Biting the Hand that Feeds You
The ongoing conflict between land-based and online gaming is getting a little more heated lately. The question of cannibalization is front and center once again, but for some reason, more than a decade of legal online gaming, there is still disagreement about this issue.
Online gaming debuted in New Jersey in 2013. For a while, it was a nice addition to the gross gaming revenues of the land-based casinos in Atlantic City. Executives were glad to receive their slice of the pie, even if a relatively small one. Remember, online gaming is a junction between the suppliers, who provide the platforms, the payment processing systems, the data storage and interpretation, and other incremental pieces. Those things aren’t inexpensive.
And then when you add the “skins”—brands like DraftKings, FanDuel, Fanatics, etc., that operate under the umbrellas of the land-based casinos and racetracks in the state—the pot grows even smaller for the Boardwalk brands.
And then consider how much iGaming is growing in New Jersey. Every month it sets a new record—it now clearly is the top gaming revenue product in New Jersey. Again, only a small fraction of the revenue goes to the land-based casinos.
So is this cannibalization of land-based players, or instead is it healthy growth of a new gaming product attracting new players? More research is needed, obviously, but if you talk to casino executives using just their gut instinct and anecdotal evidence, they will tell you it feels like cannibalization.
And then when you add the new “gray” gambling options like sweepstakes casinos and prediction markets, where are we? Proponents of those products will tell you that they aren’t gambling. But come on! Players are risking money to make more money—the very definition of gambling.
So what are land-based operators to do? Marjorie Preston penned a great article in this issue on the new demographics of gambling. As a “boomer” myself, I don’t see my kids gambling in any form. Maybe a little bit of sports betting, but nothing inside a casino. And while my grandsons are very interested in sports, they aren’t betting on anything at their age. Maybe time will tell. But some of the sources Marjorie cites are positive that Generations X, Y and Z will eventually get comfortable inside a casino and may even play slots.
But the casino experience is very social. Kids these days are glued to their screens. A lot of them aren’t interested in social interactions and are even uncomfortable in one-on-one meetings with other people.
The limited demographic we have through research into online gaming players indicates that they are younger than the average gambler. That would make sense, wouldn’t it? People who grew up interacting with screens would be more comfortable scratching their gambling itch on a screen.
So again, what are land-based casino execs to do? A few years ago, esports was going to be the path to the hearts of Gen Z and beyond. Let’s set up esports lounges or arenas in casinos and they surely will come. Well, that experiment didn’t work out very well. In one casino, they had to move the esports lounge away from the casino floor because the esports players were complaining that the noise from the nearby slots was distracting. And don’t forget, esports players wear headphones!
Nightclubs, however, have been very successful in attracting the younger generations. Now where their patrons get the money to rent cabanas and pay $500 for a bottle of vodka confuses me, but apparently they have their ways, so these nightclubs have been successful—if only for a few years until the next “flavor of the month” opens up.
So the challenges to land-based casinos are continuing to mount. But why don’t land-based casinos utilize this new pool of online players? Give them a reason to visit your land-based facilities that will make it attractive for them and profitable for you. Offer them a free meal, maybe a show ticket or even a free room midweek! This is the demographic that will continue to make your casino successful for years into the future.
Cashback? You know that works for your slot players. Could it be a draw if it was only redeemable in person?
For those states considering online gaming, be careful about how it might impact your land-based casinos. And for the executives at land-based casinos, have a plan to incorporate online players with your land-based offerings. There’s no reason this couldn’t be profitable for both sides of the coin.
