Although inclement weather dampened attendance at the East Coast Gaming Congress at Harrah’s Resort in Atlantic City, those who went were treated to sharply diverging views of gaming’s digital future.
Caesars Entertainment CEO Tom Reeg, was bullish, predicting Caesars would achieve a 50 percent-plus return on investment in its digital segment. This is in part because Caesars owns its own tech stack, which Reeg characterized as an investment that will pay off over the long haul. Also, expenses will be held down by the pre-existence of the company’s Caesars Rewards database, which Reeg considers the best in the gaming sector.
The long-term reward won’t come without some near-term cost. Reeg expects $1 billion in losses before digital gaming turns ROI-positive in 2023. “We continue to believe CZR’s digital story is underappreciated, as the omni-channel strategy will benefit from both the CZR Rewards database and single-wallet capabilities,” seconded Truist Securities analyst Barry Jonas.
In sharp contrast to Reeg’s optimism was the bearishness of Cordish Companies CEO David Cordish. He sees the igaming space as ripe for plunder, with the likes of Facebook, Alphabet, and Amazon horning in on the action.
Dissenters to Cordish’s opinion, however, point out that “most jurisdictions tie licensing to physical casinos,” as Jonas put it.
Cordish, whose company is in the process of a major Pennsylvania expansion, also worried about cannibalization of brick-and-mortar casinos by the digital sphere. Local jurisdictions benefit indirectly from casinos, he argued, including gainful employment for thousands and the generation of billions of dollars in taxes that fund governmental services.
Cordish labeled igaming as “isolationist,” whereas he sees sports betting as additive to the casino experience, thanks to its potential as a social event (an aspect stressed in sports betting advertisements).
Cashless gaming was another hot-potato topic at the Congress. While Sightline Payments CEO Joe Pappano was adamant that it is the next evolution of gambling, others were not so sure. One panelist noted that cash is hardly obsolete, whether at garage sales, flea markets, or casinos themselves. Also, cashless gaming is presently live in only seven states — Nevada, Indiana, Ohio, Pennsylvania, Florida, Oklahoma, and California — although adoption has sped up recently, thanks to a COVID-based aversion to cash handling.
A representative of the American Gaming Association chimed in to note that 57 percent of gamblers surveyed deemed cashlessness important and 54 percent considered themselves very likely to use a digital or contact-free option while gambling if it’s available to them.
Players who gamble across multiple platforms were deemed by participants to be 1.5 times more valuable than those not affiliated with loyalty programs and only 30 percent as expensive to acquire. A Penn National representative asserted that, in Michigan, the company’s omnichannel players (brick-and-mortar casinos, online casinos, and online sports betting) were three times more valuable than traditional customers.
Another topic on panelists’ minds was a lawsuit filed by Pennsylvania casinos against the state’s lottery. The casinos contend that the lottery’s games hew too closely to casino-style offerings and operate too much like random-number-generated games. So far, the lottery has prevailed in court and Pennsylvania, Jonas wrote in an investor note, “has a unique statute that tries to put ilottery and igaming in separate lanes, though the line of what makes a casino game vs. a lottery game is very gray.”
This prompted lottery expert and panelist Rick Weil to predict a future in which, like Italy and the United Kingdom today, casinos and state-run lotteries are prohibited from advertising if they are unable to get along. For his part, Jonas foresees a future in which lotteries assert themselves even more in the internet sphere, becoming a larger component of Wall Street’s gaming coverage.
The future of Atlantic City, which has already suffered at the hands of Pennsylvania casinos, was on the table as well. Particular focus was given to the award of downstate casino licenses in New York in 2023. Three full-scale licenses will be awarded and while current VLT-only operators MGM Resorts International and Genting Group are considered favorites, both Hard Rock International CEO Jim Allen and Caesars’ Reeg expressed interest in the Big Apple. Added Jonas, “Panelists noted Atlantic City may have to pivot to a more entertainment-based model to attract customers, similar to what the Vegas Strip has done.”
Finally, esports came up for discussion, although it was observed that esports as part of the casino experience was no closer to fruition than it had been several years previous. While some mergers and acquisitions might change that picture, no operator was seen as leading on that front. While esports has a kiddie connotation for many (not mitigated by the industry’s high-profile signings of pre-teen player prodigies), Jonas-cited statistics showed the average gamer to be around 35 years old, “an age demographic that operators have noted are more interested in casinos and gambling than ever.”
At least one state trying to move the ball is New Jersey. While a prior law created difficulties for those seeking to wager on esports events, it has since been amended to permit betting if the majority of participants in esports tourneys are 18 years of age or older.
