Casino vs. Sports Betting – Who Dominates Online?

Posted by Harry Kane on Wednesday, April 11, 2018

Whenever the burgeoning online gambling industry is discussed, there always seems to be a focus on how many players are making the transition from bricks-and-mortar gameplay. While this makes perfect sense, of course, it’s interesting that we rarely discuss the precise make-up of the industry or the channels that continue to drive its relentless growth.

This is a topic that was broadly covered in last years’ annual report from the UK Gambling Commission (UKGC), however, as the regulator strived to breakdown the industries growth and attribute it to specific channels. The results were striking, while they hinted at a clear growth path for the online gambling sector in the longer-term.

In this post, we’ll take a closer and more detailed look at these findings, while asking which channels dominate the marketplace and identifying those that will shape the future of the industry.

A Two-Horse Race – But Who is Out in Front?

If we start with the headlines figures from the UKGC’s last annual report, we see an incredible rate of growth that augers well for the virtual gambling industry.

More specifically, online channels achieved a peak, gross gambling yield of £4.68 billion in the year ending March 2017, with virtual platforms growing to account for 34% of the industry as a whole. This figure also marked a 10.1% increase on the previous 12 months, while it’s fair to surmise that similar levels of growth can be expected in the near-term.

While these numbers offer an insight into the prosperous nature of the market, however, they do little to define the industry or identify its key players. In fact, the only way to achieve this is to drill down into the splits that exist within the sector and determine which channels drive the highest levels of interaction and the most lucrative revenues.

Perhaps unsurprisingly, our own research revealed that online casino gameplay and virtual sports betting combine to dominate the market as a whole. The extent to which these two entities were omnipotent did come as something as a shock, however, as between them they accounted for a staggering 93.1% of the online gambling yield in the UK during 2017.

Conversely, this meant that online bingo, exchange betting and pool wagers claimed just 6.9% of the virtual gambling market last year, with the former suffering from a pronounced decline in popularity among players. In short, this activity accounted for just 3.5% of the GGY for 2017, as it trailed far further behind its rivals than experts would have anticipated.

While online casino gameplay and sports betting may well be out in front, however, the figures suggest that they do not claim an equal share of the marketplace. By the time the last financial year ended, for example, casino products and platforms accounted for 56% of the online GGY, while sports betting claimed a market share of just 37.1%.

This seemed like a disproportionate chasm given the popularity of both activities, but there can be no doubt that casino gameplay remains the dominant force and revenue driver in the online gambling industry. The question that remains is whether this trend will continue and shape the future direction of the online marketplace?

Online Casinos vs. Sports Betting – A Comparison

In order to achieve this, we need to take a closer look at each channel and determine the key factors behind their own, unique growth rates.

In the case of online casinos, it’s interesting to note that pronounced rates of growth have coincided with the proliferation of virtual slots. Since 2010, slot game activity has increased by more than 300% online, which has in turn compelled operators to position these titles at the heart of their ventures. This is also borne out by the figures, with the UKGC reporting that slots currently account for nearly two-thirds of the online casino GGY.

This figure is likely to increase incrementally in the future too, particularly with a more diverse range of titles and the world’s first VR slot set to be released throughout 2018.

These figures are impressive enough by themselves, but they stand out even more when compared with the performance of other online casino games. In fact, the revenue generated by online slots is more than 50% higher than that achieved by table games, with the former appealing to the new generation of gamers and seeming to represent the future of virtual casinos.

As the upcoming generational shift popularises online gambling further, we should definitely expect slots (particularly VR and three-dimensional titles) to become even more popular over the course of the next decade. This should offset any potential decline in demand for traditional table games, while enabling online casinos to achieve incremental growth for the foreseeable future at least.

In contrast, sports betting represents a slightly more complex market, and one that is at a different stage of growth to online casino gameplay. So, while it has yet to achieve the types of revenue and yield generated by virtual casinos, sports betting arguably has more scope to grow and diversify further in the future.

Last year, remote sports betting generated £1.736 billion, for example, which is well shy of the £2.620 billion produced by virtual casinos. Still. This figure represented an impressive increase on the previous years’ return of £1.358 billion, while there may be evidence to suggest that this sector could see even greater growth in the months ahead.

Football betting remains the dominant driver within this space, generating impressive revenue of £605.99 million in 2017. Not only this, but online football betting activity increased by a whopping 25.8% between 2015 and last year, and this marked rate of growth is something that definitely augers well for the future of sports betting in the virtual realm.

The same can be said for online horse racing betting, which saw had appeared set to decline considerably after the release of 2016’s numbers. This rebounded impressively last year, however, with this practice generating £391.83 million in revenue during a 12 -month period.

