Casinos began to open again in May after being closed for half of March and all of April. Even the states that did open, however, will only have revenue for a few days. Louisiana is the only state that has reported so far, gaming revenue from the state’s 14 casinos and 3 racinos was down 69% to $70 million. VLTs on the Bayou reported $23.9 million in win. Casinos in Mississippi, Missouri and South Dakota were also reopened in May, but have reported no results yet, except that the lottery in South Dakota had $24.2 million in VLT revenue. There was, however, some fairly significant gaming revenue received in May; it just didn’t come from brick-and-mortar casinos. It came from online gambling.
Four states have online gaming in some form: Delaware, Pennsylvania, New Jersey and Nevada. Nevada has not published its May numbers yet, and Delaware reported $1.1 million in win on $29.4 million wagered by 993 players. Only New Jersey’s and Pennsylvania’s numbers rise to the level of significance. New Jersey has had online gaming longer than the other states, although it did not start out grabbing headlines; at the end of its first year, 2014, the state reported $122 million in online revenue, 5% of total gaming revenue. But the numbers have grown consistently since then – in 2019, New Jersey’s reported online gaming revenue was $482.6 million, 14% of total revenue.
Shutterstock/Golden Nugget Atlantic City
In May, New Jersey reported a total of $95.9 million in gaming revenue, the majority of which came from online gaming, $85.9 million. That figure represented a 124% jump from May 2019. Sports betting added another $9.9 million on a handle of $96.3 million. Sports betting, of course, currently suffers from a lack of sports to bet on; professional soccer has just restarted in Europe, but no professional league has begun play here yet. As of right now, at least, it appears that both the NBA and the NHL will finish their seasons in neutral locations, and the NFL is maintaining that it remains on track to have a normal season. Major League Baseball, meanwhile, once again can’t seem to get out of its own way; the league’s management and the players have not been able to come to an agreement. When sports come back, the wagering can be significant: in 2019, it was $123.5 million.
Without any competition from sports, online gambling is showing its potential. Pennsylvania is years behind New Jersey, but its online play is growing rapidly. In May, Pennsylvania casinos reported $55.8 million in online gaming revenue, and online revenues more than doubled from March to May. Sports betting was $4.8 million; the total gaming revenue in Pennsylvania for May was $60.9 million, a number that also include $300K in fantasy sports. Like New Jersey, the results from Pennsylvania indicate the potential for dramatic growth in online gaming in both those states and, probably, nationwide.
The total revenue numbers from New Jersey and Pennsylvania are enticing. But at the property level, the numbers tell an even more intriguing story. During normal times in Pennsylvania, Parx leads the state’s 12 casinos at an 18% or better market share, with Wind Creek – the former Sands – in second place with a 15% share and Rivers Pittsburgh in third with an 11% share. In the online world, in May, the normally fourth place Rivers Philadelphia was first with a 31% market share, and Parx was in fourth place with a 12% share, while Wind Creek and Rivers Pittsburgh reported no online revenue at all.
New Jersey is just as startling. Borgata traditionally has over a 25% market share and produces more than twice as much revenue as any other casino. The Golden Nugget’s casino revenue is barely one quarter of Borgata’s, but when the online revenue is added in, Golden Nugget moves up the list dramatically. For all of 2019, the Golden Nugget was second on the overall market share list, just short of 50% of Borgata. However, in May the Golden Nugget recorded a 31% market share, compared to 18% for Borgata.
In both states there is clearly a different set of skills for an online casino operator as compared to a bricks-and-mortar one. It is a lesson that is not likely lost on either Borgata or Parx. Almost certainly, both casinos are hard at work studying the issue and developing a strategy to improve their online presence and market share. They are not likely to be the only operators in the nation looking on and adjusting strategies. But, save for those four jurisdictions, there is no opportunity. Not yet, anyway.
The pandemic has revealed a fatal flaw in everyone’s thinking. Until March of this year, casinos and other major businesses in the country believed that life would continue as it always has – steady, with occasional periods of challenge. Businesses have always closed during natural disasters. Many have failed during economic crises; sometimes whole industries have disappeared with the advent of new ways. Think saddles, buggy whips and drive-in theaters (although, with social distancing now the new norm, drive-ins seem to be making a gradual comeback.) But never before has the economy come to a dead stop, with some industries closing down completely, as has just happened. That possibility will have to be factored into business plans in the future. For gaming, that means keeping more cash on hand, reducing debt, and lobbying for online gaming as a backup plan.
Enter Michigan. Lawmakers in Michigan have already moved to legalize online gaming; Detroit casinos are still closed with no opening date in sight, and the city depends on gaming taxes. It is not alone. Other jurisdictions which depend on gaming taxes are going to be looking at New Jersey and Pennsylvania. Currently, most states are focused on getting gaming and the rest of their economies reopened, but the lessons of the shutdown will resonate long after the crisis has passed. A push to expand online gaming will likely be one of the long-term effects of the pandemic, and every casino operator in the country will be studying the day that the tiny Golden Nugget defeated the mighty Borgata in cyberspace.
