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In recent years, online sports betting has experienced a significant surge throughout the United States.
However, online casinos have not experienced that surge in popularity.
Although some states have experienced significant success with the legalization of internet gaming, there are still certain states that exhibit reluctance.
Michigan has proven that the fear of online casinos overshadowing retail casinos is unfounded.
Six states with online casinos
Michigan has now joined the ranks of states with legalized internet gaming, alongside Connecticut, Delaware, New Jersey, Pennsylvania, and West Virginia.
In contrast, more than 20 states have legalized online sports betting.
In the year 2021, the legalization of sports betting was observed in 10 distinct states. However, the process of legalizing internet gaming has been considerably slower and more fragmented.
In 2012, Delaware became the first state to accomplish it, and in 2013, New Jersey followed suit. Pennsylvania then legalized it in 2017, four years later, with West Virginia joining in 2019.
Internet gaming was legalized in Michigan in late 2019 and officially launched in January 2021. Connecticut became the most recent state to legalize internet gaming in October 2021.
Online casinos were always included in Michigan’s plan when they opted for legalized sports betting.
“Even before the Supreme Court granted permission for the state to engage in sports betting, certain legislators displayed a keen interest in this matter. Their focus primarily revolved around the introduction of iGaming bills, which became their primary objective within the legislative framework,” stated David Murley, Deputy Director of the Michigan Gaming Control Board.
Fears of online cannibalizing retail casinos
Many states launched online sports betting without hesitation due to the lack of an established sports betting industry in their respective jurisdictions.
The situation with casinos is different.
The tax revenue of several states heavily relies on retail casinos, causing both casino operators and legislators to be cautious about introducing online gambling. Their concern stems from the potential negative effects it may have on the traditional brick-and-mortar casinos.
In states where internet gaming has been legalized, the situation has been different.
According to Andrew Winchell, FanDuel’s Director of Governmental Affairs, the states recognize the positive impact on both land-based properties and tax revenue. Moreover, he believes that online sports betting complements the retail market rather than competing with it. It not only expands the overall market but also fosters a symbiotic relationship between customers who can engage in both online and retail sports betting.
Sheldon Adelson’s impact on online casinos
Sheldon Adelson, the late founder, chairman, and CEO of Las Vegas Sands, strongly emphasized the concern of cannibalizing the retail market. Adelson, a prominent political donor, possessed a staggering fortune of $33.5 billion according to Forbes in September 2020.
After amassing his wealth from retail casinos on the Las Vegas strip, Adelson developed a strong dislike for online gambling. In 2014, he played a role in establishing the Coalition to Stop Internet Gambling and this organization continues to oppose the Department of Justice’s interpretation of the Wire Act, aiming to hinder the expansion of internet gaming.
Adelson, until his demise in January 2021, made a steadfast commitment to invest any necessary resources in preventing the legalization of online gambling in various states. Even after his passing, his influence continues to cast a long-lasting shadow on the industry’s expansion.
Murley expressed that although Michigan did not experience this phenomenon, he believes that in certain other markets, the influence of Sheldon Adelson’s legacy, his opposition to iGaming, and his political engagement to halt its progress have significantly impacted the situation. Murley acknowledged that overcoming this influence might require a considerable amount of time in some states.
A look at the numbers
Obtaining a comprehensive understanding of the extent to which online casinos are influencing the retail sector is challenging. The pandemic has dealt a significant blow to the retail industry, and its impact on the industry’s figures has already been substantial in recent years.
Before the pandemic, the total adjusted revenue collected for 2019 from Detroit’s three retail casinos (MGM Grand Detroit, MotorCity Casino, Hollywood Casino at Greektown) can be summarized as follows:
- The total cost of MGM Grand Detroit amounts to $623.5 million.
- MotorCity Casino: $493.6 million
- The Hollywood Casino at Greektown has generated a whopping $337.2 million.
MGM Grand and MotorCity achieved their highest total records to date, whereas Greektown experienced its highest total since 2012.
Due to the complete closure of casinos for several months in 2020, the numbers from that year cannot be considered in the current discussion. Even in 2021, casinos faced restrictions on the number of patrons allowed and the mandatory use of masks, which had an impact on their revenue. However, considering the launch of online casinos for almost the entire year, let’s now examine the contribution of these three establishments to retail revenue in 2021.
- The cost of MGM Grand Detroit amounts to a staggering $554 million.
- MotorCity Casino: $438.3 million
- The Hollywood Casino at Greektown brings in a whopping $274.5 million.
The revenue figures for the initial five months of 2022 have been disclosed. Below is an overview of the current standings and projected performance for the entire year of the three retail casinos.
- The current revenue for MGM Grand Detroit stands at $257.6 million, with a projected pace of reaching $618.2 million.
- MotorCity Casino is currently on track to generate $405.8 million, with its current earnings standing at $169.1 million.
- The revenue generated by Hollywood Casino at Greektown amounts to $111.9 million, while its total earnings reach $268.6 million.
What the numbers indicate
MGM is projected to achieve a similar outcome as in 2019, which is a positive indication considering their dominant position in the online market in Michigan. BetMGM Michigan holds an impressive 35% share of the state’s online casino market overall, and this figure has exceeded 40% for the past three months.
As of now in 2022, BetMGM MI has accumulated $214.1 million in AGR, hinting at an estimated total of $513.8 million by the end of the year. If achieved, this would propel MGM’s overall revenue to surpass $1 billion for the year.
MotorCity’s retail revenue is projected to decrease by approximately 18% in 2022 when compared to 2019. The company has partnered with FanDuel for its online product, which currently holds the second position in Michigan’s online casino revenue competition.
As of 2022, FanDuel MI has accumulated a total of $90.6 million in AGR, indicating a projected yearly revenue of $217.5 million. When combined with the estimated revenue from the retail sector, the overall revenue surpasses $620 million, which is significantly higher than the highest retail revenue recorded in 2019.
In terms of projected retail decline, Greektown is anticipated to experience the largest dip, estimated at approximately 20% compared to its 2019 performance. Meanwhile, its online counterpart, Barstool, has generated $20.5 million in AGR (Annual Gross Revenue) in the current year of 2022. This trend suggests a potential total of $49.1 million for Barstool’s AGR by the end of 2022.
The projected combined revenue for Greektown would amount to $317.7 million, which falls short of its peak retail revenue of $352.8 million in 2011. However, Greektown has been experiencing a downward trend in revenue since then.
Tax revenue a big asset
There is no denying that Michigan has seen a significant increase in tax revenue for the state ever since internet gaming was introduced.
In 2019, the retail casinos in Detroit contributed a total of $117.8 million towards state tax revenue and $184.2 million towards city and local taxes.
The trio contributed a total of $102.6 million in state taxes and $160.8 million in city/local taxes in 2021.
Incorporating $112.1 million from state taxes generated by online casinos and an additional $55.3 million from city and local taxes.
These three online casinos have generated over $60 million in state tax revenue throughout the first five months of 2022.
