On first quarter earnings calls the last few weeks, many operators touted lower marketing and promotional spend across the board. However, that isn’t the case in Michigan, a state critical to operators’ bottom lines as one of the few jurisdictions that allows online casinos.
The Michigan online casino market is considered mature, having launched back in January 2021. To stay competitive, operators have been distributing more promotions than ever in the Great Lakes State. It isn’t expected to slow down, either.
Deutsche Bank analyst raises questions about promo spend
Carlo Santarelli, a Deutsche Bank analyst, published a report detailing the claims of promo spend trending down, as operators are saying. While there is some truth to it, especially in new state launches, Santarelli isn’t completely buying the claims.
“This is factually correct, given that the cadence of new state launches, where promotions are most abundant, has slowed,” he said. “For some individual operators, the notion of reducing promotions from an organic/same-store perspective is also correct.
“However, when looking at data from states that are not freshly launched, we see no evidence of a slowing cadence of promotions overall.”
Michigan is not a state that is “freshly launched.” While the Great Lakes State has grown into the second-largest online casino market in the US, the promo spending has not slowed down.
BetMGM Casino Michigan built a huge lead in the state because it utilized promo spend more than any operator to start. BetMGM produced $589 million in 2022 revenue while distributing $55.6 million in promotions.
FanDuel and DraftKings combined did not exceed either total. For comparison’s sake, here are 2022 revenue and promo spend totals from Michigan’s top five operators:
- BetMGM: $589 million / $55.6 million
- FanDuel: $258.7 million / $25.8 million
- DraftKings: $248.4 million / $24.8
- BetRivers: $104.3 million / $10.8 million
- Caesars: $66.5 million / $6.6 million
How FanDuel caught up to BetMGM, and the improvement from the other three operators debunks the notion of promo spend decreasing.
Michigan operators improve because of promo spend investment
BetMGM built a sizable lead in the Great Lakes State by spending considerably more on promos in the early days. Though BetMGM still spends about the same, its lead has completely evaporated in the early part of 2024. Why? Because platforms, most notably FanDuel Casino Michigan, decided to invest more in promotions.
BetMGM’s revenue and promos mostly stayed the same in 2023, producing $586.4 million and $58.6 million, respectively. FanDuel closed the gap in both categories, generating $405.4 million in 2023 revenue while spending $40.5 million in promotions. Both of which are huge steps up from 2022.
FanDuel surpassed the former market leader in March after recording $57.6 million in revenue and $5.8 million in promos, both state records.
As you can see from the graphs, all but BetMGM have improved significantly in revenue totals while increasing promo spend. Both seem to go hand-in-hand.
How does 2024 look to shake out among Michigan operators
According to projections, BetMGM is on pace to produce the most revenue in 2024. However, with the ascension of FanDuel, BetMGM’s lead appears to be in jeopardy. As we’ve seen so far, the investment in promotional spending usually translates into large revenue totals.
FanDuel is projected to hand out $59.6 million in promotions, but only yielding $595.8 million in revenue. A slower first two months put FanDuel behind the eight-ball. But it’s entirely possible that FanDuel out-performs BetMGM in revenue in the rest of 2024.
DraftKings, BetRivers and Caesars are each improving, as both categories are trending up in 2024 from 2023.
The percentage of promos to revenue is still the same despite earnings increasing for each operator. Looking at the numbers, only BetRivers Casino Michigan, slightly, has exceeded the promo spend to revenue percentage over 10% in each of the three years.
As both promo spend increases in the Great Lakes State, so will revenue. It’s a recipe that the top operators are using to build a successful brand in the market.
