Analysts at JMP Securities have highlighted in-play betting as the next frontier for revenue growth for the US sports wagering industry.
In a note to investors, Jordon Bender and Eric Ross said management commentary and M&A has led them to believe investment and product teams will shift their focus towards in-play betting in the coming years.
The analysts said this comes following new OSB legalisation and parlay expansion being the core revenue drivers for the first six years of the regulated US sports betting industry.
They said: “We believe the investment community understands in-play betting at a high level, yet we lay out the underlying drivers and companies that will increase US in-play betting to a $14bn revenue opportunity by the end of the decade.”
JMP’s base case analysis suggests in-play betting can increase at a 31% compound annual growth rate to the end of the decade.
In a scenario where micro-betting does not get targeted by regulators, the analysts said, it will be the fastest-growing betting segment in US gaming.
They argued after examining the fundamentals that the overall impact of a further shift into in-play will result in “the lifting of all boats within the industry”.
JMP highlights best-positioned in-play businesses
However, it argued the winners in the space will be the companies that are investing in the future.
DraftKings’s recent moves in the in-play space through the acquisitions of Sports IQ Analytics and Simplebet were highlighted as evidence the operator was pushing ahead in this space.
While the analysts conceded Flutter-owned FanDuel has been less vocal in this area, they said they believed management was aware of the importance of in-play due to Flutter’s exposure to global markets.
Alongside the traditional DFS giant, JMP pointed to data providers Genius Sports and Sportradar as possible beneficiaries, as well as several micro-betting suppliers.
These include include nVenue, Kero Sports and Huddle, which it argued are best positioned to benefit from the market’s hyper-growth.
JMP’s current estimate for in-play gaming margins of 8% are below the overall 9-10% industry margins, but it argued this could improve with larger customer wallets.
The analysts also referenced conversations with leagues and teams that indicated they are interested in the betting product to increase their profile and viewership.
On the consumer protection side, the analysts argued in-play does not pose a higher risk than traditional betting products.
The analysts added: “The threat of legislative oversight will always hang over the industry but is at no higher risk than pre-game betting, in our view.”