The rise of online gambling has transformed the way people bet and play games, with many casinos and gaming operators shifting their focus to digital platforms.
But what does this mean for the traditional brick-and-mortar casinos that have long been a staple of the gaming industry?
In this article, we’ll explore the economic impact of online gambling on physical casinos in New Jersey, and examine the trends and data that are shaping the future of the gaming industry.
Economic Impact of Online Gambling
Online casinos in New Jersey have generated approximately $6.91 billion in revenue and $1.03 billion in tax revenue since the introduction of Internet casinos in November 2013.
Concerns about online gambling cannibalizing brick-and-mortar casinos have been raised, but data suggests that the two sectors can coexist and even complement each other.
After the pandemic, land-based casino revenue stabilized while online revenue set new records, indicating that online gambling did not significantly detract from physical casino earnings.
Research supports the notion that the growth of online gambling has not led to a decline in brick-and-mortar casino revenues. Both sectors have experienced growth, albeit at different rates.
Jane Bokunewicz from Stockton University noted that in states with legalized internet gambling, brick-and-mortar gambling revenue has grown alongside internet gambling, although at a slower pace.
Richard Schwartz, CEO of Rush Street Interactive, also observed that online and physical casino revenues in New Jersey could complement each other.
A report by NERA Economic Consulting highlighted that while online casinos contributed $385 million in net taxes in 2022, the social costs associated with problem gambling could be roughly equal to the state’s tax revenue from digital gambling.
Additionally, the report suggested that the $2.4 billion spent on online gambling in 2022 decreased New Jersey’s economic activity by about $180 million, as this money could have generated more economic activity if spent in other sectors, such as retail or dining.
Shifts in Gambling Behavior
The Rutgers Center for Gambling Studies reported shifts in gambling behavior. The proportion of online-only gamblers nearly tripled from about 5% in 2017 to nearly 15% in 2020, while the proportion of individuals gambling at both online and brick-and-mortar venues nearly doubled from 19% to 36%.
Conversely, the proportion of those gambling only at physical casinos dropped from nearly 76% to 49%. These shifts suggest changing preferences among gamblers, with more individuals opting for online platforms while still engaging with physical casinos.
In April 2024, the New Jersey Division of Gaming Enforcement reported internet gaming revenue of $187.9 million, reflecting an 18.2% increase compared to April 2023. Meanwhile, casino wins for the nine casino hotel properties was $216.8 million, a decrease of 6.3% from April 2023.
This data suggests that while online gaming is growing, it does not necessarily lead to a proportional decline in physical casino revenues. The two mediums offer unique experiences that appeal to different segments of the market, yet can be enjoyed by the same person.
For example, an online casino may attract a certain clientele who prefer the convenience and larger variety of gaming options but also enjoy visiting brick-and-mortar casinos for the social experience and atmosphere. This points to a complementary relationship rather than a competitive one.
An iGaming study commissioned by the Sports Betting Alliance concluded that online casinos complement brick-and-mortar casinos rather than harm them. This aligns with other reports indicating that the two sectors can coexist without significant negative impacts on each other.
Despite concerns about cannibalization, the growth of online gambling in New Jersey has been largely complementary to brick-and-mortar operations.
Financial Stability and Market Trends
The success of online gambling has provided a financial cushion for operators, allowing them to weather challenges faced by traditional casinos.
However, the shift toward online gaming has also raised concerns about the potential social costs associated with increased online gambling, such as problem gambling and decreased social interaction.
In the early months of 2024, New Jersey’s online casinos continued their upward trajectory, with digital platforms generating $182.3 million in February alone, marking a nearly 24% year-over-year increase.
In contrast, the state’s nine Atlantic City casinos reported $211.6 million in revenue, a 2.4% decline compared to the previous year. This decline was largely due to a decrease in table game revenue, which was offset by an increase in slot machine revenue.
This trend of rising online revenues and declining earnings from physical casinos has been consistent since the onset of the COVID-19 pandemic, which accelerated the shift toward digital gambling options.
The convenience and accessibility of online gaming have played a significant role in this shift.
With a wide array of gaming options available on mobile devices, players find less incentive to visit physical casinos, particularly during off-season months when adverse weather conditions deter travel to Atlantic City.
Online platforms offer a broader variety of games, attractive bonuses, and promotions, making them appealing to a younger demographic that prefers digital entertainment.
While online gambling has become a dominant force, it has not entirely replaced the need for physical casinos. Brick-and-mortar establishments still hold value as tourist destinations and entertainment hubs for the common gambler thanks to the more personal experiences they offer.
However, their future viability may depend on their ability to adapt and integrate digital offerings.
Revenue Growth and Policy Dynamics
The impact of online casinos on brick-and-mortar establishments is not uniform across all casinos. Some, like the Borgata, have maintained strong in-person revenues, while others have struggled.
In February 2024, only three Atlantic City casinos reported higher in-person revenues than in February 2019. This uneven performance underscores the challenges faced by traditional casinos in adapting to changing market dynamics.
Traditional casinos may need to rethink their strategies to remain competitive, potentially by offering more unique experiences that cannot be replicated online. For instance, live events and personalized service.
New Jersey’s overall gambling market has thrived, thanks to the combined strength of online casinos and sports betting. In January 2024, total gambling revenue exceeded $559 million, a 28% increase from the previous year.
This growth was driven primarily by internet gambling and sports betting, which saw remarkable increases of nearly 20% and over 136%, respectively.
The state’s regulatory environment has supported the growth of online gambling by providing a clear and stable framework for operators to operate within.
The Division of Gaming Enforcement has been proactive in providing detailed revenue reports, which have highlighted the performance of individual online casino brands. For instance, BetMGM and Borgata Online have emerged as leading platforms, collectively generating nearly $40.3 million in March 2024.
While online casinos in New Jersey have expanded rapidly and generated substantial revenue, concerns about their economic and social impacts persist, including the potential for increased problem gambling and decreased social interaction.
The relationship between online and brick-and-mortar casinos appears to be more complementary than competitive, as evidenced by the stabilization of casino revenues and the growth of online gambling.
However, the potential social costs associated with increased online gambling remain a critical consideration for policymakers and stakeholders.
Online casinos are expected to explore new technologies, such as virtual reality and gamification, to enhance the player experience. Traditional casinos may need to adapt by offering unique experiences that cannot be replicated online.