It seems like all businesses are moving online these days, so it’s no surprise that the gaming industry is following suit.
Morgan Stanley released a research note suggesting that the online gaming market might jump to $5.2 billion in less than six years.
Theoretically, if all 50 states could launch online gaming, the market could be twice as large — at $10.7 billion. However, Morgan Stanley’s Thomas Allen notes that this event is “unlikely given [the] limited chances of Federal approval and [the] fact that there are only 39 states with Commercial or Tribal casinos today.”
Here’s the projection:
It’s worth noting that running an online gambling operation isn’t easy money. These businesses aren’t profitable when the doors open.
Morgan Stanley makes two assumptions for these estimates. First, they assume that it will take four years for the businesses in early-adopter states to reach maturity, and for margins to ramp to their long-run rate estimate for 25%. Second, they assume that online gaming operators do not “break even in a given state” until the second year.
However, the research note also adds that information from New Jersey online gaming operators suggests that the Morgan Stanley estimates could be “conservative.” Some operators are already reaching the breakeven levels after approximately 10 months.
Despite the huge growth potential, Morgan Stanley’s hypothesis is actually a downgrade from earlier estimates. The group lowered their online gaming estimates following “lower-than-expected results to-date” in several early-adopter states.
However, they maintain that they “remain bullish on the online gaming opportunity in the US.”
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