Casino Execs On Why Online Casino Cannibalization Isn’t Concern – PlayUSA

Cannibalization became the buzzword for 2024 online casino debate in battleground states Maryland and New York.

Opponents of iGaming cited, and often sponsored, studies showing that online gaming decreases revenues at brick-and-mortar casino properties. Proponents brought forth studies taking the same data and concluding that no cannibalization occurs.

The cannibalization argument has divided the gambling industry, making efforts to convince legislators to legalize online casinos more difficult.

As a result, no states will legalize online casino this year. The cannibalization debate figures to continue to affect legalization efforts in 2025 and beyond.

However, despite the spirited debate in 2024, perhaps the question of casino cannibalization will mean very little to iGaming prospects in the long run. Even if cannibalization exists, its not likely to stop future industry evolution, consumer demand and state revenue desires involving online gaming.

Brick-and-mortar casino operators at the East Coast Gaming Congress in the pioneer city of US online casino gaming, Atlantic City, New Jersey, talked about why they are excited about the future of iGaming regardless of cannibalization.

I understand the argument about cannibalization, Mohegan Gaming CEO Ray Pineault said. As an operator, its something we have to be cognizant of. But are we better off, if there is cannibalization, gaining that for our own digital media rather than let operators who dont have bricks and mortar to come in and take that guest away. As bricks and mortar operators, we have the database. We need to take advantage of that. We are the first movers in these markets that are adding digital gaming, and we have to be ahead of it.

Executives for one brick-and-mortar casino operator at last months conference, The Cordish Cos., cited cannibalization as a reason it opposed online casino expansion.

Cordish is a company that focuses on developing entertainment districts sometimes built around casinos. Leadership doesnt view online gaming as complementary to its business model.

Other brick-and-mortar casino operators see iGaming as an acquisition tool to keep their properties relevant. And regulators in legal online casino states insist that cannibalization is being overblown.

Its hard to argue that iGaming in the aggregate hasnt been complementary to gaming in the aggregate, Ballys Corp. Chairman Soo Kim said. Any individual operator given their set of assets might resist that decision, but then theyre just talking their own book, right?

On one end of the cannibalization argument tends to be online gaming operators, larger casino operators such as Ballys that have invested heavily into iGaming, online casino suppliers and affiliates. On the other end are companies such as Cordish and Churchill Downs that have determined they cant compete with the top operators in the online space, regional casino companies who cant make the same investments into iCasino, and casino workers along with their unions.

Kim said he understands not wanting to expose a casinos customers to the online gaming space, where FanDuel Casino and DraftKings Casino claim 70% of the revenue in states with open markets. But he said he believes having a physical presence in a state does have its advantages, even in the online world.

You dont want to take your best customers and open them up to a place where you at best might get 5% back. If youre a physical operator and you complement your product, I think you can survive even with the large online players. They will win on scale for that online player. But if youre a physical operator, you have a natural database. Only 30% of our customers in our database only go to the casino. So we want to be able to address the other 70, and we might as well offer them a product.

Caesars Entertainment CEO Tom Reeg said iGaming is attractive to his company. But he understands why regional casinos in many states think differently.

As it expands within the country, the regional properties outside of for us Las Vegas, Reno, Tahoe, New Orleans, Atlantic City, the places that are convenience based, I think there is going to be a risk of cannibalization. If I go to a property three-to-four times a month in Columbus, Ohio, and now I can play my same slot machine at home, I think theres going to be cannibalization.

Whether or not an individual casino company supports internet gaming, people in the state will find a way to gamble online. They can go to unregulated offshore sites, or casinos can try to meet the evolving needs of their customers.

And, while online casino legalization has hit a lull, efforts wont stop until regulated iGaming is in as many states as sports betting.

