Thinking out loud about the Detroit casino workers’ strike.
First, it seems obvious the growing prevalence of online casinos in Michigan will have a major impact on this labor dispute, which is now in its second week.
In comparison to retail casinos, the online versions require very few people to operate. That makes them a threat to jobs at retail casinos.
I haven’t seen the unions say it publicly, but I wouldn’t be surprised if the online casino threat is one of many reasons striking workers are trying to strengthen and solidify their positions at MGM Grand Detroit, MotorCity Casino and Hollywood Casino at Greektown.
DETROIT CASINO STRIKE UPDATES AS THEY BREAK:
Online casinos may give casino companies leverage in strike negotiations
As for the casino companies, online casinos may provide some leverage in negotiations.
It’s not unreasonable to suspect some Detroit retail casino customers that refuse to cross picket lines will turn to, or increase their gambling, via online casinos.
The three casinos remain open. But recent PlayMichigan estimates are that business is down around 50% costing the casinos somewhere between $1.5 million and $2.5 million daily.
But, two of those three casinos — MGM Grand Detroit and Hollywood Casino at Greektown — are still able to conduct business online and, perhaps, make up some of the losses.
MGM owns and operates BetMGM Casino Michigan.
PENN Entertainment owns and operates both the Hollywood Casino at Greektown and the Barstool Sportsbook, which will soon be rebranded as ESPN Bet.
That means those casino companies may not be in a hurry to settle the strike since money is still flowing. That gives them leverage at the bargaining table.
It’s a little more complicated with the MotorCity Casino owned by Detroit’s Illitch family.
The MotorCity Casino’s online partner is FanDuel Casino Michigan. But we have no idea what, if anything, the owners of the MotorCity Casino receive from bets made through FanDuel’s Michigan casino or sportsbook. So, likely, the strike is costing the MotorCity Casino more in terms of lost revenue.
The preferable option is coming to a fair deal, but in the meantime …
This is not to suggest this is the casino companies’ intent or plan, nor am I suggesting they may be less interested in ending the strike.
The retail casinos clearly provide synergy with their online brands and vice-versa. In the case of MGM, it operates both the number one retail and online casino in Michigan.
Clearly, the preferable business option is settling the dispute fairly and returning to full operation. But not if a settlement requires a huge increase in its employee costs due to a new contract.
And, there’s no denying retail casinos are costly to operate. Driving more business to online casinos would increase profitability.
Will Michiganders cross the virtual picket line?
We will know more for sure about how this all shakes out when October revenue reports are released sometime in November.
Then we will know exactly how much the casinos lost during the strike and what, if anything, they gained in terms of online business.
In the case of MGM and PENN, the question will be whether their customers stay loyal during a strike.
Yes, Motown is famous for its loyalty — just ask Lions fans. But Detroit is also a hard-working union town that stands up for workers’ rights.
Currently, the Detroit casino workers’ strike is the third major labor disruption in the city.
Despite a tentative deal between the UAW and Ford, a huge number of some 45,000 auto workers are still on strike with deals yet to be reached with GM and Stellantis. Also, some 1,000 Blue Cross Blue Shield of Michigan health insurance workers are currently walking the picket line.
Could the Detroit casino strike drive online business away from BetMGM and Barstool to the benefit of other operators? It’s certainly a possibility. If so, that would increase the impetus for the casino companies to resolve the strike — which is a good thing.
The benefits of online casinos in Michigan
Despite the possible impact on jobs at Michigan retail casinos, this is not to suggest online casinos are a bad thing.
It’s not even to suggest online casinos cannibalize retail ones. That theory has been debunked many times before.
For example, revenue figures from Detroit casinos, released Friday, show revenue is up marginally (0.6%) through September (before the strike started) compared to this time in 2022. That proves bricks-and-mortar casinos are still popular. They provide a completely different gambling experience than MI online casinos.
The fact that online casinos in Michigan are up 23% in revenue through the first nine months of 2023 compared to first nine months of 2022 proves both online and retail casinos can coexist successfully. MGM is a prime example that both kinds of casinos can flourish.
So, while retail casinos provide more jobs, online casinos do provide an incredible revenue source for the state of Michigan.
Michigan is forward thinking as one of only six states to authorize online casinos. Regulating online casinos has better protected Michigan residents from an activity they were doing illegally before legalization.
And, taxing the activity has returned over $1 billion to the people of Michigan in just 32 months — money that provides important support for responsible gambling initiatives, first responders and Michigan’s School Aid Fund.
Michigan was the fastest state to achieve $1 billion in online casino tax revenue. And, in September, it became the fastest state to surpass $4 billion in online casino handle (bets).
Clearly, they are an important economic driver in Michigan.
Plus, the number of games, options, live dealers and more keeps growing at Michigan online casinos. That will help sustain and grow business.
Detroit mayor Duggan on the benefits of online casinos to the city
Detroit mayor Mike Duggan previously said the city’s cut of tax revenue from online casinos helped offset loses when casinos were closed during the COVID-19 pandemic.
In March 0f 2022, while giving his proposed budget for the next fiscal year, Duggan said this about the impact of online casino tax revenue on Detroit.
“In December 2019, the casinos went to Lansing and asked for legislation to allow internet gaming,” Duggan said. “We struck a deal, with the support of our Detroit delegation, that the city got a share of the Internet gaming…that Internet gaming revenue, which was new to us, has so far offset the losses of our income tax revenue.”
So, one presumes that will help offset some hefty losses already from the retail casino strike.
From the three casinos alone, the city of Detroit is losing out on between $190,000 and $320,000 in daily tax revenue and the state is missing between $120,000 and $202,000 from its tax share of the city’s casinos.
That’s a collective daily tax revenue loss to Michiganders of between $310,000 and $522,000.
As I write, the strike is in Day 11. That means between $3.41 million and $5.742 million in tax revenue has been lost already.
Best option for all is end the strike soon with a fair deal
While online casinos could help offset some of that loss, the double-edged sword is that they could be impacting jobs at those casinos and perhaps the speed in which a deal can be reached to end the strike.
Naturally, the best option is for workers to get a fair deal soon and for Detroit casinos to return to full operation.
As it stands, workers are suffering without a paycheck and revenue is assuredly down to the casinos, state and city.
The biggest fear is that online casinos become a sticking point in negotiations — one that comes at the expense of critical jobs in the city in the midst of an impressive revival.