Is Sports Betting Less Recession-Proof Than We Thought?

Many financial experts are increasingly fretting about a recession on the horizon, and a new study suggests the U.S. gambling industry may not be as insulated from such a downturn as many people thought.

A TransUnion study released this week reported that U.S. sports bettors are generally high income, with 54% earning at least $100,000 annually. They are optimistic about their financial futures, according to the study, but also feeling the pinch of inflation and showing signs of cutting discretionary spending such as sports wagering.

If this robust job market ever starts to cool off, that trend could cut deeper still.

“People are probably going to be familiar with the old adage that the industry does well in recession, right? I’ve heard that since I was a kid,” said Declan Raines, head of U.S. gaming at TransUnion. “Now, we’re going to actually see that put to the test. I would say this report would actually counter that conventional wisdom.”

With supply-chain disruptions coming out of the pandemic, a war in Ukraine driving energy prices up, elevated inflation overall, and higher interest rates, TD Securities was the latest major institution to sound the alarm about a potential recession. The company released a finding in late July that there is more than a 50% chance of recession in the U.S. within the next 18 months.

A shift toward retention?

An economic downturn could come at a difficult time for mobile sportsbook operators and others in the U.S. gambling industry, with two of the top three biggest U.S. states — California and Florida — working through obstacles toward legalizing sports betting in the coming months. Typically, operators take losses in the earliest months of launching in new states as they scramble to acquire new customers with lavish marketing and promotional campaigns.

Raines said TransUnion’s study, which polled nearly 2,500 adults who engage in sports betting, indicates that the consumer’s behavior adheres more closely to overall economic conditions than previously thought.

“The conversation or debate we’ve been talking about the last four years, whether it’s sustainable or not, I think you’re going to see a shift towards retention as it becomes harder to justify the cost of acquisition in the current climate,” Raines said. “Overall, GGR [gross gaming revenue] is expected to drop, so I think there will be a greater focus on the existing player base.”

A weakening economy could prompt operators to increase their efforts around the efficiency of their operations and the quality of the products they offer, particularly in states such as New Jersey that moved quickly to legalize sports betting, Raines said. He also thinks operators will seek to get a better picture of their customers’ overall economic health, rather than just their betting behavior, when offering new products or tailoring approaches to problem gambling solutions.

Higher incomes, but bigger worries

The study found that mobile sports bettors are seeing increased incomes and are generally more optimistic than most consumers. That could be due to a high employment level among U.S. bettors – with 89% reporting they’re currently working, compared to 81% in the total population. In fact, 22% of mobile sports bettors said they had changed jobs for higher pay in the last three months.

Even with all that, 79% of mobile sports bettors said they were concerned about their ability to pay current bills and loans in full compared to 52% of the overall population.

“No one is immune to the concerns around the larger economic climate,” Raines said. “It would be easy to see those in opposition to each other, that people earning higher incomes wouldn’t be as concerned about external conditions. But this speaks to the fact that those concerns are causing people to alter their spending behavior. That has a lot of different implications for sports betting and the wider gaming industry.”


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