Will Online Operators Cannibalize Pennsylvania’s Land-Based Casinos?

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Cannibalization is a scary word.

In the context of online gaming legislation in Pennsylvania, it’s also a serious issue. In fact, cannibalization, or the fear of it, is the primary reason at least one existing land-based casino in the state is opposed to Pennsylvania lawmakers opening up a legal and regulated online casino market.

Some Casinos Fear Net Revenue Loss

According to the Pennsylvania Gaming Control Board, gross total gaming revenue, combining slot machines and table games at the state’s twelve brick and mortar casinos, topped $3.2 billion in 2016. In fact, 2016 marked the sixth straight calendar year total casino revenues exceeded $3 billion. After 10 years of legalized casino gaming in Pennsylvania, the PGCB says total gross gaming revenue has hit the $26 billion mark.

The fear, expressed by Parx CEO Tony Ricci at a joint committee hearing of the Pennsylvania House and Senate held a hearing regarding the expansion of legalized gambling earlier this month, is that online operations will eat away at existing land-based casino revenues. “We believe that many of the proposals currently under consideration will actually lower the tax revenue generated by our industry and effectively kill the golden goose,” Ricci said.

Parx is Pennsylvania’s top grossing casino and fears some of its customers would migrate away to online casinos. It also says, since proposed iGaming taxes are lower than what land-based casinos pay, the state’s tax revenues on gaming would dip as a result.

Studies Put Revenue Concerns Into Question

However, at least one organization that has studied the issue extensively claims cannibalization is not really an issue.

The Innovation Group, which has conducted surveys and researched and reported on iGaming issues for several different stakeholders, also appeared at the joint committee hearing earlier this month. Through written and verbal testimony, The Innovation Group said its primary research conducted among states with a legal and regulated online gaming market suggests cannibalization is a non-issue.

In fact, the group quoted Caesars executives who have claimed some 90 percent of online sign-ups in New Jersey were not previously in their database program, suggesting they had never visited its land-based casinos in Atlantic City. Plus, Caesars also claimed many of those sign-ups later visited the land-based property after playing online.

Online Brings New Customers To B&M

The Innovation Group also quoted the online gaming executives at the Golden Nugget, who claim online and land-based players are generally from two different stocks. In fact, the Golden Nugget believes it can actually convince online players to play at the brand’s land-based casino through effective cross-promotional strategies.

Golden Nugget executives have also said 80 to 85 percent of their online customers are not regular visitors to their casinos.

The Innovation Group also claimed that more participants in a survey it conducted claimed they would actually spend as much or more money at land based casinos, and visit the same, or more often, if they also had the ability to play online.

The survey, conducted in 2016, was meant to address how iGaming affects traditional casinos.

It asked participants how the ability to play online affected spending and trip frequency to land-based casinos.

Just 10 per cent said they would reduce traditional casino play while close to 90 percent said they would wager the same or more. Close to 85 per cent said they would make the same amount of trips or more to land-based casinos

At the joint committee hearing, The Innovation Group went on to say new players are attracted to the casino through online play, new cross marketing opportunities become available and ultimately, iGaming will serve to strengthen the viability and profitability of land-based operators, dispelling the cannibalization issue.

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