New Study Casts Doubt On Online Gaming Casino Cannibalization
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As more states like Maryland, New York, Wyoming, and even Hawaii consider adding online gaming and poker, some in the casino industry have expressed concerns that the virtual gaming could “cannibalize” revenue and customers from live properties. However, a new study casts doubt on this thinking and instead reports that iGaming actually adds to casino revenue.
iDEA Growth (iDevelopment and Economic Association), the leading trade association for online gaming in the U.S., released a report this week showing that in addition to adding a revenue stream for land-based casino operators, iGaming boosts revenue at live properties.
iDEA founder and general counsel Jeff Ifrah said the numbers counter a knee-jerk reaction some may have about the effects of online gaming expansion. The growth of online poker has been a major driver of additional customers to casinos, Ifrah said in an interview with Card Player.
“Fortunately, this new research helps to set the record straight with facts and real evidence from what has happened in states with both iGaming and casinos,” he said.
“For many years poker was the leading example of consumers wanting an omni-channel experience. The rise in online poker in the 2000s led to a massive explosion of live poker bringing new customers into casinos that had never visited before. The research confirms what we already knew, online gaming and land-based gaming can coexist and even thrive.
Details On The Survey
The latest survey was conducted by gaming firm Eilers & Krejcik Gaming (EKG), which dissected a previous research note by Deutsche Bank. EKG found that the bank and an additional online gaming study by The Innovation Group overlooked some key factors and used a flawed methodology when considering potential cannibalization.
EKG’s Comparing Online and Land-based Casino Gaming report is the most comprehensive research project ever conducted on the effects of online gaming on the land-based casino industry, iDEA notes. The study details an average quarterly revenue boost of more than 2.4% after the introduction of iGaming across the six U.S. states that currently have regulated the industry.
“This study offers compelling evidence that online gambling is a catalyst for growth, not a competitor to land-based casinos,” Ifrah said. “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.”
The study also compared the quarterly growth rates of those six online gaming states with a selection of land-based only casino states. EKG found that five of the six iGaming states outperformed the land-based group over the same time periods.
“The closer you look at the data, the better it is for the casino markets that have added iGaming,” EKG managing director Matt Kaufman said. “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.”
A typical state would boost casino revenue by 1.7% annually after introducing online gaming, according to the study. EKG found that the Deutsche Bank and Innovation Group failed to compare the time periods before and after each state launched online casinos – “an obvious limitation if the goal is to study the impact of online casino introduction.”
EKG also noted that the previous studies included double-counting of population growth, ignored the effects of COVID-19 on certain jurisdictions, and had other shortcomings.
States Getting On Online Gaming Bandwagon
The regulated online gaming industry celebrated its 10th anniversary in 2023 and more states are now at least considering legalization as legislators deal with budget shortfalls. Ifrah offered Card Player some additional insight on the current landscape and the potential for more states legalizing this year.
CP: What are your feelings about at least seeing more efforts at legalized online gaming in so many states right now?
Ifrah: We are pleased to be part of these important discussions. Lawmakers respond to policies that protect consumers and also raise revenue, and iGaming checks both of those boxes. The more they learn about the benefits of iGaming, the more inclined to support it.
CP: Do you have a feeling that any of these efforts will cross the finish line?
Ifrah: I don’t want to predict what lawmakers will decide to do in any of these states, but I can guarantee you that our organization and our members are helping to shape the policy.
CP: What are your thoughts on the possibility of the U.S. online poker shared liquidity market growing more in the next few years?
Ifrah: I was honored to have worked on writing the original multistate compact between Delaware and Nevada and am proud to have watched additional states join on. West Virginia is now joining the multi-state compact, and I have faith that Pennsylvania will eventually as well. The growth of online poker will largely depend on the expansion of legalized iGaming. Right now, they are tied together.
CP: Do you see the new study as a way to assuage possible legislator concerns?
Ifrah: The study is an important part of dispelling myths about iGaming, but it’s not a silver bullet on its own. We look forward to continuing to organize the industry to advocate for sensible policies. With the collective support of gaming stakeholders we can make a lot of progress over the next few years.
