Are Online and Land Based Casinos Really at War?

Swords Crossing Image With Laptop and Casino Strip Background

Online casinos present an alternative to brick-and-mortar casinos. If you don’t want to physically visit a gambling establishment to place bets, then you can simply play online.

For this reason, some states have approved internet gaming. They see online casinos as a nice source of additional tax revenue.

However, some feel that gaming sites serve as a threat to brick-and-mortar casinos. They propose that internet casinos will cannibalize gambling revenue and take away jobs at land-based establishments.

This view proposes that brick-and-mortar and online casinos are in some kind of war. Is this picture really accurate, though?

I’ll discuss this matter by looking closer at the reason why people think that internet and land-based casinos can’t exist.

Why the Belief That Online Casinos Will Topple Land Based Venues?

Sheldon Adelson, Chairman of the Las Vegas Sands Corp, is mainly responsible for pushing the idea that gaming sites are inherently evil. He even started a Coalition to Stop Internet Gambling (CSIG) to promote his agenda.

The CSIG cited Macquarie Capital’s Chad Benyon as stating that internet gaming will “cannibalize $25 million to $50 million” in revenue from New Jersey land-based casinos.

In a 2015 interview, Benyon’s overall point was actually that online gaming will provide an additional $200m to $300m. Subtracting the projected $25m to $50m cannibalization, this is still a definite net gain.

The crusade that Adelson launched to stop online gambling isn’t built on sound reasoning. However, it has still swayed some opinions.

Notable Differences Between Online and Land Based Casinos

The CSIG seems like mere propaganda to further Adelson’s land-based casino empire, which stretches from Vegas to Macau.

Nevertheless, gaming sites do hold some advantages over brick-and-mortar establishments that make them threats in certain respects. Below, you can see the primary benefits that they offer gamblers.

Online Casinos Can Run with Fewer Operating Expenses

Online casinos in the USA don’t need to build lavish complexes that are filled with amenities and hotels rooms. They also don’t have to pay huge utility bills to run these establishments.

Instead, they just need servers and a place to operate. These operations, of course, have other costs to cover, but nothing to the degree of live venues.

Land Based Casinos Need More Employees

Gaming sites also don’t need nearly the same number of employees as brick-and-mortar operators. Outside of developers, marketers, and management, they don’t require much other help.

The biggest live casinos, on the other hand, employ hundreds or even thousands of people. For example, Adelson’s The Venetian Las Vegas has 6,000 people working for it.

The minimal workforce, combined with lower operating expenses, allow online casinos to run more cheaply. As a result, they can be more flexible during a market downturn.

Gaming Sites Offer Better RTP

Land-based casinos aren’t known for featuring great odds. They’ve gradually jacked up house edges on their games to give themselves more profits.

Of course, they also need greater profits to keep their operations going. This is the primary reason why they feature slot machines with low return to player (RTP) ranging from 88% to 94%.

Most online slots, in contrast, feature between 95% and 97% RTP. They also generally offer better payback for blackjack and roulette (more single-zero wheels available).

Brick and Mortar Casinos Charge Higher Bets

Land-based establishments also charge larger minimum wagers to play. This measure is also based on the need to generate more revenue to cover higher operating costs.

Slot machines, for example, require anywhere from $0.50 to $3 to play. Table games generally have minimum wagers ranging from $10 to $25.

Online slots typically let you play for anywhere from $0.01 (one payline) to $0.50. You can enjoy table games for just $1 per hand.

Online Casinos Are More Convenient

Perhaps the biggest advantage that gaming sites have over brick-and-mortar casinos is the convenience factor. They don’t require you to travel anywhere.

You can pull up an internet casino on your smartphone, tablet, or computer. You also have the ability to take the casino anywhere with you through a mobile device.

Free Online Casino Games

Gaming sites don’t need to employ dealers or feature physical slot machines. Therefore, they don’t technically lose any money by letting you play for free.

At most casinos, you can begin enjoy free gaming immediately after completing registration. Free online casino games let you test everything out before officially deciding to make a deposit.

The Reality: Internet and Land Based Casinos Complement Each Other

Some of the aspects covered above point to the possibility that internet casinos do compete with their land-based counterparts. The numbers, though, tell a different story.

Kevin Smith, CEO of Boyd Gaming, has pointed out how online gambling boosts the company’s overall revenue—rather than take away from it.

Smith spoke about Boyd’s dual success with the Borgata and their gaming sites in 2014. He stated that the company’s internet gaming success isn’t coming at the expense of the Borgata.

“These results also once again demonstrate online gaming’s potential to expand our business,” said Smith. “About 85 percent of our online players have not had rated play at Borgata in at least two years, showing there is little overlap with our land-based business.

Picture of Las Vegas Strip

“Online gaming is growing our database, creating a long-term opportunity to market Borgata to an entirely new group of customers.”

Tom Ballance, the COO of the Borgata, backed up Smith’s comments when speaking with CNBC.

“In January, Borgata launched a mobile gaming app for iPhones and iPads, and we are scheduled to roll out a version for Android devices shortly,” Ballance explained. “As Borgata expands into mobile gaming, we believe we will further grow our business and the overall market.”

Here’s more evidence from industry executives and reports suggesting that internet gambling compliments the land-based sector:

  • Dover Downs (Delaware) CEO Ed Sutor refers to online gambling as a “new market” that targets a “new demographic.”
  • A report from the American Gaming Association (AGA) offers the consensus that online gaming helps boost land-based revenue.
  • A Nevada study concludes that most local poker players haven’t adjusted their land-based play with the presence of legal NV online poker.
  • Mitch Garber, the head of Caesars Acquisition division, points to the UK as perfect evidence that internet gaming doesn’t hurt the brick-and-mortar industry.
  • Thomas Winter of the Golden Nugget (New Jersey) states that up to 70% of their online players have never/rarely been to the Golden Nugget.

Will the Synergy Between Online & Brick and Mortar Casinos Ever Change?

Studies and comments from gambling execs prove that internet gaming isn’t having a negative impact on brick-and-mortar casinos.

Otherwise, gaming companies wouldn’t be launching legal online casinos. But will this favorable balance always remain?

More and more gambling options create extra competition across the board. Many states are already experiencing casino saturation.

For the time being, online gambling is supplementing revenue for casino corporations. However, when will the overload of land-based and internet options become too much?

Picture of Bellagio Interior

My guess is that online casinos will continue to mostly draw those who don’t typically gamble live. Therefore, gaming companies are smart to expand into live and virtual settings.

They stand to earn more money overall with presences in both spaces. That said, online and live casinos aren’t truly competitors.

The problem, though, comes when looking at the industry as a whole. Gambling saturation is a real thing in America and beyond.

Politicians continue approving gaming bills in an effort to generate quick tax revenue. They also want to prevent this revenue from flowing into neighboring states.

Eventually, though, the gambling industry will begin to stagnate (it already has in some places). Both online and land-based gaming revenue will start to suffer at this point.

Conclusion

On the surface, live and internet gaming seem to be in a war for gambling supremacy. Revenue and casino figureheads, however, paint a different picture.

Not long after Adelson waged a war against online casinos, other executives and research suggested that internet gaming improves overall revenue.

It doesn’t, as Adelson and his CSIG claim, cannibalize brick-and-mortar earnings. Of course, many casino corporations already know this and have entered the online space.

The real problem for gambling companies moving forward is saturation. Casinos—both online and live—will need to deal with an overcrowded market in the coming years.