It’s not just betting activity that slows down in the summer month at Pennsylvania’s sportsbooks — it’s the amount they’re willing to give away to entice wagering.
While the Pennsylvania Gaming Control Board’s revenue report for July released last week showed the $336.5 million in sports handle statewide was the lowest since July 2021, it also revealed the $7.8 million in promotional credits offered by online betting sites was the lowest since $7.3 million last August.
The promotional credits are of interest to bettors, as the collective welcome bonuses, odds boosts, and other incentives help them in efforts to overcome the standard 10% vig by which sportsbooks have an edge over their customers and make a profit.
The volume of credits is of interest to operators and the state, meanwhile, in that the sportsbooks are able to avoid being taxed on the amount of revenue equivalent to those credits. They are taxed at the state’s relatively high 36% rate on their “adjusted” revenue — after credits are subtracted — rather than on the gross.
But for customers who like taking advantage of special offers, those tend to dry up as the weather warms up. Their volume among the 14 online sportsbooks has diminished in each month since February, when frenzied competition to attract bettors during the Super Bowl resulted in an all-time monthly high of $22.6 million in special offers.
Since then, the volume fell to $18.1 million in March, $15.4 million in April, $12.8 million in May, $10.1 million in June, and last month’s $7.8 million.
Expect more in the fall
Various operators have discussed on recent earnings calls with investment analysts their cutbacks on promotional offers, which can be influenced by a number of factors other than seasonality. For one thing, while the giveaways help acquire customers, which is important in the long run, they also hurt current profitability.
In addition, companies may want to shift resources toward attracting customers in new states rather than pouring more money into mature states like Pennsylvania, especially when the Keystone State’s high tax rate diminishes the value of investing to acquire customers. Online and retail sports wagering are scheduled to launch in the newly legalized states of Kansas on Sept. 1 and Ohio on Jan. 1, and sometime this winter digital sportsbooks are expected to begin operating in Massachusetts and Maryland — all with lower tax rates than Pennsylvania’s.
Despite such factors, Pennsylvania bettors can expect to start seeing a lot more offers in the next month. Football season — especially connected to the start of the NFL regular season in September and running all the way through the Super Bowl — historically results in both the most betting and the most in promotional credits, as shown by this chart of the five months with the most bonuses in Pennsylvania:
|PA promotional credits
Last year, while giveaways in August were even less than in July — $7.3 million compared to $7.6 million — they increased to $19.9 million in September, $18.7 million in October, $21.2 million in November, $19.1 million in December, and $21.2 million in January, leading up to February’s record $22.6 million.
It would be surprising if a big increase from summer months to fall fails to take place this year, even with the operators needing to spread resources among new states.
Operators have different approaches
In total, in the recent fiscal year running from July 2021 to June 2022 the online operators — who represent more than 92% of overall betting volume — gave out $194.2 million in credits compared to $131.8 million the prior year. That 47.3% increase was somewhat inflated by the fact that some operators did not exist for the full 2020-21 fiscal year.
Just as FanDuel leads all operators by far in both handle and revenue, it does so in credits as well. Its promotions added up to $68.4 million in the last fiscal year.
But interestingly, while its rival DraftKings is always No. 2 in handle, that is not the case with promotional credits. BetMGM provided incentives valued at $50.1 million in 2021-22, compared to $36 million for DraftKings. The difference between them has been even starker of late, with BetMGM reporting $2.5 million in July, more than triple DraftKings’ $0.7 million. BetMGM also gave out three times as much as DraftKings in May, and twice as much in June.
And then there’s the case of a fourth major site, the online Barstool Sportsbook of PENN Entertainment, which stands out as an operator that actually gave away less in 2021-22 than it did in 2020-21. Its promotional credits totaled $12.6 million in the past year, while in just 10 months of operations in the 2020-21 fiscal year it reported $20.8 million.
In many cases, the sportsbooks focus the promotions more on attracting new customers as they start out. For PENN Entertainment, its officials have also touted a strategy in which they spend less more on marketing overall than competitors and are thus able to operate better from a revenue-compared-to-cost standpoint.