A 52-week low in the stock price of PENN Entertainment has some in the gaming industry wondering about the future.
But, in spite of a tapering off in total handle from sports betting in Michigan, revenues for PENN and other operators continue to grow in the state.
Stocks dropping despite revenue growth
PENN traded at $20 a share on the NASDAQ on Oct. 5, a steep drop from its 52-week high the previous year of $39.
In states like Michigan that have both legal online casinos and online sportsbooks, numbers reveal that sports betting activity has decreased since it launched more than two years ago.
However, the revenue generated from Michigan online casinos is helping fuel profits for PENN and others. Just in Michigan, online casino revenue is up 22.3% for the first eight months of 2023 compared to 2022. This year, revenue from online casinos sits at $1.24 billion.
PENN, which will launch ESPN Bet Sportsbook and Hollywood Casino Online in Michigan in the coming months, specifically is banking on casino revenue from MI, as well as increased margins in existing sports betting operation.
The launch of ESPN Bet and Hollywood Casino Online comes due to PENN electing to part ways with previous online partner, Barstool Sports.
Other notable gaming companies like Flutter, owner of FanDuel, MGM Resorts International and Caesars have also seen recent stock prices drop.
Online casinos generate more revenue for operators, states
Michigan has 15 online casino operators:
- Barstool Casino
- BetMGM Casino
- BetRivers Casino
- Caesars Palace Online Casino
- DraftKings Casino
- Eagle Casino & Sports
- FanDuel Casino
- Firekeepers Casino
- Four Winds Casino
- Golden Nugget Casino
- Play Gun Lake Casino
- PointsBet Casino
- PokerStars Casino
- Sports Illustrated Casino
- WynnBet Casino
Due to the nature of how much revenue online casinos pay to the state, and the odds of “the house” winning, casinos generate far more revenue than sportsbooks.
A sports betting operator may only report a “hold” of 4-10%. The hold percentage is the revenue the sportsbook takes in based on the total money wagered by the public. Because sportsbooks pay out far more winners, their revenue is lower. Online casinos also enjoy far more broad appeal than sportsbook apps.
In 2023, online sportsbooks in Michigan have generated just $236.3 million through eight months compared to the $1.24 billion of online casinos.
In 2022, the tribal and commercial operators paid $289.2 million from internet (casino) gaming activity in Michigan, while that figure was $13.7 million from online sportsbooks.
Operators adjusting to lower sports betting numbers
Michigan online casinos continue to grow in revenue, while their sportsbook counterparts are reporting lower total handle than in the halcyon days of $2,000 bonus and promo offers.
The high promotional offers were not sustainable for operators. Instead, they were used as a carrot to entice customers in Michigan and gather market share.
In a recent survey by the American Gaming Association, 75% of respondents said they felt the next six months will be “about the same” or “worse” in regards to revenue from online casino operations.
Meanwhile, most gaming executives surveyed by the AGA see the “current business situation” for casinos as good (42%) or satisfactory (55%). However, that is lower than the results from the first quarter of 2023, when 62% responded with “good” and 35% said satisfactory to the same query.
