Casinos agree that online gambling does not cannibalize their revenue
Online Poker Report

Here’s What Is Wrong With One Of The Worst Takes Ever Written About Online Gambling

PA online gambling
How do you know an online gambling bill has reached a pivotal point in the legislative process?

Watch the local newspapers. When an op-ed full of thoroughly debunked claims and wild accusations appears in a local paper, it’s a safe bet an online gambling debate is coming to a head.

The latest entry on the anti-online gambling front came in Pennsylvania. It was penned by Jeffrey S. Podoshen for Philly.com. Podoshen is an associate professor of marketing at Franklin & Marshall College.

If you’re in Podoshen’s marketing class, throw his advice about the gaming industry in the trash basket after the exam. It’s utterly worthless.

Which do you believe: Evidence or no evidence?

The key takeaway in Podoshen’s rant against online gambling is cannibalization.

Podoshen tries to gin up fears that online gambling will simply shift existing land-based casino revenue online. That would cannibalize the state’s physical casinos, his theory goes.

He makes this claim despite overwhelming evidence that there’s little overlap between online and land-based casino customers.

In his op-ed, Podoshen writes:

“Take a short trip down the Atlantic City Expressway to see what happens when gambling revenues are eaten by online competition and a new wealth of brick-and-mortar casinos appear within a two-hour’s drive in Philadelphia. Atlantic City is suffering today and the landscape is riddled with abandoned buildings and sunk costs that will never be recovered.”

Podoshen is partially right. Atlantic City was a victim of cannibalization …  from market saturation and casinos in neighboring states.

It’s also hard to blame online gambling when total casino revenue in Atlantic City fell every year from 2007 through 2013. (Online gambling launched in November 2013.)

A look at what’s actually happening at casinos

It’s also hard to give Podoshen’s talking points any credence when every casino involved in online gambling in neighboring New Jersey has found it to be beneficial.

Caesars

During a March hearing in Pennsylvania, Caesars SVP of Government Relations David Satz said 80 percent of Caesars’ online gambling customers were not in the company’s casino database. Furthermore, Satz said 42 percent of the customers in its database had been inactive for at least 12 months.

The customers are simply different. Conflating online gaming with land-based gaming as Podoshen does shows a complete ignorance of the issue.

As Satz, said:

“[Caesars land-based casinos are] in the business of providing entertainment, and the vast, vast majority of our customers. … Come for the social elements; they come for our restaurants; they come for our spas.

“The person who is coming for the internet isn’t getting that. It’s the customer, and what they want ultimately is going to drive whether they want to come to the casino or they want to go play [on the internet].”

Tropicana

Tropicana has seen similar results.

According to Vice President of Online and Internet Marketing Luisa Woods, 80 percent of Tropicana’s online customers were new or inactive.

Of the existing customers that have an online account, Woods said this:

“Not only was their online spend completely incremental, but they also grew their land-based spend.”

Resorts

Seventy-five percent of Resorts‘ online customers are new to its database. While it didn’t declare what percentage of online customers were inactive, Resorts did tell Online Poker Report the casino hasn’t seen any decrease in visitation or spend from existing customers who register.

Golden Nugget

New and inactive customers account for 92 percent of Golden Nugget’s online signups. Its land-based casino spend increased by 15 percent among active customers with an online account.

Borgata

At Borgata, the percentage of online registrants who are new or inactive players is 85 percent.

“Online gaming is growing our database,” said Boyd Gaming President and CEO Keith Smith in a February 2014 earnings call. Smith also said online gambling was “creating a long-term opportunity to market Borgata to an entirely new group of customers.”

Bottom line on online gambling

I’m not sure what Podoshen teaches his students. But here’s what online gambling does:

  • Brings in a slew of new customers
  • Helps reengage inactive customers
  • Increases the average spend of existing customers

With that reality, the word “cannibalize” doesn’t really spring to mind.

Podoshen can claim whatever he wants, but he’s flat wrong and doesn’t offer evidence to back up his claims. On the other hand, three years into its online gambling experiment, many praise NJ iGaming as one of the key factors in Atlantic City’s first year-over-year casino revenue increase since 2006.

Or as the Associated Press wrote in April: “There’s no longer much of a debate about it: Internet gambling is helping to save Atlantic City’s casinos.”

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Steve Ruddock
- Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus for OPR is the developing legal and legislative picture for regulated US online poker and gambling.