A recent study by Eilers and Krejcik Gaming (commissioned by iDEA Growth) highlighted the symbiotic relationship between online and land-based casino gaming. Using data from casinos, state governments, and regulators, the study has demonstrated that, contrary to popular belief, online casinos do not cannibalize land-based casinos but instead contribute to an overall combined increase in casino revenues across the board.
Compared to land-based casino players, online players have proven to be slightly younger and more likely to be male. Online play requires a lower investment of time and money, which allows for more consistent engagement for lowered stakes.
Online casinos also attract a different audience segment since they lack the social element of being in a dedicated physical location and interacting with players and staff in person.
Key Differences Between Land-Based and Online Casinos
The study found that different gaming products draw different types of customers. It found that 55% of the online casino audience was male, while land-based casinos reported a more even split of 49% male to 51% female. In stark contrast, the audience of online sports betting is almost exclusively male, with female bettors only accounting for 5% of this demographic.
Drawing a comparison between time spent gambling online vs. offline, online casino experiences are measured in minutes, while a physical casino visit spans a few hours.
Similarly, the lower limit of wagers permissible at an online casino is typically only a fraction of the lowest stake at a land-based casino. For instance, an online casino may offer blackjack for $0.05 a hand, but the minimum buy-in at casinos starts at $5.
The Potential For Cannibalization
Several casino executives were interviewed to gather information about the impact of online casinos on their land-based counterparts. Executives from land-based casino companies report a solid dynamic between online and traditional casinos. Some executives even said online casinos have been complementary to land-based casinos, as they can reactivate and reacquire dormant customers.
Bill Hornbuckle, CEO of BetMGM, said, “The idea that omnichannel [casino] can and will work — and not be cannibalizing — is something I’m very excited about moving forward.” Other top casino executives echoed this sentiment.
“There is still a misconception that online casino play cannibalizes land-based casinos. But iGaming’s competitors are Netflix and Candy Crush—not casinos,” said Thomas Winter, former SVP of Online Gaming at Golden Nugget Atlantic City.
Casino Operators Surveyed
The think tank surveyed casino operators who run land-based casinos to gather information on whether they believed cannibalization was occurring. The survey employed operator databases to determine the extent of crossover between the online and land-based casino audiences.
Accordingly, the most reliable and accurate data, derived from the internal customer databases of casino operators, allow each operator to draw valid conclusions on whether online products cannibalize their retail counterparts.
Several casino operators were asked about their experiences through a survey. Each respondent to the survey represented a company or entity that operates both a land-based casino and a related online casino brand. Here are the highlights of the survey:
Question: How would you describe the impact the introduction of online casinos has on land-based casino revenue?
Response: 80% said revenue “stayed roughly the same,” while 20% said land-based revenue “moderately increased.”
100% of all surveyed participants responded to this question with “no”. The common themes that emerged included a majority of online players being new customers to each brand and historical performance showing no cannibalization. The survey found that the benefits of online casinos dramatically outweigh the perceived risks.
Among the operators who shared information about their player databases, none of the respondents believed that any cannibalization had taken place. On average, the operators said that only 7% of customers play at both online and retail casinos.
This minimal overlap between the two sets of customers is one of the biggest reasons that online and land-based casinos cannibalization has not been observed. In contrast, the upper end of the range reported by casino operators stood at 12%, indicating that even in the worst-case scenario, only 12% of players are spending at both online and land-based casinos.
Impact Of Online Gaming On Land-Based Casino Revenue
In a comparison between the compound quarterly growth rates of land-based casinos before and after the introduction of online casinos, every state showed a positive change in growth.
Land-based casinos in Connecticut showed steady signs of decline in year-on-year gross gaming revenue before the introduction of online casinos.
Since 2021, when online casinos launched, the contraction rate of GGR in the state has flattened out. Interestingly, land-based casino GGR in 2023 is on track for its first year of growth since 2007.
Year-on-year GGR from Delaware also showed a similar contraction prior to the introduction of online casinos. Since the launch, land-based casino GGR has been on the uptick every consecutive year except for 2020.
Michigan is home to only three land-based commercial casinos located in Detroit. As an outlier compared to other states, land-based GGR never recovered to pre-pandemic levels in Michigan despite the introduction of online casinos. However, since the launch of online casinos in January 2021, Michigan’s GGR has grown by 4.89%.
Similarly, the New Jersey land-based casino market was also contracting in terms of GGR before the introduction of online casinos. In Pennsylvania, the land-based casino market was en route to realizing modest GGR gains prior to the introduction of online casinos.
In PA, online casinos were introduced in 2019, and the state then faced restrictions in 2021 and 2020 due to the pandemic. In 2022, the land-based casino growth phase resumed, and both land-based and online casino GGR hit an all-time high in 2022 and will likely continue into 2024, based on the growth pattern observed in 2023.
The numbers tell the same story in West Virginia, where gambling is only permitted at the state’s handful of racetracks. The market’s GGR has been in a state of contraction since its all-time high in 2012. After online sportsbooks launched in the state during the pandemic, land-based casinos bounced back to their pre-pandemic GGR levels. When viewed as a whole, it’s clear that online casinos positively impact the revenue generated by their land-based counterparts.
How Land-Based Casinos Benefit From Online Counterparts
Using a set of conservative assumptions and a hypothetical state, a model described in the study deduces the net impact of land-based gaming to stand at +1.7%. The study highlights the symbiotic relationship between the two prevalent forms of gaming based on demographic segmentation, omnichannel participation rates, casino availability, wallet growth, cross-selling, and margin analysis.
Data from operators has suggested that omni-channel players spend 2.5x more than online-only players. When compared to land-based players, they spend 5.5x more. In 2022, Deutsche Bank published research on the performance of land-based casinos against online counterparts.
This study concludes that non-iGaming states grew by +13%. However, it was found that the research failed to consider various factors by comparing a group of states in a state of decline against those just bouncing back from pandemic closures.
Conclusion
Overall, the study by Eilers and Krejcik Gaming has successfully outlined the importance of robust omni-channel casino experiences. Online casinos have been shown not to cannibalize land-based revenue. The study also suggests that a well-regulated and organized online gaming market can positively impact land-based casino revenue.
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