Casino Exec: Online Casino Cannibalization Debate Misses The Point

Written By Adam Hensley on March 20, 2024 - Last Updated on March 23, 2024
A picture of a dartboard with darts missing the board for a story about how the Wynn Resorts CEO believes the current debate around online casino cannibalization misses the mark.

Online casinos are Maryland’s newest hotly-contested topic.

Over the past few weeks, retail casino operators and other leaders expressed their desire or hesitancy for the legislature to legalize Maryland online casinos.

The biggest detractor when it comes to that expansion is the concept of hypothetical cannibalism. Opponents believe that since players can simply log into their mobile devices, rather than physically travel to a gambling location, foot traffic will plummet — and so will their revenue.

They feel as though the ripple effect will not go unnoticed, as employees may lose jobs and each community may suffer as a result of less tourism dollars.

But is that really the case?

Craig Billings, CEO of Wynn Resorts, thinks it’s a mistake to frame the debate like this in the first place.

Wynn Resorts CEO: Cannibalism discussions are ‘a bit reductive’

In a LinkedIn post, Billings tabbed the online casino discussions as “a bit reductive.”

He called himself a neutral party since Wynn Resorts does not have an online presence or a large portfolio of regional casinos.

“The analysis and debate always seem to focus on the impact to the total addressable market (TAM) and the tax base. A pretty narrow focus when considering the much broader set of implications.”

Billings focused on the fact that these states with retail casinos have had stable markets for years. Now, new players enter the arena who are capable and competitive.

“No matter which side of the ‘cannibalization vs. no cannibalization’ debate you are on, assuming that the (positive or negative) impact will be uniformly shared by all regional casinos is pretty naïve.”

And that’s definitely true. What happened in one state isn’t a perfect representation of what happens elsewhere.

What are the arguments from casinos against expansion in Maryland?

Earlier this month, representation from four of Maryland’s six retail casinos voiced their desire to move forward with iGaming.

HB 1319, the bill that has created this buzz, would call for a 55% tax rate. Should an online operator offer live dealer games, that number drops to 20% on tax revenue.

Ocean Downs Casino & Racetrack and Live! Casino are the two opponents to online casino gaming.

Mark Stewart, The Cordish Companies’ executive vice president and general counsel, spoke on behalf of Live! Casino Maryland during the hearing.

Stewart pointed to a study from the Innovation Group that acknowledges “iGaming will cause substantial job loss.”

Another Live! Casino representative Rob Garagiola of Compass Advocacy, likened this situation to who online sellers like Amazon seemed to wipe out brick-and-mortar stores.

“How many businesses have closed due to online shopping? JC Penny’s, Toys R Us, Bed Bath & Beyond – there are hundreds of businesses across the country that have closed their doors. That will happen with respect to gambling in the casinos and the brick-and-mortar jobs in the state of Maryland. You can’t say it won’t happen. It will happen, but to what degree?”

These points echo Billings’ sentiment in the LinkedIn post. According to Billings, the biggest online operators in the U.S. “employ between one to two people per million dollars of revenue.” On the other hand, land-based casinos employ five people per million dollars of revenue.

But do online casinos actually take away sizeable business from retail locations?

Opponents of iGaming made the comparison of online shopping decimating shopping centers. And while it’s a popular comparison, it should not be taken as a mirror image.

A recent study by iDEA (iDevelopment and Economic Association) and Eilers & Krejcik Gaming found that iGaming is a positive for land-based casinos.

The study discovered that iGaming in six states led to “an average quarterly revenue boost of +2.44%” for brick-and-mortar casinos. Five of those states produced better quarterly growth rates than states with just retail casinos.

This study found issues with the Innovation Group study cited by Stewart during the hearings. The latest findings show that previous analyses failed to compare revenue after one state launched its iGaming platform. Moreover, the former studies did not account for COVID-19’s impact, showed inaccurate population growth numbers for certain areas and also included children as potential problem gamblers.

But even Stewart, who highlighted the old findings, admitted that the retail operators “would be fine” financially in a market that includes online casinos.

“If iGaming passes, we’re a gaming company – we’ll do well financially. But despite our potential financial gain, we are asking you not to do iGaming, and that should speak volumes.”

The study from Eilers & Krejcik Gaming concluded that states that have retail casinos but no online presence could see their revenue jump 1.7% annually with that change.

Will casino employees lose jobs due to iGaming cannibalism in Maryland?

Casinos may let some employees go. But it’s not certain.

During the hearings in February, casino employees voiced their fears about job security.

Billings addressed this, too, in his LinkedIn post, saying that he believes there will be job loss.

“For the market share losers from online gaming, do you expect them to just pass the revenue loss on to their shareholders / tribes?  No, they will shed labor.”

Just like any industry, there is always the potential for job loss. And it often happens when industries make drastic shifts and margins become ever-so-thin. Take a look at the newspaper business, which has seen layoffs upon layoffs as digital becomes the norm, oftentimes

running print-focused operations into the ground.

New Jersey could provide a preview of job market

New Jersey is seen by many as one of the gambling epicenters in the country. It boasts a booming market from casino, iGaming and sports betting standpoints.

Since it legalized iGaming in 2013, though, the state saw 6,660 new jobs from opportunities in the online casino sphere. It’s viewed as though online casino wagering brought a new player base to retail operations, similar to what advocates in Maryland noted in March’s hearings.

MGM Resorts Sr. VP of Government Affairs Rick Limardo spoke on behalf of MGM National Harbor. He explained that he views iGaming as an expansion — not a detractor — to retail operations.

“There are different types of players that play online versus brick-and-mortar. … We have over $1 billion invested in Maryland and would not jeopardize that investment if we thought iGaming would compete with or negatively impact our business.”

Again, there is no perfect example for what could happen in Maryland, like Billings hinted at in his post. But it’s worth noting that in many states (if not all with iGaming), it’s not the end of thre world.

That synergy between the online operators and brick-and-mortar locations is key going forward. Given that proponents of iGaming stress the need for it, it’s almost a given that if online casino gaming comes to Maryland, both sectors will be connected.

“IGaming gives casinos a new way to engage with their customers and introduces a new demographic to land-based gaming, which is why we support a framework that tethers iGaming licenses to casino operators,” Limardo said.

That’s a good sign for employees potentially questioning their job status.

Photo by PlayMaryland
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Adam Hensley

Adam Hensley is a journalist from Des Moines, Iowa, with experience covering online sports betting and gambling across Catena Media. His byline has appeared in the Associated Press, Sports Illustrated and sites within the USA Today Network. Hensley graduated from the University of Iowa in 2019 and spent his college career working for the Daily Iowan’s sports department, both as an editor and reporter.

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