The American Gaming Association (AGA) estimated that $2.7 billion was legally wagered on the “March Madness” tournament this past weekend, which does not account for office pools and private bets among friends. While this is a small fraction of the $23.1 billion estimated to have been wagered on this year’s Super Bowl, both reflect a dramatic increase over prior years given the proliferation of new sports gaming apps and additional states permitting legalized gambling.
The AGA estimated that the U.S. gaming industry revenues was $66.5 billion in 2023, which is a 10% increase over 2022. If one were to include the “tribal gaming” revenues, the total would have been closer to $110 billion. While legalized sports betting was only $10.9 billion in 2023, it increased significantly year-over-year by 45%. Clearly, there has been a dramatic post-Covid upswing in gaming revenues with robust consumer spending, popularity of new gaming apps, and that gambling is now permitted in 35 states.
The AGA is quick to point out that $14.4 billion was paid in gaming taxes in 2023, which while laudable and a real number, happens to only be how much was spent on just treating Parkinson’s Disease last year. Perhaps what is more troublesome (or insidious), along with a much more permissive environment and greater real-time accessibility, is the level of unchecked illegal gambling, now estimated to be $510 billion. To provide some context, this is the GDP of Thailand or the United Arab Emirates.
While the AGA claims that there are 468 commercial casinos in the U.S., PlayToday.co estimates that there may be as many as 2,150 gaming locations nationwide. Coupled with mobile sports gaming apps, the proliferation is extensive.
But the AGA casts an even wider net, taking credit for the $329 billion of economic activity “associated” with gaming which in turn generated $53 billion of tax receipts. In addition to the 700k people directly employed by the gaming industry, there are as many as another 1.1 million people employed by ancillary industries, all in support of the gaming industry. Those “benefits” simply need to be weighed against the costs of irresponsible gaming and frankly a better understanding of who should bear those costs.
It is also increasingly apparent that gaming is skewing to a younger demographic as the on-ramps to gaming is targeted to that age group. The emergence from Covid appears to be correlated with younger consumers craving “experiential” consumption versus goods. This past year was the greatest difference between the average age of the overall U.S. adult population and those who frequent casinos.
Some additional context. According to BankMyCell, there are 8.93 million mobile apps globally and those are projected to generate $613 billion in app revenue by 2025. There are an estimated 300 app stores globally. The Apple app store only has 1.64 million apps available, while the Google Play Store has 3.55 million. Mobile games are nearly 14% of all apps with $51.6 billion spent on them in 2021. Approximately 175 billion apps are downloaded annually. The typical subscriber has 40 apps on his/her phone. It is utter chaos out there.
Buried in the overall gaming industry data is the explosion of iGaming, which the AGA sized at $6.2 billion in the U.S. in 2023. Trackier’s iGaming Report 2023 estimates the global iGaming market to be $81.1 billion, perhaps suggesting an emerging Third World concern. This phenomenon was just on the horizon when I last dug into the impact of gambling on the healthcare sector.
The migration to iGaming also promises to be far more profitable for the gaming industry as gamblers betting on in-game action are believed to face poorer odds of winning. An analysis by Macquarie concluded that traditional pre-game betting generated 5% margins to sports gambling groups but that in-game betting will likely be greater than 10% margin. BetVision estimates that 25% of all sports gambling today is in-game, which will likely reach 70-80%. Interestingly, the S&P 500 Casinos and Gaming Index is down 2.9% over the last twelve months, while the MarketVector Global Gaming Index is up 4.9% over the same period.
The effects of out-of-control gambling on an individual and the overall burden to society are reasonably well understood. A male gambling addict is thought to have between $55 – $90k of gambling debt (women gamblers have on average $15k of debt), according to Debt.org. While the National Council on Problem Gambling estimates that 75% of Americans have gambled at least once in the prior twelve months, it is believed that 15% gamble weekly and approximately five million people are considered “problem gamblers.” An estimated 20% of these gamblers file for bankruptcy. Sadly, 500k American teenagers are considered “problem gamblers” – see chart above. The American Psychological Association determined that 4% of those with substance use disorders also are considered problem gamblers.
Even more disturbing is the link between gambling and suicide. A 2022 study published in Front Psychiatry looked at studies from several countries and concluded that between 22 – 81% of problem gamblers have had suicide ideations, and that 7 – 30% had actually attempted to commit suicide. Consistently in all studies reviewed, suicidality was notably greater than that of the general population. Overall, the American Foundation for Suicide Prevention estimates that there are 49k suicides annually.
Until 2013, problem gamblers were considered to have an impulse control disorder, which has since been reclassified as an addictive disorder, consistent with alcohol and drugs. The implication of this determination is that problem gamblers develop an intolerance that requires more intense gambling (higher stakes, more frequency) to feel satisfied. Low income and younger gamblers are considered the most vulnerable to the addictive nature of gaming. As with other vices, gambling tends to prey on the most vulnerable.
An arms race of sorts is unfolding to treat behavioral health issues. It is estimated by the IQVIA Institute for Human Data Science that there are now 350k health and wellness apps in apps stores globally, of which more than 10k are specific to mental or behavioral health conditions. In 2020 alone, there were an estimated 90k new health apps released, a clear response to the pandemic.
A 2019 study published in Nature Digital Medicine concluded that while many of these apps made effectiveness claims, unfortunately a majority of them did not cite specific validated scientific studies leading to significant clinical skepticism. The most popular apps offered guidance on relaxation, mindfulness, and meditation which has limited applicability for problem gambling and those with more significant clinical conditions.
These issues are not lost on healthcare technology investors. According to Rock Health data, since 2019 the most funded clinical indication each year was the Mental Health category, having seen nearly $11.5 billion invested over the last five years. There was $4.9 billion invested just in 2021, in the vortex of the pandemic. The next most active indication was Cardiovascular, a distant second at $5.1 billion.
These digital solutions may serve as effective adjuncts to the more traditional treatment infrastructure. According to the Substance Abuse and Mental Health Services Administration, there were 14.9k registered behavioral health facilities in the U.S. in 2022, of which only 9.6k completed the National Substance Use and Mental Health Services Survey. The total number of clients in treatment as of March 2022 was 1.6 million, obviously a small fraction of those considered most in need of such services. It is this gap that many of the digital behavioral health solutions are hoping to address.
Is it any wonder that the U.S. dropped so precipitously in the World Happiness Report (2024) released last week, which is now ranked #23 of the 143 countries surveyed? On the 8-point scale, the U.S. earned a 6.725, trailing far behind perennial winner, Finland, with a score of 7.741. The report specifically called out the dramatic decline in the happiness of America’s youth (ranked #62), declining twice as fast as that for elder Americans. In most other regions of the world, the young tend to be happier than the old which is not the case in U.S. Sadly, Afghanistan ranked last with a score of 1.721.
One can only hope that technology will improve the overall human condition. Maybe, for all the advances made, continuing to enable poor behavior just keeps us running in place…
Source: World Happiness Report
On the Flying Bridge 