EKG report dismisses claims online casino regulation results in land-based cannibalization
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Research commissioned by iDEA Growth and conducted by Eilers & Krejcik Gaming (EKG) has claimed the addition of igaming poses no threat of cannibalization to existing bricks-and-mortar casinos in the US.
As online casino legislation continues to falter in the US, with just six states having regulated the vertical to date, concerns have previously been raised over the potential impact to longstanding land-based operators in the face of incoming online competition.
The EKG report has instead suggested that igaming legalization would offer a new revenue stream for land-based firms, as well as improving revenue return from existing bricks-and-mortar operations.
Research into online and land-based casino revenues across the six US states that have already regulated igaming showed that there is an average quarterly revenue boost of 2.44% following the regulation of the online sector.
Additionally, EKG ascertained that five out of six igaming states outperformed their land-based-only equivalents over the same time periods.
Other findings from the report include that online casinos attract different customers to land-based users, hedging the risk of cannibalization, and that a typical state would see an increase in casino revenue by 1.7% annually following the introduction of igaming.
The iDEA believes that the 32-page report, ‘Comparing Online and Land-based Casino Gaming’, is the most comprehensive research project yet on the subject after the EKG team dissected a research note by Deutsche Bank that overlooked some key factors.
EKG noted previous research conducted by The Innovation Group in Maryland used a “flawed methodology” when preparing a report for the Maryland Lottery in the face of potential igaming regulation.
The Maryland report claimed legalizing online casino could have a 10% negative revenue impact for land-based firms.
However, EKG said the Maryland study “erroneously double-counts population growth which inflates its results” as well as “arbitrarily” comparing land-based performance between 2019 and 2022, regardless of when online casinos were introduced in respective states.
The EKG report is based on data from casinos, regulators, and state governments over a 16-year period, as well as comparing quarterly performance of online and land-based casino states to solely land-based jurisdictions.
Jeff Ifrah, iDEA founder and general counsel, commented: “This study offers compelling evidence that online gambling is a catalyst for growth, not a competitor to land-based casinos.
“The research underscores the conviction that legalizing it drives beneficial economic impact across the industry. As lawmakers consider the merits of legalizing and regulating igaming, they can be assured that it will complement the land-based casinos to deliver even more tax revenues to their states and establish meaningful consumer protections.”
Eilers & Krejcik Gaming MD Matt Kaufman added: “The closer you look at the data, the better it is for the casino markets that have added igaming. Nearly all states with mature casino markets have experienced land-based casino declines this century.
“States that have introduced igaming have been materially more likely to see that decline flattening, and at times even returning to growth, compared to states with only land-based casinos.”
