Study: iGaming Does Not Cannibalize Casino Revenues

A new study by Eilers & Krejcik Gaming has found that the addition of online gaming does not cannibalize brick-and-mortar casino revenues, and in fact boosts them.

Study: iGaming Does Not Cannibalize Casino Revenues

iDEA Growth (iDevelopment and Economic Association), the leading trade association for online gaming in the U.S., has commissioned groundbreaking research from Eilers & Krejcik Gaming (EKG), which reveals that, in addition to adding a revenue stream for land-based casino operators, iGaming helps boost revenue of operators’ brick-and-mortar properties.

As part of the project, the EKG team dissected a research note by Deutsche Bank, which overlooked some key factors, and a study on iGaming by The Innovation Group, which the EKG team said was based on flawed methodology when considering potential cannibalization.

The 32-page EKG report “Comparing Online and Land-based Casino Gaming ” is one of the most comprehensive research projects ever conducted on the effects of the introduction of online gaming on the land-based casino industry.

iDEA Founder and General Counsel Jeff Ifrah commented, “This study offers compelling evidence that online gambling is a catalyst for growth, not a competitor to land-based casinos. The research underscores the conviction that legalizing it drives beneficial economic impact across the industry. As lawmakers consider the merits of legalizing and regulating iGaming, they can be assured that it will complement the land-based casinos to deliver even more tax revenues to their states and establish meaningful consumer protections.”

The in-depth study of online and land-based casino revenues reveals an average quarterly revenue boost of 2.44 percent from the introduction of iGaming across the six U.S. states that have regulated the activity.

The EKG team of economists, data analysts and industry experts compared the quarterly growth rates of the six states that have legalized iGaming with a selection of land-based-only casino states. They found that five of the six iGaming states outperformed the land-based group over the same time periods.

“The closer you look at the data, the better it is for the casino markets that have added iGaming,” commented Eilers & Krejcik Gaming Managing Director Matt Kaufman. “Nearly all states with mature casino markets have experienced land-based casino declines this century. States that have introduced iGaming have been materially more likely to see that decline flattening, and at times even returning to growth, compared to states with only land-based casinos.”

The EKG team also used advanced mathematical modeling techniques to study the potential impact of the introduction of iGaming in land-based casino states that have yet to legalize the online channel. They concluded that the typical state would boost casino revenue by 1.7 percent annually after introducing iGaming.

The timely study comes as state lawmakers in the Maryland House and Senate meet to discuss iGaming legislation at the end of the month.

“iDEA welcomes these findings so that the debate around iGaming is centered on real facts and data. This study bolsters our advocacy efforts in key states, and we look forward to sharing the information with policymakers,” said Ifrah.

The section of the report that focuses on previous studies concluded that the Innovation Group study and the Deutsche Bank research note contained several methodological flaws. Both failed to compare the time periods before and after each state launched online casinos, an obvious limitation if the goal is to study the impact of online casino introduction.

The EKG methodology looks at the impact of online casinos on land-based casino revenue in each state that has launched online casinos individually. This is a much more intuitive approach that shows online casinos have positively impacted land-based revenue.

The Innovation Group’s study for the Maryland Lottery attempted to establish a baseline figure for how land-based casino revenue in iGaming states should have grown during the time frames they studied, but that baseline used arbitrarily chosen time periods, double-counted population growth, and included children as part of the population change of potential gamblers.