Point-Counterpoint
Two research firms have come to very different conclusions about the impact online gambling has on existing land-based gambling.
The Bulletin Board
NEWS: A deep dive into the EKG online gambling cannibalization report.
BEYOND the HEADLINE: Anti-gambling advocates will latch on to this data point in the EKG report.
WAY BEYOND the HEADLINE: The demographics of sports betting.
VIEWS: The Innovation Group defends its Maryland report as “unbiased.”
NEWS: New Jersey court rules that casinos are not obligated to cut off compulsive gamblers.
NEWS: Jason Robins is bullish on online casinos in Illinois.
AROUND THE WATERCOOLER: The Wall Street Journal focuses on VIP programs in a new gambling piece.
STRAY THOUGHTS: Appreciating things differently as you get older.
Sponsor’s Message - Kambi Group is the leading provider of premium sports betting technology and services, empowering operators with all the tools required to deliver world-class sports betting and entertainment experiences.
The Group’s services not only include its award-winning turnkey sportsbook but also an increasingly open platform and a range of standalone sports betting services from frontend specialists Shape Games, esports data and odds provider Abios, and AI-powered trading division Tzeract. Together, we are limitless.
Visit: www.kambi.com
Did Eilers & Krejcik End the Cannibalization Debate?
*Eilers & Krejcik Gaming is a newsletter sponsor.
I reported some of the highlights from the Eilers & Krejcik Gaming report on the interaction between land-based and online gambling that was prepared for iDEA Growth last week. You can find the report here.
Overall, the report does an excellent job of debunking existing cannibalization claims.
According to the report, land-based revenue growth in five out of six states with online casinos outperformed states with only land-based casinos.
In a key takeaway, EKG states:
“Land-based and online casino draw different kinds of customers because each product provides a fundamentally different experience. An online casino visit, for example, is typically measured in minutes, while a land-based casino visit is more likely to be measured in hours.”
Per the EKG report, the motivations to gamble online or visit a land-based casino differ:
Time Investment (Online = Lower; Land-Based = Higher). The time investment required for an online casino “visit” is often measured in minutes, versus the typical time commitment required to visit a land-based casino, which is more likely to be measured in hours.
Stake Levels (Online = Broader; Land-Based = Narrower). The lowest stakes available online are often a fraction of the stakes that a land-based casino can support due to physical space constraints; land-based casinos typically offer $5 blackjack as a minimum stake, whereas online casinos can (and do) offer blackjack for $0.05 a hand.
Overall Experience (Online = Narrower; Land-Based = Broader). Land-based casinos typically offer specific amenities, such as food, beverage, and entertainment options. Additionally, they incorporate unique environments and social elements into their products.
Four casino executives were also asked three questions on cannibalization:
In states where you have both land-based and online operations, what percentage of customers participate in both land-based and online casino games?
Average response = 7% | Lowest response = 2% | Highest response = 12%
What percentage of online-first customers participate in land-based casino games?
Average response = 6% | Lowest response = 1% | Highest response = 13%
What percentage of land-based-first customers participate in online casino games?
Average response = 9% | Lowest response = 4% | Highest response = 17%
It also points out the difficulty of comparing apples to oranges. Every market is different.
“On average, across New Jersey, Pennsylvania, Michigan, and Delaware, nominal casino GGR fell by roughly 12% in the year prior to launch. We do not view these markets as comparable to other states with commercial gaming in a post-Covid recovery analysis. For example, Illinois (+12%), Indiana (+21%), and Ohio (+11%) YoY growth was strong in February 2020.”
Bottom Line: Markets are highly complex. Looking at Pennsylvania, you had not only the introduction of online casinos but also satellite casinos, VGTs, and an online lottery. The Live! Casino opened in Philadelphia in January 2021, and other casinos have changed hands, including Sands Bethlehem becoming Wind Creek Bethlehem. Not to mention some minor event in early 2020 that threw the entire world into disarray.
Because of that complexity, I’m skeptical that the report will change many minds.
Beyond the Headline: An Anti-Gambling Talking Point
The report provides some potential fodder for the anti-gambling crowd:
“High Omni-Channel Spend: Our data from operators suggests that omni-channel players spend 2.5x online-only players and 5.5x land-based players. Although we expect that much of that difference owes to those players being highly engaged with or without iGaming, we estimate that a small amount of their play in land-based is accretive due to iGaming participation.”
Essentially, highly engaged gamblers may become more engaged following the introduction of online gambling. Now substitute engaged gamblers with at-risk or problem gamblers.
Way Beyond the Headline: Sports Bettors Are Different
A super interesting graphic also demonstrates the difference between sports bettors and casino customers (seen below, red highlight mine). The difference between online and land-based casino customers is minimal, with online customers skewing slightly younger and more male.
However, the difference between online sports bettors and land-based casino customers is drastic. Online sports bettors are 95% male and skew 20 years younger than land-based casino customers.
TIG Defends Initial Report
The purpose of the EKG was to refute a single cannibalization claim in a previous report commissioned for Maryland by The Innovation Group (TIG), which defended its findings in an interview with Bet Maryland.
Author’s note: Too many people are losing sight of the larger TIG report, which is complimentary toward online gambling. It’s not negative towards online gambling.
Brian Wyman, the EVP of TIG, said he was disappointed that EKG didn’t reach out and how it framed TIG’s work.
