What impact has Michigan had on the market a year after legislation was approved?
A state long known for its fishing industry, with 3228 miles worth of coastline, not even three years ago would even the most informed of experts have wagered on a successful debut 12 months into the online gambling industry.
However, it appears that the proverbial net was cast far and wide; while perhaps not considered a whale in the US online gambling industry, it does at least seem like they are using the right bait.
Reportedly, Michigan online casinos and sportsbooks made $1.4 billion in revenue during their first 12 months - casinos responsible for $1.1 billion of that, while wagering figures in the state topped $3.7 billion.
The state also became the third in history to exceed $1 billion worth of revenue for its first year - a remarkable feat and one that certainly inspires intrigue for the next couple of years.
Upon receiving regulatory approval to offer online gambling legally to residents, no one could have predicted that the market would take the industry by storm as much as it did.
Previously, gambling enthusiasts were limited to land-based casinos in the city of Detroit - home to three imposing structures and while these usually had a respectable turnover, these have since been dwarfed by the introduction of online gambling.
Clearly exceeding all expectations, all things considered, the figures speak for themselves and this is reflected in the taxation that was generated for the state, which will go a significant way towards improving infrastructure.
It is understood that operators paid $201.67 million in internet gaming taxes in addition to sportsbook taxes of $7.27 million.
How Michigan could be primed to overtake New Jersey
For those who have been able to join the dots, they will have noticed that despite Michigan only just coming in behind New Jersey in terms of revenue for 2021 (NJ generated $1.337 billion).
Factoring in that online gambling in New Jersey has been operational since 2013 - a difference of eight years when compared to the mid-western state, reflecting that the growth trajectory for the latter indicates a potentially formidable surge over the next few years.
One of the major factors and also main correlators between the two states is the impact that heavyweight casino and sportsbook DraftKings has had, with this being the prominent operator for players in both.
Initially starting life as a daily fantasy sports site to get around gambling regulations, it has since been developed into an all-purpose sportsbook and casino, while it was already positioned to be successful.
Similarly, FanDuel had a similar impact on both markets (arguably the biggest competitor to DraftKings in every state), in addition to established US brand Golden Nugget and MGM Resorts online joint-venture with UK conglomerate Entain, BetMGM.
Because each of these operators are live in every state and inevitably will secure licences in future states, it poses an interesting question, comparably. Following the recent launch of mobile sports betting in New York, this is a state that is being predicted to be the largest in terms of wagering volume in the US.
It should also be noted that compared to New Jersey, Michigan boasts a population that is just over one million more than ‘The Garden State’ (9.987 million:8.882 million), which certainly could play a factor in whether Michigan may eventually eclipse New Jersey.
Growth in sportsbook participation in Michigan?
There is no doubt that online casinos lead the way in the state - the sportsbook revenue is impressive for the first 12 months, especially when considering that not every US sport runs all year round.
In addition, compared to other states, Michigan does not have well-known sports franchises - perhaps the Detroit Red Wings who compete in the NHL (National Hockey League) have the most pulling power from a betting perspective.
Compared to a state like New York which has US residents from all around the country which obviously means that there is a lot of betting interest, due to the state’s residents supporting numerous franchises, Michigan perhaps does not have this.
However, one factor that could be responsible for a growing sports betting enthusiasm, is the strong interest in fantasy sports, which have been available in the state for well over a decade. This can also be reflected in the strong performance from both DraftKings and FanDuel, the latter being the state’s leader for sports betting, generating in excess of $993 million in bets during its first year of operation in the state.
Furthermore, such impressive figures as well as being an obvious interest, could pave the way for more operators to enter the Michigan sports betting market. Recently, Australian operator PointsBet has started to make a splash in the US - now legal in six states and swiftly growing its reach via astute partnerships and clever marketing campaigns.
Then you have the European contingent of operators which are gradually paving the way to enter the US market - some of which already have. With more years of experience in the industry could see some overtake US operators in certain states, due to their expertise from a customer acquisition standpoint.
Michigan certainly represents an interesting proposition for European operators, essentially a litmus test based on the reaction of the market in the first 12 months to US operators; this will of course be encouraging. There are many who are specialists in the sports betting arena and the likes of Betway and 888 are going to be primed to move fast should licences be granted - both firms more than capable of wrestling market share from their competitors.
What can we expect from Michigan over the next five years?
In terms of continued predicted growth in the online gambling industry for the Michigan market, a lot will depend on operators’ ability to both retain and acquire customers and as a result, they will need to be highly attuned to customer behaviour.
Knowing and understanding your customer or even target customer is going to be vital in being able to ensure that wagering figures, in addition to revenue, keep on improving. It is often the case that the first year’s numbers for any market and even business can be deceptive.
For Michigan certainly, the first year is perhaps hard to use as a forecast to how the market might behave during the following 12 months. It could be the case that a proportion of the state might have become disillusioned and as a result, end their online gambling interest.
Some of the market, especially the younger generation, might step into higher-paying jobs and as such have a more disposable income which therefore means potentially more to wager.
Infrastructure improvements could see more companies move into the state and therefore a mass migration of people would mean a rise in population figures, meaning an increase in different target markets for operators. Currently, many big companies based in locations like New York and Chicago are on the lookout for cheaper land for their corporate headquarters - Michigan could turn out to be one state that can offer this - even for operators themselves.
Regardless of how the market responds over the next five years in Michigan, one thing is for sure - it seems that at least one “fisherman has seen another fisherman from afar”.