iDEA commissioned a study from Eilers & Krejcik Gaming (EKG) to conduct the most comprehensive analysis to date on how online gaming impacts land-based casino performance.
The report shows that online casinos have a positive impact on gross gaming revenue at land-based locations, with a projected 1.7% annual lift to a state’s land-based revenue after introducing iGaming.
EKG compared the quarterly growth rates of the six states that have legalized iGaming with a selection of land-based casino states. They measured an average quarterly revenue increase of +2.44% following the introduction of online casinos.
The study also found that five of the six states with both legal iGaming and brick-and-mortar casinos outperformed the land-based only group in terms of their directional change over the same periods.
Attracting different customers
The data in the report clearly shows that online casinos attract moderately younger customers than land-based casinos. The online and land-based products are fundamentally different and the study suggests that just 7% of customers play both online and at retail casinos.
“We view this minimal crossover between the two sets of customers as one of the biggest reasons that cannibalization has not been observed,” the EKG team said in the report.
Penn CEO Jay Snowden was quoted in the report and he confirmed the stats that suggested iGaming helps land-based casinos attract a diversified audience:
“...roughly 66% of [our online casino] players [are] new to our ecosystem or reconnected former patrons. The average age of these players is much younger than our core land-based player, which highlights the lack of cannibalization iCasino has had on our brick and mortar business.”
Big bosses are bullish
The report cited quotes from several notable casino executives who all operate both land-based and online casino businesses.
"In terms of cannibalization, we have seen nothing to date in terms of cannibalizing the brick-and-mortar business," affirmed Caesars CEO Tom Reeg.
Meanwhile, Keith Smith, CEO of Boyd Gaming, claimed, "We firmly believe that the [online and land-based] businesses are complementary, and together they make for a much stronger product overall."
MGM Resorts CEO Bill Hornbuckle also stated, "The idea that omnichannel [casino] can and will work—and not be cannibalizing—is something I’m very excited about moving forward."
Dissecting prior research
As part of its research, EKG analyzed previous efforts by Deutsche Bank and The Innovation Group to model potential cannibalization in the gaming industry.
The EKG team concluded that “both the Innovation Group and Deutsche Bank studies that were cited by online casino detractors fail to consider a variety of factors in their respective analyses.”
EKG even calls the prior studies “an ‘apples-to-oranges’ comparison”, which did not lead to comprehensive conclusions.
The Innovation Group report was prepared for the Maryland Lottery and published in November 2023. EKG noted that this report arbitrarily compares performance for all states regardless of when they introduced online casinos, and that four states included in the study launched online casinos after the start of the comparison period.
EKG also asserts that The Innovation Group study erroneously double-counts population growth, which inflates its results, and it includes minors as part of the potential gambling population.
“Although we view any approach as having some limitations to precisely modeling potential cannibalization, we view our own methodology and supporting evidence as substantially more robust.”
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