As online casinos continue to flourish in Michigan, a big question that many in the state still have is, “is iGaming cannibalizing retail casinos?”
According to a recent study from Eilers & Krejcik Gaming, that answer is “no.”
iDEA Growth recently commissioned a report from EKG that asserts that online casinos (also known as iGaming) in the state, as well as nationally, are not cannibalizing brick-and-mortar casinos.
In fact, their data shows that it’s not only an added revenue stream for the land-based casinos, but iGaming has boosted revenue for the commercial casinos.
Looking at all states that have legalized online casinos, the report found an average quarterly revenue boost of 2.44% from the introduction of iGaming across the six states.
This report looked at a set time frame for land-based casino revenue prior to the introduction of iGaming. It then used the same time frame to look at it post-online casino launch.
Each of the six states showed growth in revenue percentages, with Michigan being among the leaders.
There are definitely some caveats to the report, especially with Michigan. However, it shows that other factors outside of Michigan online casinos are what have hindered the Detroit casinos in recent years.
Michigan GGR grows nearly 5% since iGaming launch
For Michigan, EKG only used data from the three Detroit casinos – MGM Grand Detroit, MotorCity Casino and Hollywood Casino at Greektown. Though they reached out to the tribal casinos, they did not receive any responses.
EKG looked at the eight quarters of land-based casino revenue prior to the launch of online casinos. It then looked at the eight quarters following the launch and compared the two.
Prior to launch, the eight quarters were Q1 of 2019 to Q1 of 2021. Post-launch was Q1 of 2021 to Q1 of 2023.
In that time, the change in land-based gross gaming revenue grew 4.89%.
Adjusted gross revenue shows greater growth
The adjusted gross revenue has an even stronger picture for the EKG timeline. The AGR for the Detroit casinos has grown by 21.6% when averaging out the eight quarters pre-and-post-launch for online casinos.
Here’s how the AGR numbers look
- 2019: $1,454,274,694
- 2020: $620,385,027
- Average Quarterly Revenue: $259,332,465
- 2021: $1,266,762,531
- 2022: $1,256,974,742
- Average Quarterly Revenue: $315,467,159
Pandemic factors into EKG study’s results
With this information, there are some important things to consider.
In the eight quarters prior to the online casino launch, that included all of 2020. During that time, the Detroit casinos were closed entirely from March 16 to Aug. 5. They were also closed from Nov. 18 to Dec. 20. When open after March, they were under 15% maximum occupancy.
The pandemic also has factored into the retail numbers post the launch of online casinos in January of 2021.
In 2021, the Detroit casinos had capacity limitations until June 22. Even after that point, vaccine requirements were in place until May of 2023. That also could have factored into the 2022 revenue total.
Detroit casino revenue falls for second consecutive year
While the EKG report is positive for online casinos not cannibalizing the Detroit casinos, it’s still clear that those casinos haven’t returned to their pre-pandemic glory.
The 2019 revenue of $1.45 billion still stands as the yearly record for the Detroit casinos.
The last three years have all seen similar results.
- 2021: $1,266,762,531
- 2022: $1,256,974,742
- 2023: $1,222,794,216
It’s hard to say just where the Detroit casinos would be had the pandemic not occurred. There are patrons who attended casinos regularly prior to 2020 that may never find themselves comfortable returning at the same rate.
“Michigan is one of those markets where it’s really difficult to, to kind of come up with a comprehensive analysis because of both COVID and other issues that have impacted the state’s land-based casinos,” John Pappas, iDEA Legislative Director, told PlayMichigan.
“But, I think it’s pretty clear based on this data that iGaming shouldn’t be considered a contributing factor to any land-based declines. In fact, overall casino revenue is growing in states like Michigan.”
Prior to strike, 2023 commercial revenue was on pace to best 2022
Though there has been a decline each year since 2021, the Detroit casinos were on pace to best 2022’s total this year. However, the Detroit casino workers’ strike that took up half of October and the majority of November impacted collective revenue.
