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Spectrum Gaming Says Online Gambling Helps Land-Based Casinos

Cliff S, Jun 20, 2017 10:23 UTC

Spectrum Gaming Group, the independent research firm which released the groundbreaking SIGHT study in 2002, released a white paper on the future of American gambling in June 2017. The study found that online gambling helps land-based casinos in a number of ways.

For that reason, Spectrum recommands that brick-and-mortar casino companies should embrace online gambling, instead of trying to squelch it. Having an online casino helps land-based casino companies strengthen brand recognition and loyalty while a player is off-property. It also creates new customers in the younger player demographics casinos want to attract.

Ultimately, land-based customers with an online gaming account make more visits to land-based casinos, while spending more when they make these visits. The white paper, which is called “Online Gaming from Land-Based Perspective: Observing 15th Anniversary of SIGHT”, updates the findings from the original “Spectrum Internet Gaming Heuristic Theorem” from 15 years ago. The full study is located in a pdf here.

Synergy in Online and Live Gambling

Spectrum Gaming makes the case that online gambling supplements brick-and-mortar casinos, which should look at the Internet as a supplement to their business model. The idea that Sheldon Adelson and old-style brick-and-mortar casino executives have — that online gambling is a competitor — is tackled head-on.

It is noted that only 11% to 20% of live gamblers also fall into the online gambling community. In other words, the two forms of gambling are, for the most part, mutually exclusive. They are synergistic, not competitive.

Similar Examples from the Past

A number of prior examples are noted. Conservative baseball owners in the 1920s thought it was crazy to let radio stations broadcast baseball games, because they saw it as giving away their product for free. Instead, radio proved to be free advertisement for baseball. It was a way to get whole families to love baseball, so they would come out to the ballpark from time to time.

Movie executives in the 1950s were threatened by television. Later, movie studios became producers of TV content, while TV became a secondary market for films. In the 1980s, those same movie studios sued to keep VCRs from showing movies. When the US Supreme Court rejected the film studios’ arguments and home video rentals became common, it made movies far more popular and profitable than they ever had been before.

Like those cases, land-based casinos should see online gambling as a way to get free advertisement and to reach a much bigger customer base. Spectrum Gaming Group shows not only that the online casinos do not cannibalize brick-and-mortar revenues, but they also make it more likely that online gamblers will spend in live casinos. Though counter-intuitive, the two business models help one another.

AC Examples: Tropicana and Golden Nugget

To back up those arguments, Spectrum Gaming breaks down the numbers for Atlantic City casinos like Tropicana, Caesars, Golden Nugget, and the SugarHouse Casino brand. Golden Nugget Casino and Tropicana Casino make good examples.

Golden Nugget players who signed up for an online casino account increased their land-based spend in Atlantic City by 15%. Similarly, long-time Tropicana players who signed up for an online account increased their total land-based spend after signign up.

Multiple Revenue Streams

Spectrum’s conclusion is that traditional casino executives need to view online gaming portals as another potential revenue stream. The execs need to view these not as competing operations, but a way to diversify their customer base and create multiple revenue streams. As an investor diversifies their portfolio, a casino executive should diversify their potential range of gambling winnings.

Taking those insights to their logical conclusion, casino executives should not fight against online casino and online poker legislation. Though it is counter-intuitive, they instead should encourage the expansion of online gambling regulation in the United States. To fight against online gaming expansion is to cost themselves money.

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