Wyman also said he greatly respects EKG, but at several points in the column, Wyman used the word “unbiased” to categorize TIG’s report. Bias creeps into many gambling reports, like the report prepared by Spectrum Gaming for Washington DC, which was roundly criticized on social media.
“Our work was performed for a client asking for an unbiased estimate of impacts, and we tried to thoughtfully provide that in a way that was not only accurate but intuitive and easily explainable to a broad audience,” he said. “We believe and stand by our work, but also in the belief that legislatures should be provided neutral information so that they can make good policy decisions.”
Wyman elaborated on this in a LinkedIn post (with a lengthy debate with GeoComply co-founder David Briggs):
“… it’s not compelling at all to go ask CEOs or employees of companies that massively benefit from iGaming about their “views” of cannibalization. I could equally go ask the companies that don’t stand to benefit from iGaming, and their CEOs will present a doom and gloom view.”
He also said EKG’s critiques were “by-and-large valid, but not fatal.”
“As with any study like this, we have to choose timeframes and states to compare, etc. They, of course, did the same when choosing their set of 7 states to compare to in Section 5… We modeled many and did not cherry-pick something to support a particular outcome.”
SPONSOR’S MESSAGE - Underdog: the most innovative company in sports gaming.
At Underdog we use our own tech stack to create the industry’s most popular games, designing products specifically for the American sports fan.
Join us as we build the future of sports gaming.
Visit: https://underdogfantasy.com/careers
Court: Casino Not Obligated to Cut Off Gamblers
Do casinos have an obligation to stop people from gambling? According to the courts, the answer is no.
“U.S. District Court Judge Madeline Cox Arleo dismissed a lawsuit on Jan. 31 by Sam Antar against the gambling companies, saying the voluminous rules and regulations governing gambling in New Jersey do not impose a legal duty upon casinos to cut off compulsive gamblers.”
“The New Jersey Legislature ... has not yet seen fit to require casinos to prevent or stop inducing gambling from those that exhibit problem gambling behavior,” Arleo wrote in her opinion. “As a matter of law, (the) defendants do not owe a negligence common law duty of care to plaintiffs.”
As the article notes, this is not an outlier opinion. Courts have sided with the casino industry on this issue, including a 2008 ruling “against New York gambler Arelia Taveras who sued seven Atlantic City casinos that she said had a duty to stop her from gambling.”
The article also references cases in Indiana. A quick Google search revealed multiple instances of Indiana courts siding with casinos. One case was dismissed in 2009 when a gambler lost $125,000 in a single night. Another case that spanned a more extended period was dismissed in 2003. There is also a similar case in Sweden against Kindred, with the court reaching the same decision.
On X, responsible gambling consultant Jamie Salsburg reacted to the New Jersey ruling by saying this is “the uncomfortable but right decision.”
Another aspect to consider is that Borgata and MGM were not simply accused of allowing him to bet but of plying Antar with free bets and other VIP perks - which I recently wrote about.
DK CEO: Illinois Is the 2024 iGaming Dark Horse
During DraftKings’ recent earnings call, CEO Jason Robins was asked about online gambling (casino).
“There are a few states that I think are getting momentum on iGaming, and it will be hard, but I think we’re going to get at least one or two this year.”
Robins called Illinois the dark horse in 2024, pointing to two factors:
“One is a number of different states wanted to do OSB first and see how that went, and that's still ramping for them, so the draw for new tax revenues from online gaming isn't as strong if you just launched online sports betting and you're… still getting more and more accustomed to and comfortable with it.
“The second thing is that we talked a few years ago about post-COVID and how that was going to be a real catalyst given states would need tax revenue. What we ended up seeing was that so much federal money was pumped into the state's coffers… it kind of extended that timeline a bit. But now that's coming to an end in many states. They're starting to see budgets that really look a lot like the budgets four or five years ago in many states and the surpluses in some of these states are no longer there.”
I don’t share Robins’ optimism, but it’s not entirely misplaced. As I wrote in my Q1 Online Gambling Temperature Check on Monday, the door is open in the Land of Lincoln:
Illinois - State Rep. Edgar Gonzalez Jr. told Bonus.com that legal online gambling is inevitable but a “long-term project.” However, he did leave the door open, saying, “Because the budget is a perpetual discussion, as well as new revenue streams, I want to be sure that this bill is in the discussion.”
Around the Watercooler
Social media conversations, rumors, and gossip.
The Wall Street Journal published a column with the subhead, “While Kavita Fischer sank deeper into six-figure losses, companies kept her going with bonus credits, VIP treatment, and data tracking.” It’s an excellent article that highlights a complex topic, including the failings of the state-run programs.
The New York Times Ken Vogel added some color to the story on X (you may remember Vogel receiving a ton of pushback for his industry coverage in 2023).
The WSJ piece is the latest in a series of negative columns, and more and more are wading into the murky VIP waters.
Where does the blame reside? There is an excellent discussion in this thread.
I covered the issues with VIP Programs in a recent feature column, and it’s safe to say that as more and more coverage focuses on problem gambling, VIP programs could become one of the most significant topics in the space.
Stray Thoughts
One of my greatest pleasures is hearing a song I haven’t heard in years, sometimes decades, and realizing how damn good it is—an example.
If the numbers are correct, it's a tremendous opportunity for the sportsbook that figures out how to do it.
I am very surprised by the 40% difference in particpation by women in online casino vs online sports betting. Is that because they understand the casino games better? I'm skeptical about the number. What do you know about this?