Prior to the strike, the casinos were averaging $106.5 million per month in gaming revenue. That was better than both 2021 ($105.6 million) and 2022 ($104.7 million).
The 2024 revenue year didn’t get off to a good start, as the three casinos brought in just $93.9 million in January. That was the lowest monthly total that wasn’t impacted by the strike or pandemic since June of 2005.
Online casinos hit nearly $2 billion in 2023
While Detroit’s retail casinos have found a bit of leveling off in recent years, the online casino industry in Michigan has still yet to reach its peak.
The $1.92 billion in revenue Michigan recorded in 2023 was a 21.6% jump from the $1.58 billion it recorded in 2022.
The state closed 2023 with $181.4 million in revenue for December, the highest month it had ever recorded at the time. That was then topped by January with $181.9 million.
Pappas believes that online casinos are going to continue to push revenue numbers even higher in the years to come.
“The trend we’re seeing in all these iGaming states is intense growth. I think, for now, we’re in that kind of high-growth phase, where there’s a real strong emphasis on customer acquisition, and crossover of customers from sports betting into iGaming,” Pappas said. “So, I think you’re going to continue to see growth over the next five years at least in all of these markets that have iGaming platforms.”
Unclear how iGaming revenue ties to each retail casino
While it is unclear just how much of the online casino revenue each retail casino receives, in the case of the MGM Grand and Hollywood Casino, both are owned by the same company as their online product.
MGM Resorts International receives the revenue of both MGM Grand Detroit and BetMGM Casino Michigan. The same goes for PENN Entertainment, which owns Hollywood Casino at Greektown and Hollywood Casino Michigan.
For those companies, being able to keep customers under their umbrella through either land-based or online play is a win-win situation.
“I’ve heard directly from casino executives in Michigan, who have said that online gaming has been a net positive for their business because of the ability to modernize their approach to meeting their customers where their customers are,” Pappas said.
“So whether they’re coming into the casino, or they are 100 miles away from the casino, they can still connect with their customers through the online channel.”
That cohesion doesn’t apply to most of the casinos in Michigan. MotorCity Casino is owned by the Ilitch family, while FanDuel Casino Michigan is owned by Flutter.
Most tribal casinos don’t own their online casino either, though four different tribes have elected to operate their own iGaming platform in order to bring in a bigger chunk of the online revenue.
EKG report finds retail and online customers differ
The basis of the EKG report was to note that online casinos were not cannibalizing the brick-and-mortar casinos in their respective states.
The study found that online casinos attract a different customer base than retail casinos.
Where land-based casinos require more time investment and have narrower stakes, they provide a broader overall experience.
Online casinos require little time investment and have broader stakes to wager with, but have a narrow overall experience. Online casinos are also able to update their gaming library with greater ease, providing new games more frequently than a retail casino.
In the report, EKG asked those operators to look at their player databases for the crossover between their online and land-based players in states where both product types are available.
The average response was that just 7% of customers play both online and at retail casinos.
EKG views this minimal crossover between the two sets of customers as one of the biggest reasons that cannibalization has not been observed.
“Roughly 66% of (our online casino) players (are) new to our ecosystem or reconnected former patrons. The average age of these players is much younger than our core land-based player, which highlights the lack of cannibalization iCasino has had on our brick and mortar business,” PENN Entertainment CEO Jay Snowden said in the report.
Report could help further iGaming expansion
Through six factors, EKG determined that the net impact online casinos have on land-based gaming is +1.7% in gross gaming revenue.
Those factors are:
- Demographic segmentation
- Omni-channel participation rates
- Casino availability
- Wallet growth
- Cross-sell
- Margin analysis
Online operators are hoping this report will encourage states that are hesitant to consider legalizing online casinos a different perspective.
“It’s no surprise that companies like MGM, and PENN National are very bullish on pushing for iGaming in other jurisdictions like Maryland,” Pappas said. “They’re not doing it because they think it’s bad for their business. They’re doing it because they know that it is additive to their land-based investments.”
Currently just six states have legalized online casinos while 29 states plus Washington DC have legal mobile sports betting.
