Two casino-industry consultants described igaming as helping preserve the New Jersey casino industry by bringing in younger players, without cannibalizing revenue at the land-based properties.
Gaming analyst Steve Ruddock and Gene Johnson, executive vice president of Victor Strategies, appeared Wednesday in a webinar hosted by the Indian Gaming Association on the evolution of gambling from traditional slot machines to mobile gaming apps and the ways in which it’s reshaping the industry. As online platforms and smartphones gain popularity, land-based casinos are encountering new challenges and opportunities.
“New Jersey was facing some pretty stiff competition from Pennsylvania and a lot of the casinos were underwater when they first started looking at igaming in 2012,” Ruddock said. “They got it done in 2013. It got off to a bit of a slow start, but over time it’s grown into an absolute juggernaut. I’ve argued that if not for online gaming in New Jersey, maybe three or four casinos would be left as opposed to what we have now. A lot of closures after the market opened had nothing to do with online gaming, but preexisting conditions in the market. There’s still a lot of room for improvement in the land-based market, but online gaming has saved many of those casinos and in the process many of those jobs.”
Johnson said igaming has “been tremendously significant” in New Jersey. Through August, the industry has produced $4.2 billion in revenue, of which $1.9 billion has been from igaming. Slots produced $1.4 billion.
“This is a huge piece of the industry,” Johnson said.
“Tables are a half-billion and sports betting is about three-quarters of a billion, but increasingly, igaming is becoming the main revenue producer. It’s growing at 28% year over year and appears to be sustainable.”
In New Jersey, igaming is tethered to casinos, but there are multiple skins for each casino. Some casinos have multiple brands in which they partner.
Johnson noted that this week, Boyd Interactive, part of Las Vegas-based Boyd Gaming, purchased Resorts Digital, the online gambling arm of Atlantic City’s Resorts casino. The price wasn’t disclosed.
Resorts Digital has outperformed the land-based Resorts casino for several years and has generated $573 million – five times more than the $109 million over the first eight months of this year – that the physical casino did. Resorts Digital posted an operating profit of $9.6 million during the first half of the year, up 5.6% year over year, while Resorts casino had an operating profit of $355,000 in the first half of this year, down almost 89% from a year earlier.
“I think Boyd wants to gain the capability and here’s the chance to get an operator with proven ability in multiple states,” Johnson said. “This gives Boyd an online interface.”
Webinar host Victor Rocha, chairman of the IGA Tradeshow & Conference, said Boyd has been aggressive. The company reached out to tribes in California to prepare for the merger of land-based and online gaming.
Rocha questioned whether casinos need to worry about cannibalization from their land-based properties, because people might prefer to stay home rather than go to the casino.
“You need to be concerned about the current strategy you’re deploying if the customer behavior is shifting,” Ruddock said. “I think the pandemic changed the way a lot of people interact with the internet. A lot of people hesitant about doing things online, like ordering from a restaurant, were suddenly forced to do it. They said this isn’t so bad.”
Customer behavior is changing, not because people are pushing them in those directions, but because that’s what they prefer, Ruddock said.
“I don’t think you can stop it,” Ruddock said. “You can try and get in the way and slow it down, but eventually those behaviors are going to become the reality.”
Ruddock said people are looking to gamble online, but that doesn’t mean they don’t want to go to a casino and partake of other things a casino offers.
“I watch movies at home, but I also go to the movie theater,” Ruddock said. “There’s a place for both and the casinos that get the balance right will come out even better in the long run.”
Johnson, who worked as a research director for Atlantic City casinos in the past, said it showed they had a missing demographic. Most of the patrons were older and retired and had money to spend, but younger people weren’t able to participate online.
“All of that money coming into the market is driven primarily by new customers who weren’t there before,” Johnson said.
While Nevada hasn’t embraced online gaming like New Jersey has, Ruddock said it’s captured disposable income of younger people through nightclubs and other amenities.
“That’s how Las Vegas has approached it and it makes sense as a tourist destination,” Ruddock said. “They understand people are going there to spend money and they aren’t looking at it as a regional market where you might approach that demographic differently. Las Vegas has fine-tuned how to get young people to spend money.”
Johnson said land-based casino revenue in New Jersey is flat and igaming may have taken away “a little bit of the growth.” He added igaming took off when sports betting was legalized in July 2018 in the state.
“There’s a symbiosis between sports betting and igaming,” Johnson said. “People on the sports-betting site find that there’s also a casino and igaming is increasing steadily.”
Rocha said there’s apprehension in Indian country about online gaming, because of the investments to their properties and what it’s meant to the tribal government and social services. There’s also concern that companies like FanDuel and DraftKings are getting a big chunk of the online revenue versus the land-based properties in other states and that scenario wouldn’t work for tribes in California. The companies were leaders in a failed ballot measure in 2022 to bring online sports betting to California.
“Tribes are seeing an existential threat and it’s for good reason,” Rocha said.
Rocha also repeated what he’s said in the past, that there will ultimately be a backlash against online betting, as there has been in Europe, because of concerns of problem gambling. That could lead to government intervention down the line, even though current legislative pushes in Congress haven’t gained any traction.
