U.S. combined commercial casino revenue rose by 3.7 percent year-over-year in 2017 to reach an unprecedented $41.2 billion, according to analyst Ken Adams’ research.
Even better: the industry’s healthy growth rate last year is likely to be overshadowed by an even stronger 2018.
With the Supreme Court’s repeal of the Professional and Amateur Sports Protection Act (PASPA) and the imminent launch of the Pennsylvanian online gambling market, 2018 is already a landmark year. Savvy casinos will seek to navigate the post-PASPA landscape by developing products and marketing strategies with a strong digital emphasis, for the industry’s future is arguably omni-channel.
HARRISBURG TO THE SUPREME COURT
Last October, Pennsylvania became the fourth state to regulate iGaming. The legislation allowed licensed casinos to offer real-money online casino and poker products. Nine properties have applied to expand their product offering into the digital space when the market goes live, likely before Thanksgiving.
These Pennsylvanian casinos’ decision to pursue an iGaminglicense was no doubt influenced by the commercial success of the New Jersey market. Online brands in the Garden State achieved a record $25.6 million in revenue in March, according to the state’s Division of Gaming Enforcement (DGE). The state regulator also revealed in Julythat total revenue for the market since its 2013 launch had crossed the $850 million threshold, leaving growth on-track to reach $1 billion by year-end.
New Jersey was also instrumental in the Supreme Court challenge to PASPA and its prohibition of single-event sports betting outside of Nevada. The repeal of PASPA in May was a victory for the Garden State and its bid to allow its casinos and racetracks to offer their patrons sports betting both on-property and, crucially, online as well. With multiple states having either launched or preparing to launch legal sports betting markets, it was also a victory for casinos across the country.
Delaware joined New Jersey in launching a retail sports betting market in June followed by Mississippi in August, while Pennsylvania, West Virginia and Rhode Island will likely go live before year-end, with New York set to expand its existing sportsbook legislation in 2019. The states’ regulatory enthusiasm is understandable, given that the American Gaming Association estimates that the illegal U.S. sports betting market totals $150 billion a year.
The new sports betting markets of Delaware and Mississippi have currently focused on sports betting on-property. However, in New Jersey, Resorts Casino Hotel and DraftKings’ launch in August of a pioneering online and mobile sportsbook likely signals the evolution of the sports betting landscape, given the revenue opportunity that digital wagering represents.
The online betting space provides casinos with a revenue stream that is complementary to their core brick-and-mortar businesses, as the New Jersey iGaming market’s experience has proven. After a decade of declining land-based casino revenue, Atlantic City’s nine properties enjoyed a second consecutive year of growth in 2017, with total revenue of $3.54 billion, according to the DGE.
DIGITAL CONSUMPTION & OPPORTUNITY
Casinos concerns about competitive cannibalization from the online gambling space have largely been dispelled. At the same time, the casino industry should realize that a digital gaming product offers far greater value than just an additional revenue stream.
The Internet increasingly dominates American consumers’ time. Nine out of 10 adults surf the web daily compared to less than three-quarters a decade ago, according to Pew Research Center. Zenith forecasts that in 2018 the average time a North American spends online per day on a mobile device or desktop computer will never be higher (226.3 minutes), rivalling TV (270 minutes) and far surpassing radio (99.2) and print media (15.9).
Casinos have responded to the rising importance of digital consumption by developing websites for their properties supported by social media and, less frequently, concierge apps. Nonetheless, however diverse a casino’s digital strategy may be, they are still using online channels to promote an inherently offline product—the property. A customer conversion—a physical visit to the property involving spend—faces the challenge of being lost in translation between the online and offline worlds.
Conversions are also constrained by geography. A Pittsburgh resident may visit a Philadelphia casino on vacation and then follow the property’s Twitter and Instagram accounts, but how frequently will subsequent social media campaigns entice the customer to revisit the property?
In contrast, a digital gaming product—whether online casino, poker or sports betting—offers casinos the revolutionaryprospect of direct consumer conversion well beyond a casino’s locality. A Philadelphia casino with an online casino and, depending on regulation, a sportsbook would allow someone who once physically visited the property to digitally visit its online slots or wager on an Eagles-Steelers game.
The “stickiness” of the casino’s digital gaming product would also serve to increase the likelihood of the customer making a return visit to the property. After wagering on football games online during an NFL season, a customer would be exposed to ads and content relating to the property itself.
Of course, as well as re-engaging existing customers, a digital gaming product also allows casinos to acquire new patrons—and the conversion process is highly direct and streamlined. A web user served an online advert promoting a casino’s online sportsbook could click through, register for an account, deposit and begin wagering within a matter of minutes.
A digital product also allows casinos to deploy a larger digital marketing arsenal. Although Google doesn’t permit PPC adverts for U.S.-facing real-money online gambling brands, the online space does offer significant scope for affiliate marketing—performance-based marketing by third-party publishers. This approach can drive up to 30 percent of customer acquisitions for iGaming and online sports betting brands, according to Income Access data. Since its iGaming jurisdiction went live in 2013, New Jersey’s DGE has embraced the affiliate channel, which has contributed significantly to the market’s growth.
New Jersey’s welcoming approach towards affiliate marketing will almost certainly be emulated by Pennsylvania’s Gaming Control Board for its online casino and poker market and by other states’ nascent online sports betting markets as well. Indeed, the recent experience of the Garden State, a fertile space for online gaming’s symbiotic relationship with land-based gaming, and vice versa, likely signals the lucrative, omni-channel future of the wider casino industry—in 2019 and beyond.