Some New York legislators worry that online casinos would hurt retail gaming revenue. Online gambling advocates feel they’d debunked that idea years ago, but it has proven to be a hard myth to quash. Now, it threatens to stall the 2023 iGaming legalization effort.
“Cannibalization” is the colloquial term for the idea that legal online casino and poker sites could pull gamblers away from land-based gaming facilities. Put simply, retail casino owners believe gamblers will stop visiting their buildings when legal iGaming allows them to start betting online.
In April 2021, the cannibalization topic arose when Illinois seriously considered legalizing iGaming. In New Hampshire, where an online casino bill is pending, a Churchill Downs Incorporated (CDI) representative expressed the same fear on Jan. 25.
However, that’s not true, say gambling expansion advocates who spoke at yesterday’s joint public hearing in Albany. The Assembly and Senate racing, gaming, and wagering committees convened to review the first year of New York online sports betting. No online casino bill is pending in the New York State Legislature, but the Assembly has an online poker measure in committee.
While lawmakers and speakers did discuss sportsbooks yesterday, they also spent a sizeable portion of the four-hour-long hearing talking about legalizing online casino and poker gambling.
That’s when the topic of New York online casino cannibalization came up.
DraftKings, FanDuel Leaders Respond
State Sen. Pamela A. Helming, R-Canandaigua, asked yesterday about New York sportsbook cannibalization and how iGaming may further impact the retail casino and a racino in her Upstate New York district. District 54 creates a horseshoe around Rochester.
Helming said:
I’m just wondering about, has there been any discussion or talk or data presented on mobile sports betting, any impact it’s had on these brick-and-mortar facilities? And since my colleague brought up iGaming, of course, I’m sure you’ve done some studies to show how that may or may not impact these brick-and-mortar, existing facilities that are so important in our communities.
When FanDuel Group President Christian Genetski responded, he mentioned a retail casino south of Helming’s district.
He testified:
On the retail sports betting side, we’re partnered with Tioga Downs [Casino Resort], and we have a FanDuel Sportsbook there. It was opened before mobile launched and has continued since mobile has launched.
However, as is the nature of humans, New Yorkers spend more time on their couches than visiting retail sportsbooks and cheering on teams with their friends, Genetski said.
That’s why the New York FanDuel Sportsbook will send promotional offers to gamblers within a 25- to 50-mile radius of Tioga Downs Casino Resort, encouraging them to visit the retail sportsbook. He said that gets gamblers in the door, who will likely venture onto the casino floor.
Genetski agreed with earlier testimony from Robert Williams, the executive director of the New York State Gaming Commission (NYSGC), that sports betting is “an amenity” gamblers expect to see in retail casinos. It’s a social activity rather than an income center because sports bettors may still wager on their phones as they watch the TVs.
So in that way, FanDuel adds new casino customers, Genetski said.
As for New York online casino cannibalization happening, he said, “the answer to that is unequivocally ‘no.’ ”
Genetski said data from Michigan, New Jersey, and Pennsylvania show online casino gamblers are generally interested in linking to retail casinos for rewards and become “additive” to the customer base.
Plus, they’re often younger than long-time visitors. In marketing circles, that means they have longer customer lifetime value.
DraftKings’ Robins: iGaming Benefits All
Helming asked specifically about online gambling cannibalizing business for the racino in her district. In New York, the nine sportsbooks partner with retail casinos that have full licenses.
DraftKings CEO Jason Robins said everyone benefits from legal online gambling. Data show retail casinos, lotteries, and “all other forms” of gambling grew.
So New York online casino cannibalization fears are unfounded, he said.
Robins said:
The way that I would explain this is you’re bringing more people into the market. There’s marketing, there’s other things that come with the legalization. More people are able to access it because it’s more convenient.
So you’re just bringing more people into the market – that lifts everything.
Still, “there’s no upside for me” is the answer Robins says he gets from gaming facility owners who oppose online gambling legalization efforts because they won’t get to partner with an operator.
What About New Jersey Sportsbooks?
Lawmakers and stakeholders assembled yesterday did seem to agree that the New York sportsbook launch did seem to cut into New Jersey’s online sports betting marketplace.
Bloomberg reported on Monday that New Jersey sportsbooks lost 20% of their bettors when the New York market opened up.
However, state Assemblyman J. Gary Pretlow, D-Mount Vernon, took issue with calling it cannibalization.
He said yesterday that New York didn’t cannibalize the New Jersey market. The Empire State just took New Yorkers back.
Pretlow said:
We recaptured them.
BetMGM Is Bearish
Cannibalization worries from retail casino owners will kill iGaming legalization during 2023, said BetMGM CEO Adam Greenblatt.
The man running the online casino with the No. 1 market share in the US predicts that this year will have to be used to educate lawmakers and casino owners that iGaming won’t cannibalize anything.
Then 2024 may be different, he said on Monday during the BetMGM Business Update.
Meanwhile, 2023 online casino legalization bills are pending in Indiana, Maryland, and New Hampshire. Online poker legislation is also underway in Kentucky and New York.
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