This trend has also be continued into this year, with Worldpay recently forecasting a significant surge in online betting activity ahead of last week’s prestigious Cheltenham Festival. In fact, the brand predicted that the amount wagered online on the event could increase by up to 45%, with Irish punted apparently more likely to place bets than their UK counterparts.

This forecast has been based on analysis of last years’ figures, which revealed that bookmakers saw a 126% increase in the volume of online bets placed by Irish citizens during the Cheltenham Festival. Most importantly, however, it highlights to continued popularity of horse racing wagering online and the pivotal role that it plays in driving virtual sports betting in the UK.

With these points in mind, we can drawn two clear conclusions. Firstly, the increased yields generated by online casinos and sports betting are easy to understand, as both channels have key drivers that are being successfully leveraged by operators in the digital age.

Secondly, it’s obvious that online casino gameplay has stolen a march on sports betting activity, thanks largely to the prevalence of slots and the relentless pace of technological advancement and game-changing concepts such as VR.

Will Casino Gameplay or Sports Betting Dominate in the Future?

As we’ve already said, however, it’s arguable that there is more scope for online sports betting to grow over the course of the next decade. This will depend on a number of variable factors, of course, but there’s no doubting the huge potential of sports betting in the future marketplace.

One of these is the spectre of esports betting, which already represents a huge market and one that is set to grow at an exponential rate over the course of the next two years. According to market intelligence firm Newzoo, the global audience for esports will expand to 589 million by the end of 2020, from a starting point of just 323 million back in 2016.

Given that this will increase the viewership of esports considerably, it’s little wonder that corresponding revenue forecasts follow a similar compound annual growth rate (CAGR) of 15.4%. Now, while this figure does not include esports betting, it’s fair to say that those who enjoy watching competitive tournaments are also inclined to wager on the outcome, creating a niche betting market that will benefit both on and offline bookmakers from around the world.

There are already a number of UK operators offering esports betting opportunities to customers in 2018, but this sector is likely grow exponentially as new markets become available and the level of demand grows significantly.

Another factor that could drive online sports betting is the proposed cap on fixed-odds betting terminal (FOBT) wagering. After a recent review, the government department for Digital, Culture, Media and Sport (DCMS) has pledged to slash the individual betting limit from £100 to just £2, limiting an activity that currently accounts for 56% of all betting shop revenue in the UK and potentially forcing the closure of around 9,000 high street outlets.

This would truly decimate the offline sports betting market, forcing punters across numerous demographics to make the hasty transition online. As a result, we could well see the virtual sports betting market prosper at the expense of land-based outlets nationwide, and this could trigger a significant dynamic shift in the online gambling industry.

Of course, some of these gains may be offset by the implementation of more stringent regulations in the online industry, as the UKGC looks to enhance the perception of the marketplace and provide safeguards for vulnerable and potential problem gamblers. Recently, we’ve seen dominant gambling brand William Hill penalised for failing to adequately protect its customers and prevent widespread money laundering online.

In total, the brand was required to pay a penalty package worth £6.2 million for its perceived negligence, and it’s believed that others could also be sanctioned for similar offences in the near-term.

Not only this, but the UKGC are also keen to tighten the regulations surrounding promotions and the withdrawal of accrued winnings by customers, whilst also striving to minimise the impact of questionable advertising practices.

These new (and more stringent) regulatory measures would impact on both online casino gameplay and sports betting, of course, potentially triggering declining growth rates across the board. Still, if sports betting was to benefit from an influx of players from offline players in the wake of the FOBT cap, it would probably emerge relatively unscathed from any virtual crackdown.

The same cannot be said with certainly for the online casino sector, as players are unlikely to transition at the same rate within this space. So, while it’s fair to say that a growing number of older players are eschewing traditional gambling establishments in order to bet online, this remains more of a gradual evolution than a sudden switch.

The Last Word – Will Sports Betting Grow to Dominate Online?

When appraising the future of the online gambling industry, there are some things that we can surely take for granted. Both virtual casino gameplay and sports betting are bound to experience growth over the course of the next decade, for example, as sustained technological advancement and the emergence of new markets continues to overcome the impact caused by stringent regulatory measures.

There are a number of variables at play in this market, however, and this makes it extremely difficult to predict which entity will grow at a faster rate in the future.

From our perspective, however, it’s hard to deny that online sports betting can the greatest scope for future growth. The potential decline of high street bookmakers in the UK will play a significant role in this, as will the unstoppable rise of esports betting and its popularisation in the mainstream market.

These factors, when combined with the enduringly popular nature sports betting, means that there may well come a day when the practice generates a superior, online GGY to virtual casinos. For now, however, the latter are firmly established as the dominant force in an industry that continues to break new ground every single year.