Boom Or Bust

The question of our time: Has the legalization of online casino gambling helped or harmed existing land-based operators in the US?

Last Friday, Dustin Gouker, responding to Las Vegas Sands CEO Rob Goldstein's recent statements, made a compelling case that online gambling doesn’t harm land-based casino revenue.

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I agree with Gouker’s overall sentiment that online gambling is a net positive for the industry, at least collectively:

“ONLINE CASINO IS ADDING ALMOST $2 BILLION IN REVENUE A YEAR. That money is new money; absent online casino there is not some pent-up demand to add this kind of revenue to retail casinos. So any argument that says NJ online casino has been anything but a net win for the gaming industry as a whole (again, yes, there are winners and losers) is making a bad-faith argument.”

On LinkedIn, he went a step further, writing:

“It's 2024, and we're still getting people trying to tell us online casino is bad for the land-based casino business. And with an increasing amount of data, it's hard to listen to that argument with a straight face. In New Jersey and Pennsylvania, at least, it's clear this is not the case.”

Longtime New Jersey reporter David Danzis is one of those people. Danzis responded to Gouker, saying, “NJ and AC are the canary in the coal mine. Online is absolutely crushing land-based operations there, and it's only going to get worse. Online is bad for land-based, and I'm not sure it's even debatable anymore.”

Another local reporter, Kevin Shelly, has a slightly different take that lands between the two:

“First online wagering saved brick and mortar AC casinos with new revenue streams. And then online began to cannibalize the infrastructure it had rescued.”

Take the Good With the Bad

My belief, which I’ve been stating for several years, is that there is a demand shift from brick-and-mortar to online, but it’s not a bad thing, and preventing it is not a viable long-term strategy.

As I’ve written, “casinos can’t stop online gambling any more than Blockbuster could stop Netflix or Tower Records could stop streaming.” You might be able to stall adoption temporarily, but that’s a tactic that ensures you won’t be involved in the future.

Further, if casinos embrace online, deploy it properly, and retool their land-based properties, the demand shift door can swing both ways.

“Instead of asking how long we can preserve the current ecosystem and delay the inevitable, they should ask where they fit in. How can my organization mitigate or embrace online gambling to future-proof our business and bring in younger customers?

“The answers to those questions will differ for different properties, but complete opposition is little more than a stalling tactic. All that does is give you a stay of execution. It doesn’t eliminate online gambling or the threat it may pose to your property.”

Another point is that online casinos provide land-based casinos with a pipeline into demographics they cannot otherwise reach. An online-first customer needs to be enticed to visit a land-based property, and providing links between the two is imperative, particularly as the world becomes more online.

Basically, any company not preparing for a future that includes online casinos is making a strategic blunder — I suspect many of the opponents are preparing for that eventuality, and their opposition, while sincere, also buys them some extra time.

The good news is that Atlantic City casinos seem to be getting the message that a thriving online industry requires some changes to land-based strategies. In Atlantic City, the land-based properties are deriving more and more of their revenue from non-gaming sources, according to data from the 2023 NJCCC annual report:

That Data Is Messy

All that said, I’m not entirely convinced that the evidence about the relationship between online and land-based casino revenue is clear.