I-gaming results during the shutdown could jump-start legislative discussions

The demand for gaming found refuge online during the six weeks of peak brick-and-mortar shutdown starting in mid-March, and the impacts figure to resound in legislatures around the country as beleaguered states ponder ways to improve their overall financial pictures.

That’s the view that emerged as states with existing regulated online gaming industries filed March revenue reports with i-gaming emerging as the lone bright spot. This was to be expected, but with the near-term future of land-based revenues looking to be dimmed by economic and operational constraints for many months to come, observers see new openings for the online sector in the U.S.

“Online gaming is inevitable—eventually there will be a point, even if it’s 10 years from now—when tastes and preferences will dictate that a large portion, if not a majority, of gaming revenues, will be generated online,” said Bobby Soper, president & CEO, Sun Gaming & Hospitality, in a webinar entitled, “Gaming in Crisis: The Path Back,” which was led by The Innovation Group. “I cannot imagine a better time to illustrate to a legislator and officials the need for online gaming.”

Such enthusiasm was fueled by results in New Jersey, the most established regulated online gaming market in the country. In a webinar entitled, “Outlook for Gaming in the Context of COVID-19,” presented by Spectrum Gaming Group and Management Science Associates, it was noted that online gaming in the Garden State was up 25 percent in March over the prior month, or between $12 and $13 million of additional revenue.

“That’s what you’d expect to see when people are forced to go online, but it definitely didn’t hit all casinos the same,” said Geoff Atkinson, senior data analyst, Management Science Associates. “Two of the biggest increases come from the Borgata, which jumped up about $4 million, and the Golden Nugget, which jumped up about $3.5 million. Those were two casinos that were already growing their online business in 2019. They were kind of ready for this situation. The surprise was Caesars, which jumped 48 percent in online gaming revenue, or about a $2 million increase, after they had been holding level through 2019 and several years before that.

“It looks like casinos that were already working to build online gaming were best prepared to take advantage of this disruptive situation.”

GROUNDWORK FIRST

Atkinson said the important lesson for anyone who is looking at entering online gaming now is that it’s not necessarily just a switch you can flip when you need to, which one could also take to mean that the sooner states get started, the better. “You have to lay the groundwork; it’s going to take a while to see the benefit from offering online gaming, particularly on the jurisdictional level,” he said. “For states thinking about adding online gaming in the current situation, it’s important to do it carefully and to do it right because it’s not going to be an immediate fix.”

To illustrate the point, Atkinson contrasted New Jersey, where the first operations came online in December of 2013, with Pennsylvania, which only started offering online gaming in the middle of 2019. “Rivers Philadelphia saw the biggest jump in their online gaming, another $1.5 million from February to March,” noted Atkinson. “This was a casino that was working on online gaming as much as it was allowed to in Pennsylvania; they had seen increases throughout 2019. They had been offering SugarHouse online in New Jersey for some time so they probably had some wisdom and knowledge about online gaming before they started offering it in Pennsylvania.”

Investors have, for the time being at least, placed bets on growth in the sector, according to Rob Heller, CEO, Spectrum Gaming Capital, who is tracking The Stars Group, 888, Flutter, GVC, William Hill and GameSys to reflect sentiment in the B2C i-gaming marketplace.

“The i-gaming group took off in the fall because of football season and the impact that sports betting was going to have on the digital market in the U.S.,” said Heller. “The thing we really want to point out is that after the market hit its recent bottom and came back up again, people became very selective about where they were putting their money and digital gaming became a hot commodity. People in this business have become focused on this opportunity.”

Among the publicly owned gaming companies, Penn National is probably has the most focus, said Heller. “They recently bought Barstool Sports and analysts are being very aggressive about their expectations for that,” he said. “Digital gaming will become of bigger importance to most companies especially if we see an acceleration in legalization of more forms of digital gaming.”

Heller also sounded a bullish note on e-sports. He cited data from Europe that one-third of bettors had placed a bet on e-sports during the current shutdown period because there weren’t other sports to bet on, and one-third of those players were first-time e-sports bettors. E-sports is expected to grow to $1.6 billion in revenue by 2023. “Nevada just approved betting on the League of Legends Euro Championship and New Jersey is probably going to do something very similar,” said Heller.