It is no secret to anyone paying attention to the gaming industry in the United States that 2021 is a record year.
Every jurisdiction has reported more revenue in 2021 than in 2020 and most reported more than in 2019. That is the most significant comparison, as 2019 was itself an all-time record year and 2020 was plagued by closures and restrictions. Through 10 months in 2021, gaming revenue is $43.4 billion, up 76 percent from 2020 and more tellingly, up 16 percent from 2019. Although 2021 has been a recovery year, during the first few months, most jurisdictions still had COVID restrictions in place.
Many factors that contributed to the results in each of those years make comparisons difficult; there are few apples-to-apples examples. Besides a surprisingly strong recovery trajectory, more gaming options are available in 2021 than any other year: more casinos, more VLTs, and more jurisdictions with sports betting and online gaming.
The new options are the most important element of the narrative for 2021. Sports betting expansion has outpaced everything else. Since May 2018, more than 30 states have legalized sports gambling. Twenty-four reported revenue from sports betting in October: $400 million on a handle of $7 billion. In October 2020, 18 states reported $280 million on a handle of $3.2 billion. In 2019, 12 states generated $150 million on $1.5 billion in handle. For the first 10 months of 2021, the win from sports betting was $2.3 billion on a handle of $31.5 billion.
Igaming is not as widespread as sports, but it is still significant and becoming more so each month. For most of 2021, five states reported online-gambling revenue and in October, a sixth state joined the list. In November, igaming generated $340 million in revenue, slightly less than October, but October had one more day. For the first 10 months of 2021, igaming revenue was $2.9 billion. There are no handle numbers, but as the majority of igaming revenue comes from slot machines, one can assume the coin-in was something close to $30 billion. Combined, sports betting and igaming generated $4.3 billion in revenue.
Without that additional revenue, 2021’s numbers would be very close to 2019 and if you subtract the new VLTs and casinos, 2021 and 2019 are comparable. But then you have to account for twice as many states with sports betting and three additional states with legal online gambling. Until the expansion of sports and igaming peaks, year-over-year comparisons will not be very meaningful. But the media are less focused on meaningful comparisons and more interested in attention-grabbing headlines.
The headlines highlight the increase in revenue, but for the most part neglect the underlying importance of wagering on sports and online casino games. Underlying sports betting is the importance of remote betting. Mobile, not bricks and mortar, is driving it. In every state with mobile sports betting, it represents 80-90 percent of all wagers. Ten of the states that reported sports revenue in October have legal remote-gambling options. Thus, the vast majority of the sports win and handle also comes from online wagering. It is interesting to note that all of the states that generate over $200 million in handle per month have a remote option.
The shift to remote is particularly noticeable in the major gaming states that offer both remote sports and igaming: New Jersey, Pennsylvania, and Michigan. While reporting significant overall revenue increase, even all-time revenue records, the brick-and-mortar casinos in those three states are either flat or down. In November 2019, for example, casinos in New Jersey generated a win of $202 million; it was $206 million in 2021. Pennsylvania casinos were up 3.7 percent in November as compared to 2019 and 2021 includes four additional casinos. Michigan casino revenue was down 10.2 percent in 2021 from 2109. At the same time, total revenues in November 2021 were up 49.6 percent in New Jersey over November 2019, 52.4 percent in Pennsylvania, and 201.9 percent in Michigan; Michigan’s igaming and sports also include revenue from 10 Native American casinos. In 2019, Michigan reported revenue from only the three casinos in Detroit.
The brick-and-mortar casinos are slowly falling behind. It is only a matter of time before the switch to remote gambling begins to impact retail outlets. The reduced revenue will result in a cutback in reinvestment in the properties, a reduction in the number of employees, along with fewer tourists and the other economic activity they bring. However, it does not negatively impact the states’ tax revenues. In fact, it’s quite the opposite. Gaming taxes keep pace with the revenue, regardless of the source.
The phenomenon of switching from in-person visits to technology enabled visits is hardly new. We have seen it with movie theaters, as television, DVD players, and now streaming services changed consumer behavior. It occurred in retail with the shift to big-box national-brand stores from small local retail operation; the switch has continued with the move to online shopping. Newspapers, magazines, and books, too, have experienced the same trends. The phenomenon is not temporary or reversible. Over the course of the next decade or two, it is estimated that the majority of retail and entertainment purchases will be made via the internet. And of course, the internet is available everywhere, not just on computers, as it was 20 years ago.
It is too soon to assess the impact of virtual gaming on physical casinos, but not too soon to note the trend and compare it to other industries. Just as shopping on Amazon and movie-viewing on Netflix are commonplace, gambling on a remote device will become just as prevalent. I don’t have any predictions, dire or otherwise. But the trend is becoming too pronounced and important to ignore.