Whether there is or is not cannibalization happening, digital gaming is happening, whether you like it or not, Pineault said. Your competitors, whether they be the FanDuels, the DraftKings, the Fanatics of the world or the other casinos down the street, theyre seeking legislation to expand gaming in the digital space. So I think what we have to do is be prepared for it.

Regular physical casino goers are an aging population. Through cross-marketing and promotions, casinos can attract younger adults to their properties.

Hard Rock International CEO Jim Allen is thinking down the road about how people will want to gamble in the future, and hes not sure its sitting at a slot machine.

If we think about if the people in this room are the customer of gaming in the future, the answer is definitely not. Its that 10-year-old or 12-year-old that can navigate around a smart phone a million times faster than probably anyone in this room. So what is going to be their form of entertainment 10-15 years from now? I think thats the part where you have to think about tech.

Reeg said optimism for the future of the industry centers around iGaming.

In iGaming as an industry as a whole, the growth is extraordinary. Youre growing 20-30-40% per year. Brick and mortar is flat. Its important to Caesars that we are part of what happens in digital, which is why weve made this investment.

Its obvious that online commerce has impacted physical properties in the past decades.

That makes online gaming an easy target for casino worker unions and casinos that hope to maintain the status quo.

But it also shows that progress cant be stopped. Companies that opposed online innovation in their space couldnt stop it from happening. They just disappeared, along with the jobs they provided.

So casinos are working to figure out how to use iCasino to remain prominent in their communities.

Pineault said that when its players arent at their casinos, they want them to remain part of the Mohegan brand.

Theres a difference between bricks and mortar and iGaming. For digital gaming, you do all your advertising on social media. Thats where their customers get their info, their offers. Thats what theyre following. This is an opportunity for us as bricks-and-mortar operators, as multipurpose operators, to use an omnichannel approach, to bring some of our bricks-and-mortar guests into the digital age and take some of those digital people who have never been to Connecticut to come to our property.

Pineault added that Mohegans most profitable online promotion was a giveaway to a Bruce Springsteen concert on the property.

Reeg said the Caesars Palace online app, launched in September, has outperformed projections.

From our standpoint, the iGaming business is particularly attractive. We have tens of millions of people in our Caesars reward database, and its really the most well-developed system in terms of generating cross-market play. Tapping into that digitally is the key, and in iCasino its a particularly distinct advantage for us.

States are accustomed to a certain amount of gambling revenue each year. Often, this revenue is earmarked for important areas such as education.

When they see decreasing casino revenues while other states expand their overall gambling take, state legislators wont care about possible cannibalization. Brick-and-mortar casino revenue could go down, but state revenue will still be going up by legalizing iGaming.

And when states have budgetary needs, which is coming as soon as the next recession, online casino will be a way to fill those holes without increasing taxes.

Kim pointed to what already is going on in the strongest iCasino markets:

If you look at New Jersey, Pennsylvania and Michigan, which are the three largest fully penetrated casino states that also have full iGaming and sports, overall GGR in online gaming, sports and casinos, in the aggregate now are larger than casino gaming if you take those three states combined. That all happened in three years. You had GGR being flat for casino gaming, and then you had online gaming at 1x itself. I think its a great win for the states and the citizens, because they get the benefits of now collecting two forms of taxation.

Pineault knows that state legislator narratives will shift at some point.

I think, at the end of the day, when it comes to digital gaming, its happening and its going to continue to happen whether through our own volition, through our competitors demands or through state legislature tax demands.

Reeg said that online casino isnt going to grow from a grassroots effort like with sports betting. But, eventually, states will want it. Hes seen it many times before with evolutions in gaming.

What happens invariably as you look back for 30 years is the states run into budget issues and gaming becomes a popular way to fill budget gaps. I dont expect to see much in the next couple of years in terms of legalization but, as you get into 26 and [pandemic relief] money is gone and states are back on their own from a budget perspective, I think youre going to see momentum in iCasino.

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Casino Execs On Why Online Casino Cannibalization Isn't Concern - PlayUSA