Subdued growth: a survey of traditional games
It is estimated by IBISWorld that 46.1 percent of U.S. non-casino industry revenue is generated by lotteries (including video lotteries with a 6.3 percent share), while 44.1 percent is generated by Native American reservation gaming and 6.3 percent by pari-mutuel wagering. The remainder is derived from legal bookmaking, card rooms, charity bingo and other charity games.
Around half of all lottery play is dedicated to lotto-style games, 39 percent to instant scratch tickets and the remainder to other games, including video lottery. In general, around half the states with lotteries have recently experienced declines in gross receipts. Pari-mutuel wagering on horse races (thoroughbred, quarter horse and harness racing) is legal in 43 states, with most wagering occurring at off-track betting sites. Eight states currently permit telephone account wagering. Greyhound racing accounts for about 9.2 percent of the sector. Charitable gaming, including bingo, is allowed in 47 states. Card rooms are legal in 11 states, offering mostly poker games.
The three classes of Native American gaming defined by federal law are: Class I, which includes social games played for prizes of minimal value or traditional forms of tribal gambling, both regulated solely by the tribes; Class II, which includes bingo and non-banked card games and is regulated by the National Indian Gaming Commission; and Class III, which includes all other forms of gambling, including house-banked, casino-style games, and is regulated by federal law and joint tribal-state agreements.
LOOKING AHEADLotteries continue to confront the prospect of significant change, as state government budgetary constraints associated with the economic recession lead to the increasing possibility that licenses will be sold to private operators, or leased out, to raise funds. However, the federal government’s legal advice to the states is that lotteries cannot be privatized. This still leaves open the leasing option, although this may not raise as much funds.
For lotteries in 2009, the recession is expected to lead to a real revenue decline of 3.7 percent. There will be few areas of product growth, as households reduce their overall gambling expenditure and unemployment rises. The industry will continue to be adversely affected by the spike in unemployment, which will result in only sluggish growth in consumer spending, at least into 2010, before the economy improves. For 2010, real revenue growth is forecast at 1.6 percent. Areas of growth will continue to be instant lotteries, mega-lotto draws, VLTs and keno, but with some cannibalization of revenue across product lines.
Over the five years to 2014, real revenue is forecast to increase at an average annual rate of 2.6 percent. The industry is also in the mature phase of its life cycle and is experiencing increasing competition from other forms of gambling and from other industries involved in leisure, sport and entertainment.
Looking longer-term, through 2014, growth in non-casino gaming will continue to be relatively subdued, but will improve from 2011 on. Over this period, the traditional industries will have to contend with increasing competition from other components (especially video lotteries), increasing competition from other gaming industries (especially commercial casinos) and from the continuing decline in interest in certain gaming and wagering areas, such as racing. Continuing restrictions on domestic Internet gambling and sports betting will also constrain the growth of certain components.
Overall, better revenue growth is expected from video lottery machines, card rooms and Native American casinos (with an increasing emphasis on allowing and expanding the number of slot machines in states that allow these). Other areas are seen as only offering the potential for marginal real growth, or will decline, as consumers switch their expenditure to more attractive products with a perceived higher level of entertainment value.
IBISWorld, with headquarters in Los Angeles and Melbourne, Australia, is a leading independent publisher of research covering 700 different U.S. market segments. For more information, phone +1 800 330 3772 or visit www.ibisworld.com.