G2E: A few gaming industry predictions from the Eilers & Krejcik team Howard Stutz, CDC Gaming Reports · October 13, 2018 at 4:14 pm Will California overtake Nevada as the largest U.S. slot market by 2019? Will oversaturation choke the social casino revenue stream? Will Illinois and Michigan legalize online poker? Will the major sports leagues gain a piece of the action from sports betting? Rather than just repeat numbers and add commentary, the team at Eilers & Krejcik Gaming used their session at last week’s Global Gaming Expo to offer a few predictions on where the sectors covering gaming equipment, social casino, online gaming, and sports betting might be headed in the next few years. Todd Eilers, who founded the Southern California-based research and advisory firm, said the ideas were based on market numbers from the various gambling equipment industries. For example, 81 percent of last year’s estimated $6.9 billion worldwide gaming equipment sales was directly linked to slot machines. He said the total figure is on pace to reach $7.1 billion this year. His bold prediction was that California’s tribal casino market would eclipse Nevada as North America’s largest slot machine revenue-producing market next year. The prediction isn’t based on number of machines – Nevada has twice the number of games as California – but on win per day per machine. Eilers, who oversees research into gaming equipment and technology, estimated California will generate $8.1 billion in slot revenue next year, based on an average win per day of $300 on each of the state’s 73,000 slot machines. He predicts Nevada’s win per day will be $150 from each of the Silver State’s 161,000 games. He expects some merger deals to take shape between U.S. gaming equipment manufacturers and land-based and interactive European gaming companies. Eilers also believes one more state will legalize slot machine route operations, joining Nevada, Illinois and other states. He cited Indiana, Missouri, Ohio and an expansion to Pennsylvania’s fledgling market as the potential states. “There are 106,000 slots currently installed in 10 legal route markets in North America,” Eilers said. “We believe there is untapped potential for an additional 200,000 to 300,000 incremental games.” Adam Krejcik, the firm’s head of digital and interactive gaming research, said the investment community no longer questions the value of social casino gaming. He cited $10 billion in mergers in the last five years, which included the $4.4 billion sale of Playtika by Caesars Entertainment to a Chinese consortium and Aristocrat Technologies’ acquisition of Big Fish Games from Churchill Downs for $990 million. “The social casino is no longer viewed as a gateway to real money gambling in the U.S.,” Krejcik said, noting the $3 billion in revenue produced by social gaming in 2017. He expects that figure to rise to more than $6 billion by 2021. Krejcik predicted the conversion rates for social gaming – from customers playing for free to those willing to pony up a few dollars for virtual tokens – will remain steady. The market, he said, has become saturated. Many of the social casino companies will also look to expand beyond casino games into other entertainment genres. Krejcik said small changes will help the market grow. “Improving conversion rates and driving higher monetization is easy to say in principle, but much harder to execute,” Krejcik said. Chris Grove, who tracks sports wagering and emerging verticals, said New Jersey drives the current three-state online gaming market, which includes Nevada and Delaware, and dismissed concern that the state would be hurt by Pennsylvania’s entry into the market. New Jersey currently has 19 different online gaming brands. “Each new brand has appeared to result in net growth for the market,” Grove said. “The open question (is) when will the market reach (its) saturation point?” He added that states, including Illinois and Michigan, are looking at legislating online casinos as a package with sports betting. As for sports betting, the nationwide market grew quickly after May’s U.S. Supreme Court ruling that killed the Professional and Amateur Sports Protection Act. Delaware, New Jersey, Mississippi and West Virginia have all launched sports betting at casinos and racetracks. A New Mexico Indian casino is opening a sports book this week, and Rhode Island and Pennsylvania sports betting operations are in the works. Grove said casinos operators are in a rush to get ahead of the competition. “It’s like a plane being assembled in mid-flight,” he said. “There’s been too much too fast, and there are bound to be some growing pains.” Grove is certain any hint of federal regulatory action on sports betting will die off, but he wouldn’t be surprised if the major sports leagues, which have been seeking some form of revenue share from the states, gain “a couple ounces of flesh.” “The leagues have shown a willingness to act aggressively and may have sent a message in West Virginia, despite resistance from lawmakers and regulators,” Grove said. “They may be able to split the sports betting lobby.” Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at firstname.lastname@example.org. Follow @howardstutz on Twitter.