What can $1 buy these days? Quite a lot, as it turns out.
By way of example, my inbox is replete with message after message imploring me to subscribe to an online version of a daily newspaper for a full six months at the low-cost, one-time-only (until I get another message tomorrow) price of a single buck. Six months for $1 to read a newspaper that used to sell for $2 for a copy of that day’s paper? Wow. What a bargain. Or not.
For the gaming industry, that same $1 offers a compelling, multimillion-dollar lesson … but it might not be the lesson you think.
Newspapers are one of the most visible casualties of the digital age. Their business model was built on print advertising, fleets of trucks, delivery staff and millions of readers willing to trudge out their front doors through rain, sun, snow and sleet to retrieve their papers and learn what happened in their community and around the world the previous day. That model funded armies of journalists (including me, for 13 wonderful years) who uncovered, analyzed and reported what was happening.
The obituary for that business model has already been written. According to the prestigious Medill School of Journalism at Northwestern University, two newspapers per week shut down between 2019 and May 2022, and the threat remains. If current trends continue, another third of all remaining newspapers will be gone within three years.
While those numbers and projections are dire, the real trend is likely worse. In my view, a newspaper that sells six months of its services for $1 is already dead.
The decline in newspapers is only one sad tale of analog businesses that could not compete in a digital era. And the gaming industry, in all its verticals and permutations, has been paying attention. That is why various stakeholders, ranging from lottery retailers to hotel workers at casinos, have opposed digital gaming.
The views of such stakeholders are understandable, but they ignore the unassailable, irreversible larger trend: Younger adults gravitate toward online sales. With respect to lottery, an oft-cited data point from the U.S. Bureau of Labor Statistics notes that, in 2018, the average annual spend on lottery tickets was $70, but that dropped to a bit more than $40 for adults between 25-34, and less than $8 for adults under 25.
Yes, you can argue that, in the intervening 5-plus years, spending habits as well as income can change and grow. But the reality remains unchanged.
As lottery expert Mark Hichar of Greenberg Traurig noted last year in a well-researched white paper, “Consumers increasingly acquire their information, entertainment, goods and services, and do their banking and investing online. The success of state lotteries requires that they have a robust online presence, and a failure to offer lottery products online could result in lotteries not being relevant to the growing demographic that shops, learns and plays online.
“This does not mean offering lottery products exclusively online, as traditional sales channels continue to be the primary means of state lottery sales. However, there is an increasing body of evidence demonstrating that iLottery contributes significantly to state revenues. Accordingly, iLottery should be included in the discussion when state legislators consider the appropriate mix of gaming for their states.”
Pennsylvania Lottery Deputy Executive Director for Marketing & Products Stephanie Weyant noted that “Selling online expands the lottery player base by acquiring new players, forming a relationship with those players, making lottery relevant to them – and then using marketing strategies to drive those new players into retail stores. Studies, such as the Spectrum Gaming report in 2022, showed that iLottery states grew their retail sales faster than non-iLottery states. It’s important for retailers to understand that lotteries are committed to growing retail lottery sales and iLottery is a way to acquire new players.”
Unlike newspapers, gaming is a regulated industry, and thus has the ability to marshal support that can keep the digital genie in its bottle. That, however, is not the only answer nor is it the right answer.
Lotteries and casinos face challenges, most notably an aging demographic. Digital platforms offer an opportunity to reach players who would otherwise not be interested in the analog version of such offerings.
A recent report from Spectrum Gaming Group on the potential for iGaming in Indiana expertly tracks the evolution of that fear, and quotes Thomas Winter, who had recently served as general manager of North American iGaming for DraftKings, who made a prophetic statement in 2020: “A couple of misconceptions are interesting to address. The first misconception is that online gaming is going to cannibalize land-based gaming revenues and of course we don’t want that. … When I started (in 2013), this was a fear. What we demonstrated … was that, not only was it not true, but it was the opposite.”
Spectrum’s research is replete with other examples of how land-based operators have managed to leverage iGaming to capture the loyalty of younger demographics and get them to spend money in their physical facilities.
When it comes to converting digital adults into land-based customers, casinos have an advantage that newspapers certainly cannot match: Even in a digital age, adults still crave real-world entertainment experiences. Strapping on a robe to retrieve a newspaper in the rain does not meet that craving.
Earning loyalty points to see a show, dance in a nightclub, eat a steak or play craps with real dice fits the bill. That reality is why the casino industry has learned that, if it has exclusivity or primacy in the offering of iGaming and sports betting, the result will be increased revenue (including benefits to multiple fiscal streams for their states), as well as attracting a younger audience.
Exclusivity or primacy alone will not maximize that potential. The tax rate on both land-based and iGaming must be considered, as operators need sufficient incentives to encourage multi-channel play. Most important, however, are the marketing efforts to be deployed.
Marketing, however, offers the most important key to unlocking that potential. For example, as casinos use digital channels to reach younger consumers and offer them in-person experiences, this will grow revenue, increase profitability, encourage more capital investment and create demand for hotel rooms, meals and other services.
This should assuage the concerns of union workers, lawmakers and other stakeholders concerned about cannibalization, who fear that casinos and lotteries will follow the path of newspapers.
So, with that in mind, here is a piece of good news: While consumers like me might have no interest in spending $1 on a product that does not meet our needs, we readers have not fully given up on newspapers. I still subscribe to the digital version of several newspapers, including the New York Times and Wall Street Journal. Why? Because they endeavor to compete on the basis of quality.
They offer valuable insights, thoughtful analyses and timely, actionable information, i.e., they meet market demands, and that has attracted readers and advertisers. Their model may not be as profitable as the old print model, but they are not fading away and are making this digital business model work.
The real lesson from that single dollar has nothing to do with hand wringing, nor should it focus on trying to keep digital gaming bottled up and unavailable through legal, regulated channels.
Rather, as the newspaper industry—as well as retailers and others—have demonstrated, the winners are those who adapt, and learn to provide value to their target audience. Adults still need and want social experiences, and the winners will be those who meet those needs.
So, while this insight might not be a stop-the-presses moment, it is good news.
