online gambling impact land based

Is Online Gambling Having An Impact On Land-Based Casinos?

Over the last five years, US residents have seen a steady stream of new legal online gambling options.

The current increase in gambling options rivals the casino boom of the early and mid-1990s. From 1978 to that time, customers had two choices, Atlantic City or Las Vegas. By 1993 the number of states with legal casino gambling had grown to 13. In 2021, there are six states without casino gambling.

We are in the midst of a similar explosion, only this time it’s in the online realm.

Making the (Early) Case

As a longtime advocate for legal, regulated online gambling, I’ve encountered (and refuted) dozens of arguments against it over the years. A few of the greatest hits are:

  1. Minors will have access to gambling without visual confirmation of an ID – the “won’t anyone think of the children” claim.
  2. Problem gamblers will have unfettered 24/7 access to gambling – the “casino in every pocket” trope.
  3. Criminals and terrorists would use online gambling to launder money anonymously.
  4. Gamblers will shift their play online out of convenience – the cannibalization argument – which will cost the state jobs and tax revenue from land-based gambling venues.

The Evidence Rolls in

These arguments have dwindled but not entirely disappeared, as we’re nearly a decade into the US online gambling experiment, and the evidence against each of the above claims is even more compelling:

  1. Player verification and geolocation technology are robust and working.
  2. Online gambling operators have instituted comprehensive responsible gambling protocols that are light years ahead of land-based gambling venues.
  3. There is zero evidence that criminal organizations are using online gambling to launder money. In fact, the evidence points to online gambling being less anonymous than land-based gambling.

The fourth bullet point is where things get tricky. All the evidence pointed to online gambling bolstering land-based revenue during the early days of legal online gambling in the US. Even in the COVID-19 era, land-based gambling weathered lockdowns and restrictions, despite the rapid expansion of online gambling.

That said, I’ve maintained throughout that there is cannibalization of land-based gambling, but the small percentage of land-based revenue lost is more than offset by the new customers and revenue generated online. Essentially, the gains from the new customers converted to multi-channel (land-based and online) exceed the losses.

What COVID-19 Helped Uncover

Pre-COVID, the formula for casinos dabbling in online gambling was simple:

  • Most online customers were not current gamblers at land-based casinos.
  • Some land-based casino customers shift some of their play online, while some online customers shift some of their gambling spend to land-based venues.  

Any revenue produced online was additive. Land-based revenue remained the core of the business as online gambling was working to prove itself. And prove itself it did.

That simplicity became more nuanced as online revenues steadily grew over the years before being turbocharged by the COVID-19 lockdowns and restrictions. Essentially, the slow migration to online gambling became a mass exodus, as previously skeptical land-based gamblers were left with one option: gamble online or don’t gamble at all.

Yes, the land-based industry is recovering (and producing some bawdy numbers of late), but it’s not all puppy dogs and rainbows. The positive numbers are hiding what I believe to be a concerning trend.

Gambling looks to be following in the footsteps of retail shopping, in that mom & pop stores are giving way to big-box and online retailers. Everything is becoming concentrated at the top. In other words, the prior fears from certain corners of the industry prove at least partially correct, as customers choose convenience.

That’s good news for some and bad news for others.

The Future of Land-Based Gambling

Online gambling is no longer a nice little side hustle. Sports betting and the likelihood of online casinos spreading in the coming five to ten years is a core part of a gambling corporation’s business model. I would argue that it’s now a critical and necessary part of running a successful operation.

The problem I see on the horizon is that the rich (national and international companies running destination casinos) will get richer.

Based on the current trend, gamblers will choose online options and save up for the occasional casino visit – a visit that is unlikely to be to a local casino. That likely means a casino arms race with promotions and amenities and high-end dining and shopping attracting customers. That will likely result in smaller venues winding up as casualties, as online gambling continues to cannibalize these venues as customers choose convenience. 

In non-destination locales, convenience will win out and what you’ll see is continued M&A as a handful of companies dominate the US land-based and online gambling landscape. Smaller local operators won’t have access to the capital needed to run both land-based and online operations. They will slowly be squeezed out as their core customers steadily migrate to online options run by their large competitors.