Forge Casino Resort its home. William Hill US powers Hollywood Sportsbook, and SugarHouse also boasts an online sportsbook and casino in New Jersey.
Pennsylvania participation boosted NJ sports betting
Earlier this year, Lindsay Slader, VP of regulatory affairs for GeoComply, a geolocation company that ensures gambling occurs within state lines, noted the prevalence of NJ gambling close to state borders.
Slader said that approximately 80% of all geolocation hits in the state come within 10 miles of the New Jersey border. Within 2 miles, she said, some 44% of users pop up. That includes Pennsylvanians crossing the Delaware River to get in on the action.
“One of the things I think we’re going to be in position to do is engage those customers on both sides of the river,” Davis said. “Having had that mobile presence already in New Jersey, we’re excited to be able to carry that interest in Pennsylvania, as well.”
Once again, experience emerges as a factor, not just by operators but also by bettors. There is no substitute, and rarely is anything more valuable, than experience.
How experienced are Pennsylvania’s operators? All four providers powering eight live sportsbooks in the Keystone State were already operational in New Jersey. Statewide, 12 properties in Pennsylvania have partnered with seven bookmakers, six of which are up and running in New Jersey and another that is on the way.
Experience and familiarity jump-starts Pennsylvania
Hennessy lauded FanDuel’s start in Pennsylvania. The sportsbook accepted over $2 million in wagers in March, its first month of reporting PA sports betting revenue. Part of that, he said, can be attributed to bettors’ familiarity with the FanDuel brand as well as their familiarity with the company’s online sportsbook in New Jersey.
“Having a well known and trusted brand in Pennsylvania will be a big key to our success,” Hennessy said. “It gives FanDuel a great opportunity to build our customer base and continue to deliver another quality product to our customers in PA.”
Hennessy then compared FanDuel’s foray into Pennsylvania with its NJ entrance:
“This time around we are a little more ahead of the game in terms of dates, prep, and knowledge. Even though NJ and PA are not identical, they are close in proximity and that allows us to take some data and optimize based on results. At this point, we have a better understanding of what our customers want or do not want to see.”
Untapped PA sports betting market provides optimism
Since November, Pennsylvanians have whetted their sports betting appetite. Last fall, one of the most anticipated untapped markets was no longer as Hollywood opened its retail location.
Still, even with vibrant cities like Philadelphia and Pittsburgh alive and well with wagering opportunities, most of the state does not have a PA retail sportsbook in the area. Fortunately, the first online sportsbook has hit the market, with more to follow soon. Within the next few weeks, online casinos will follow suit, thus allowing the rest of the untapped state to, once again, be no longer.
“One of the things we’re excited about for the launch of mobile sports betting is we’re going to be able to touch people we don’t really have a reach to,” Davis said.
“There’s a huge population center that lives within easy driving distance of SugarHouse. But there’s also a ton of people who don’t. To be able to reach out to those folks and give them an opportunity to wager on sports, who might not necessarily live or work in Pennsylvania but might be passing through Pennsylvania.”
Certainly, as comes with an area that has yet to taste legalized sports betting or online casinos, mystery still remains as to what can be expected. Fortunately, the success of both industries in New Jersey provides ample optimism, according to Chris Grove, managing director at Eilers & Krejcik Gaming.
“If New Jersey is any indication,” Grove said, “Pennsylvania should manage to produce a healthy, vibrant and competitive market for online casino, poker and sports betting.”