Michigan Proving Online Casinos Don’t Cannibalize Retail Casinos

Written By Drew Ellis on July 12, 2022

The United States has seen online sports betting explode across the country in recent years.

Yet, online casinos haven’t seen that boom.

Despite a lot of success from states that have legalized internet gaming, others remain hesitant.

With the fear of online casinos cannibalizing retail casinos remaining a big reason, Michigan has shown that not to be the case locally.

Six states with online casinos

Michigan joins Connecticut, Delaware, New Jersey, Pennsylvania and West Virginia as states with legalized internet gaming.

By comparison, online sports betting is legal in over 20 states.

In 2021, 10 different states legalized some form of sports betting. Legalized internet gaming has been much slower and spread out.

Delaware was the first to do it in 2012, followed by New Jersey in 2013. It was then four years before Pennsylvania legalized it in 2017, following by West Virginia in 2019.

Michigan legalized it at the end of 2019, and it eventually launched at the end of January 2021. Connecticut was the latest to legalize internet gaming in October of 2021.

When Michigan decided to pursue legalized sports betting, online casinos were always part of the plan.

“Some legislators took a very early interest in this even before the Supreme Court allowed the state to do the sports betting. And so, they were pushing iGaming bills and that was kind of their mission in the legislature,” said David Murley, Deputy Director of Michigan Gaming Control Board.

Fears of online cannibalizing retail casinos

Because sports betting wasn’t an established industry in states, launching online sports betting came without hesitation in many of them.

That’s not the same situation with casinos.

Retail casinos are a big part of several states’ tax revenue. Both casino operators and legislators have had hesitation about bringing in the online product over fears of it heavily impacting the retail product.

For the state’s that have legalized internet gaming, that has not been the case.

“I think that the states understand that it is a boost for the land-based properties and a boost for the state and tax revenue, and it doesn’t cannibalize the retail market,” said Andrew Winchell, Director of Governmental Affairs at FanDuel. “It just helps grow the market and also grow the sports betting market at the same time. The two do have a synergy for customers to go back and forth between the two sides.”

Sheldon Adelson’s impact on online casinos

The fear of cannibalizing the retail market is something that was heavily pushed by the late Sheldon Adelson. Adelson was founder, chairman and CEO of Las Vegas Sands and a large political donor. Forbes listed Adelson as having a $33.5 billion fortune in September of 2020.

Adelson had disdain for online gambling after he created his fortunes off retail casinos on the Las Vegas strip. In 2014 he helped form the Coalition to Stop Internet Gambling. That group still fights against the Department of Justice’s interpretation of the Wire Act in hopes of slowing down the growth of internet gaming.

Prior to his death in January 2021, Adelson vowed to spend whatever it took to stop states from legalizing online gambling. His influence continues to have a lingering impact on the growth of the industry.

“This didn’t seem to happen in Michigan, but I do think in some of the other markets, the legacy of Sheldon Adelson, and his stance towards iGaming and his political involvement to stop iGaming has, has had a major effect,” Murley said. “That’s probably going to take some time to overcome in some of these states.”

A look at the numbers

It’s tough to get a perfectly clear picture on how much impact online casinos are having on retail. With the pandemic being a major blow to the retail industry, numbers have been greatly impacted already in recent years.

Just looking at Detroit’s three retail casinos (MGM Grand Detroit, MotorCity Casino, Hollywood Casino at Greektown), here’s the total adjusted revenue collected for 2019, prior to the pandemic:

  • MGM Grand Detroit: $623.5 million
  • MotorCity Casino: $493.6 million
  • Hollywood Casino at Greektown: $337.2 million

Those were all-time records for MGM Grand and MotorCity, while Greektown had its highest total since 2012.

The 2020 numbers can’t factor into the discussion since casinos were closed entirely for months. Even in 2021, casinos dealt with patron limitations and mask requirements that impacted numbers. With online casinos launched for nearly the entire year, here’s a look at what the three did for retail revenue in 2021:

  • MGM Grand Detroit: $554 million
  • MotorCity Casino: $438.3 million
  • Hollywood Casino at Greektown: $274.5 million

Revenue numbers have been released for the first five months of 2022. Here’s where the three retail casinos stand and their projected pace for the entire year.

  • MGM Grand Detroit: $257.6 million, pacing for $618.2 million
  • MotorCity Casino: $169.1 million, pacing for $405.8 million
  • Hollywood Casino at Greektown: $111.9 million, $268.6 million

What the numbers indicate

MGM is on pace to finish right around where it did in 2019. That’s a good sign considering their online product is far and away the leader in Michigan. BetMGM Michigan accounts for 35% of the online casino market share in the state all-time. It has been over 40% the last three months.

So far in 2022, BetMGM MI has $214.1 million in AGR. That’s on pace for $513.8 million in 2022. The combined revenues would put MGM over $1 billion for the year.

MotorCity is on track for about an 18% drop in retail revenue in 2022 compared to 2019. It is partnered with FanDuel for its online product, which sits second in Michigan’s online casino revenue race.

FanDuel MI has $90.6 million in AGR thus far for 2022. That’s on pace for $217.5 million for the year. Combining that with the retail’s projected revenue is over $620 million, well above its peak retail number from 2019.

Greektown is the one seeing the biggest projected retail dip at about 20% from its 2019 mark. Its online partner, Barstool, is bringing in $20.5 million in AGR thus far in 2022. That’s on pace for $49.1 million for 2022.

That would leave Greektown at a projected $317.7 million in combined revenue. That’s still below its peak of $352.8 million of retail revenue in 2011. But, Greektown has been trending down in revenue since that time.

Tax revenue a big asset

One thing that can’t be denied is that Michigan is bringing in a lot of additional tax revenue for the state since launching internet gaming.

For 2019, the three Detroit retail casinos generated $117.8 million in state tax revenue and $184.2 million in city/local taxes.

In 2021, the trio generated $102.6 million in state taxes and $160.8 million in city/local taxes.

Now, add in $112.1 million in online casino state tax revenue and $55.3 million in city/local taxes.

Through five months of 2022, more than $60 million of state tax revenue has been generated by these three online casinos.

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Drew Ellis

Drew Ellis is the Lead Writer for PlayMichigan, and has contributed for multiple Play sites around the Midwest. Working in sports media since 1998, Ellis has over a decade covering sports betting before expanding into US casino markets in 2020.

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