Last year was a record year for gambling in Pennsylvania. While brick-and-mortar casino revenue was up, growth largely came from the introduction of sports betting and online gambling, as well as gains by the daily fantasy sports industry.
Online casinos first launched in the state in July, and revenue has grown every month since. December was no exception, closing out 2019 on a record high for operators. Total win surpassed $33 million for the first partial year of operation, yielding more than $13 million in tax revenue.
Just as the overall industry was bolstered in 2019 by the new addition of online gambling, gains toward the end of the year in that sector came from two newcomers: Mount Airy Casino in conjunction with The Stars Group, and to a lesser extent Mohegan Sun Pocono in partnership with Unibet.
The growth of PA online gambling in December was underpinned by a few key highlights and trends:
As expected, Mount Airy surged far into the lead in terms of market share. It would have done so even without growth in its daily revenue, as November was only a partial month. That said, its growth in partnership with PokerStars has put it head and shoulders ahead of the competition in terms of total package.
The other newcomer, Mohegan Sun doubled its net revenue from month to month. It was small to begin with, however, and Unibet has a long way to go if it hopes to catch up with other sites.
Annual Total for 2019 (Percentage of total)
Total revenue: $33.6 million
Taxes collected: $13.3 million
Net revenue: $20.3 million
Slots: $20.9 million (62%)
Taxes: $11.3 million (85%)
Revenue: $9.6 million (47%)
Table games: $8.2 million (24%)
Taxes: $1.3 million (10%)
Revenue: $6.9 million (34%)
Poker: $4.4 million (14%)
Taxes: $710k (5%)
Revenue: $3.7 million (18%)
* : Taxes include state tax, CFA county grants, and local share assessment.
Slots were the big story in Pennsylvania for 2019, largely due to the first few months of operations. From July through October, they outpaced the growth of table games, making up 80% of total revenue at their peak. Due to their higher tax rate (54% vs. 16% for casino and poker), they accounted for a staggering 93% of tax revenue generated that month.
Two factors diminished the importance of slots towards the end of the year. The launch of PokerStars and introduction of PA online poker was obviously one of those. The other is that only Parx had blackjack available at launch. The addition of the game to Hollywood and SugarHouse provided a huge boost to their online casino revenue.
As a result, slots now make up just over half of gross revenue while still producing the lion’s share of taxes at 79%. Their importance for the year as a whole remains higher thanks to those early months, but expect it to come down in 2020.
Monthly Total (Change since November)
Total revenue: $10.6 million (+10%)
Taxes collected: $3.82 million (+10%)
Net revenue: $6.81 million (+10%)
Slots: $5.57 million (+9.4%)
Taxes: $3.01 million
Revenue: $2.56 million
Table games: $2.58 million (-0.6%)
Revenue: $2.14 million
Poker: $2.47 million (+26%)
Revenue: $2.07 million
Although December gross revenue reached a record high, the 10% monthly rate of growth was a record low. In large part, that’s simply because there were no major new additions to the market in December, either in terms of operators or products.
That said, it’s normal for any new market to enjoy a honeymoon period for the first few months. Ignoring new additions, we’d expect the growth of existing operators and products to slow over time.
Indeed, it feels as if the honeymoon is already over for the first three operators to market. Rivers, Hollywood and Parx all saw their revenue decline in December. That doesn’t mean that growth is over for them, however.
Some of the loss is likely due to players switching to Mount Airy/PokerStars. Its gross revenue surged 31% in December and receive almost all the credit for the market’s growth last month.
The above figures don’t include sports betting, which also debuted this year. Although it remains the biggest vertical, December was the first month in which PA online sports betting revenue did not exceed those of the others combined. Handle (total bets) increased, but operators’ combined gross revenue actually declined to just $8.4 million — or 44% of the revenue of all four verticals combined.
Read more about sports betting revenue at PlayPennsylvania.
Mount Airy held a close second place in November in terms of gross revenue, but it only launched a week into the month. It was bound to claim the top spot in December simply because it would be its first full month of operations. It did much better than that, however, surging to over $4 million in gross revenue and $3.1 million after taxes.
It remains the only operator offering online poker in the state, and that vertical was responsible for 61% of its gross revenue in December.
At launch, Mount Airy’s biggest weakness was slots. It doubled revenue for that vertical this month, however, though it remains the smallest of the three. Meanwhile, poker and casino grew 26% and 22% respectively.
Rivers was the market leader right through November, though its days were numbered once the PokerStars/Mount Airy partnership launched.
Its gross revenue dropped 6.4% in December. The good news, however, is that the losses came from its slots vertical, while its casino continued to grow. As a result, it became the least slots-focused operator aside from Mount Airy, which is advantageous in terms of taxes. In fact, its net revenue from table games exceeded those from slots for the first time since July.
With $3 million in gross revenue in December, it’s about three-quarters the size of Mount Airy, but bigger than all the other operators combined.
Hollywood is either the third- or fourth-place site in the state depending on whether you look at revenue before or after taxes. It’s in very close contention with Parx either way, but as the state’s most heavily slots-dependent operator, a lot of its gross revenue goes to the state.
It had the worst month of any operator, shedding 9.4% in gross revenue. Like Rivers, however, the losses came from slots while casino grew, so the damage to net revenue wasn’t quite as bad at just 8.2%. It still had to pay almost half of its $1.7 million gross revenue in taxes, keeping just $862k.
The story for Parx in December was the opposite of Rivers and Hollywood.
Parx actually increased its gross revenue by 1.8% yet still came out behind after taxes, because it swung heavily towards slots. Its gross slots revenue was up 15%, yet its table games plunged 18% and as a result its net revenue ended up down 3.1% to $890k.
That’s more than Hollywood, but at $1.5 million gross, it’s probably fairer to say Parx is the fourth-place site.
Mohegan Sun was the last of the five to enter the market, and the Unibet brand is not yet well established in the US. As a result, it’s the baby of the state and likely to remain so for a while.
December was its first full month of operations, and its slots vertical grew 365% in revenue. On the other hand, its casino vertical actually lost money, presumably due to promotional offers, though it grew 254% in terms of bets received.
Overall, its gross revenue tripled to $406k, though it became more slots-dependent in the process, so its after-tax revenue merely doubled, to $173k.