Andrew Tottenham - October 4, 2014

Does iGaming compete with land-based gambling?


In the last couple of years there has been quite a debate as to whether iGaming competes with land-based gambling opportunities. This debate has been fuelled by various initiatives to legalise iGaming with both sides of the debate trotting out statistics to support their case. This article is a qualitative look at both activities and draws conclusions.

There is evidence to suggest the crossover for land-based casinos is between 10% to 15% of the land-based customer base. The evidence is drawn from polling iGaming customers about their land based activity and vice versa. The figure for the betting industry is much higher.  Customer take-up of iGaming in New Jersey and Nevada has been poor and cannot be described as the saviour of New Jersey’s casinos.

I believe take up and crossover rates, the extent to which iGaming will compete with its land-based rivals are dependent on a few things, not least of which; the iGaming product offer and the extent to which land based gambling is artificially constrained by regulation.

First let’s take a look at betting, which has been phenomenally successful in attracting a new, younger base with its expanded online offer and migrating some of its existing customers to their online portals. The internet and its various methods of access; pc, tablet, smartphone is ideally suited for transactional interactions; matching buyer and seller, those seeking information with the information, etc. The rise of Amazon and other online retailers is purely the consequence of the ease of the transaction and their ability to fulfil the order. Finding the product and buying it has never been simpler. Fifteen to twenty years ago, with our slow dial-up modems we could only dream of the possibilities that the internet might bring.

Betting is a transaction. I have an opinion that this team will win or lose and I place a bet accordingly. The activity of placing a bet is not entertaining, in some cases far from it! It is watching the game, race or event that provides the entertainment. Online betting makes it much more convenient to place a bet when compared to a retail betting outlet and allows a customer to watch the event in the comfort of their home, office, racetrack or anywhere instead of at the retail betting outlet. It is similar with lotteries. Buying a lottery ticket in a supermarket or convenience store could hardly be described as an entertaining experience. Watching the draw live or checking your numbers in the next day’s newspapers is where the entertainment comes in. It’s limited entertainment value, I know, but that is where it happens.

Placing a bet or buying a lottery ticket is not a social activity; it tends to be a solitary activity. Perhaps there is some interaction with the person at the till but it has as much entertainment and social interaction as withdrawing your money from the bank. That is why online is the ideal medium for this activity.

I argue that gambling in a casino is slightly different. Yes, there is the transactional element; buying chips, placing a bet but the outcomes are part of the game; what number did the ball drop in to? Did I get the ace on my face card? People sitting around a blackjack table (21 table) quite often talk during play, sometimes not very pleasantly!  But they do talk and interact with the other players and the dealer. The same can be said of a roulette, baccarat or craps table. Sometimes people sit silently and do not interact with the other players but nevertheless it is a social activity; a shared experience. This is a social activity or shared experience in the same way that watching television or a film with family or friends is a shared experience. People do not necessarily talk during the program or film but they prefer watch with someone else rather than alone.

Some argue that playing slot machines is not a social activity. I have spent much time watching slot players and conclude that most of them only talk/interact with other people when they leave a machine to move to another or cash out.  Even if they came to the casino or slot parlour with friends very little social interaction takes place while they are playing, sometimes only to celebrate a win. But I would argue that playing slots in a casino is a social activity the same way that going to see a film is. It is the shared experience that is important to most players.

The demand for gambling is universal, although some cultures have a higher propensity to gamble (propensity is the percentage of the population that will gamble) all cultures gamble. We like it, humans invented it. The legislators in Europe have constrained land based casinos through restricting the number and location of casinos or through punitive taxation. Restricting people’s access to land based casino gambling only drives them to seek a similar activity online. It is not possible to restrict the number of machines or prizes in the online world; real estate is cheap. Governments have tried to stop their citizens gambling online with blacklists and/or banning credit card transactions but just as with prohibition they are failing. If people cannot find what they want legally they will go and find the activity on illegal sites and there are still many of them around.

With this in mind I believe that where land based casinos constrained or not, iGaming casino games only compete for those players who are not looking for the social experience.  Those who like to gamble in a social setting will only do so online if they cannot easily access the land-based alternative, in other words their product of choice is not easily available.  The real threat to land based casinos will come when the technology (which exists today) is generally available that will allow a group of friends to get together in front of a large screen which becomes their own private blackjack table, each person having their own account and betting their own chips.