Online betting market explodes to twice the size of casinos

The growth of online betting in South Africa has been astronomical since the Covid-19 pandemic.

In that year, revenue (more technically, gross gambling revenue) at traditional casinos nearly halved to R10 billion (from R19 billion). It has steadily recovered since then, and last year it neared R17.5 billion. But the days of growth at casinos are long gone.

Revenue in the five years between 2015 and 2019 barely moved (from R17.8 billion to R18.8 billion). Over that same period, the share of the market held by betting operators (racing, physical bookmakers and online) doubled from R4 billion to R8 billion. This saw its share increase from 17% to 27%.

Lockdown changed everything when horseracing ceased and severe limitations were placed on physical casinos (number of people as well as trading times).

The night-time curfew (which at its most extreme began at 9pm) was particularly damaging.

Betting operators overtook casinos in 2020/21 and there’s been no looking back.

By 2021, betting (±R14 billion) was already marginally bigger than casinos (±R13 billion).

Trading places

The National Gambling Board (NGB) says “a striking swap” has occurred between betting and casinos.

“Starting in FY2020/21, when betting became the dominant gambling mode in South Africa, its rapid expansion has continued unabated. These two sectors appear to be trading places, with the picture becoming the inverse of a decade ago.”

By 2023, betting and racing (counted as a single category, given the type of licence held by operators) generated revenue of R32.5 billion versus the R17.4 billion reported by casinos. This means they held a staggering 60% of the market, with casinos accounting for just less than 30%.

Of that ‘betting and racing’ category, Sun International (using industry intelligence) estimates the online betting market to be 80% of this total. That means online betting in South Africa is a R26 billion business, by gross gaming/gambling revenue. This metric is the revenue that betting companies and bookmakers generate from people placing bets (in other words, the amount wagered less the amount won by gamblers).

The overall betting and racing category has been growing by 40% to 50% a year in the last two years, driven primarily by online betting. This means online betting is almost certainly a R36 billion-plus business by now, which puts it at twice the size of the land-based casino market.

The total (licensed) industry reported gross gaming revenue of around R60 billion last year. This was on total turnover (amount waged) of R1.1 trillion, an amount that was up 40% on the prior year!

According to data shared by MultiChoice during its 2023 Capital Markets Day, the three leaders in the local market are Hollywoodbets, LottoStar and Betway. It estimated the local online betting market size at $0.8 billion, which was about R16 billion. This aligns almost perfectly with the 2022 estimate based on NGB data.

Betting’s growth is unsurprising

None of this is surprising, especially if one watches television – especially SuperSport (and if one listens to commercial radio).

LottoStar sponsors practically everything on M-Net, and most SuperSport channels are a constant torrent of ads for various betting operators, most notably Betway, Hollywoodbets, World Sports Betting and SuperSport Bet.

Betway now even sponsors the entire PSL as title sponsor (taking over from rights holder DStv), not to mention Hollywoodbets sponsoring Brentford FC’s shirt for four seasons (it will end this deal after the current season).

One can also see evidence of this in Blue Label Telecoms’s results. Revenue from so-called “universal vouchers” quadrupled in the last year to nearly R16 billion. Despite the name, the overwhelming majority of these are being used to load credit onto online betting sites.

Traditional casinos still profitable

Traditional casinos are still profitable and tremendously cash-generative. This is the primary reason Sun International is buying Peermont – for Emperors Palace. All the talk of the ‘omnichannel’ prospects remains that. Sun International’s SunBet operation is significantly larger than Peermont’s PalaceBet was (the latter has since been shut).

In justifying the deal, Sun International says it “has taken a strategic decision to focus on growing gaming revenue, from both its land-based and online platforms to ensure that gaming assets remain the majority earnings generator of the Sun International Group”.

It adds: “Sun International believes that land-based casinos, while mature, will continue to deliver approximately inflationary growth in gaming revenues with strong margins and cash flow, while online gaming has significant potential for double digit growth over the medium term.”

SunBet reported total gross gaming revenue of R600 million in the first six months of this year. More than half of this was from online slots (unsurprising, given its core customer), with live casino games at nearly a quarter. Sports betting trails at R100 million.

On total income of R500 million in the six months, it reported adjusted Ebitda (earnings before interest, taxes, depreciation and amortisation) of R170 million. This is already more profitable (in absolute terms) than its limited payout unit, Sun Slots (which bettors will know as Grandslots).

However, the online betting unit (SunBet) is already trading at the same margin as its urban casinos (33%). Expect this to grow further as the market continues to boom. – moneyweb