Analysis Group Study Offers Arguments Against Online Casinos Cannibalizing Land-Based Casinos

Written By Grant Lucas on April 3, 2024
Image of gamblers playing at Resorts World NYC for a story on a study that offers evidence that online casinos would not cannibalize land-based gambling but actually help

If New York ever hopes to legalize online casinos, it must deal with the strong opposition of the New York Hotel and Gaming Trades Council. It must deal with the fears that iGaming would cut into land-based revenue, concerns that online expansion would become “a job killer,” as the HTC has claimed.

A new study commissioned by the Sports Betting Alliance, however, serves as the latest evidence that those fears are unfounded.

The 167-page report, titled “The Potential Economic Impact of Legalizing iGaming on Casino Revenues in Five States” and conducted by the Analysis Group, analyzed data from the six states that offer iGaming and projected revenue for five states that could join the fold. Overall, the study found that legalizing online casinos in New York would not hurt land-based casinos at all. In fact, iGaming could help brick-and-mortars grow.

“The six iGaming States generally had stagnant or declining gaming revenues prior to legalizing iGaming,” the study concluded, “so the net effect of iGaming shows that total gaming revenues far exceeded the projected revenue that would have occurred based on the pre-iGaming growth rates of Land-based revenues alone.”

The study added:

“Rather than cannibalizing existing Land-based revenues, iGaming is more often associated with increased Land-based revenues.”

Online casinos in NY could become lucrative for state

The study – commissioned by a trade group consisting of FanDuel, DraftKings, BetMGM and Fanatics –  estimated the potential economic impact of iGaming by measuring the observed impact of online casino gaming the six existing jurisdictions: New Jersey, Delaware, Pennsylvania, West Virginia, Michigan and Connecticut. On top of that, the Analysis Group conducted 34 consumer research interviews and an online survey of 2,389 current and prospective gaming consumers.

As a whole, according to the findings, “iGaming expands the overall gaming market and increases the growth rates of overall gaming revenues.”

In the six existing states with online casino gambling, total revenue from land-based casinos and iGaming exceeded pre-iGaming revenue from brick-and-mortars by 46%. Just in the last year, according to the study, retail and online casino revenue clocked in 75.1% over projected revenues that did not include iGaming.

How does that apply to New York? According to the Analysis Group, looking at 2024 through 2029, NY online casinos could help land-based revenue grow from $4.1 billion to $4.5 billion and potentially even by another $438 million “from the additional growth … due to iGaming.” That does not include the $1.9 billion from the coming three new downstate casinos.

Just in the first full year, which the group decided was 2025 despite iGaming in New York not being included in the budget this year, online casinos could generate $2.5 billion in revenue, increasing up to $4.5 billion by 2029.

Projecting retail casino revenue in New York after iGaming

All told, revenue from land-based and online casinos in New York are projected to grow by 117.4% through 2029, capped by $11.3 billion in that final year.

The justification for those figures should come as no surprise. The Analysis Group attributed those projectes to New York’s “large population for iGaming” and “its demonstrated large sports betting revenues.”

In just over two years, sports betting in New York has led to $3.39 billion in gross revenue and $1.73 billion in state tax revenue.

Speaking of state tax revenue, the Analysis Group determined that iGaming in New York could add another $18.1 billion from 2025 to 2029.

Why iGaming actually boosts land-based revenue

The Analysis Group offered several explanations as to why iGaming would further bolster the land-based gambling landscape rather than cannibalize revenue.

The group cited that in four of six states that offering legal online casinos, iGaming has led to increased revenue from land-based casinos. According to the Analysis Group, in those other two states, “external factors” played a role, such as competition from new casinos or other gambling facilities in neighboring states.

Among the “multiple explanations” offered, iGaming can essentially reached in untapped demographic for retail casinos, introducing gambling to individuals who may not otherwise make a trip to brick-and-mortars.

The group emphasized iGaming and land-based casinos “cater to different audiences,” further indicating that the online and retail casinos “can be viewed as two different products” as opposed to direct competition.

After all, the study noted, land-based casinos can offer what iGaming platforms cannot: on-site experiences, amenities and other activities that “provide unique value to visitors.”

More studies emerging to refute cannibalization concerns

Consider some responses to open-ended questions posed by the Analysis Group. Consumers were asked why they might become interested in going to a land-based casino within the next 12 months when they hadn’t done so over the previous year. Some 447 respondents said that visiting brick-and-mortars would a different experience entirely from iGaming.

Some even noted that iGaming opened their eyes to land-based casinos and would lead them to make the trip. For example:

“I never bet in an actual casino so I would love to try that in the next 12 months.”

In New York, a bill to legalize online casinos will not be included in the final budget, unless some 11th-hour movement happens. This comes as a result of the New York Hotel and Gaming Trades Council remaining heavily opposed to iGaming expansion for fear that it would cut into jobs and land-based revenue.

This SBA study, of course, rebuts that argument. And it’s not the first.

Earlier this year, Eilers & Krejcik Gaming shared a report that looked at the growth rate of land-based casino revenue before and after the introduction of online casinos. That study showed that retail revenue increased by 2.44% after iGaming went live.

The “typical state,” according to EKG, would see iGaming boose brick-and-mortar revenue by 1.7% annually.

Photo by Julie Jacobson / AP Photo
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Grant Lucas

Grant Lucas is the managing editor for PlayNY. A longtime, award-winning sports writer, Grant has covered gambling and legal sports betting since 2018, when he got his start reporting on the New Jersey and Pennsylvania industries. He now oversees PlayNY as New York expands legalized gambling to sports betting and online casino gaming.

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