Writing on social media, Industry Executive, Seth Young shared his views on the importance of clear definition and understanding when it comes to cannibalisation.
This morning I read Jessica Welman‘s clipped X post in Dustin Gouker‘s newsletter.
Welman wrote, “During the opening panel of the National Council of Legislators from Gaming States, Chad Beynon of Macquarie Group echoed The Innovation Group’s estimate that cannibalisation of land-based casinos by online casinos is roughly 15%. You could literally hear people uncomfortably shifting in the room.”
Hold on just a minute
By definition, in business, cannibalisation refers to a situation where a company’s new product or service takes away sales from its existing product or service, rather than attracting new customers or expanding the overall market.
Hearing “cannibalisation” over and over in this context makes me shift uncomfortably in the room I’m sitting in, but it’s probably not for the same reason as those in the room at NCLGS.
The fact is, online gambling has significantly grown the total addressable revenue opportunity for companies operating within the gambling market, and it continues to do so. It’s also engaging an entirely new cohort of consumers.
Isn’t that the exact opposite of cannibalisation? 🤔
Cannibalisation might be the right word to use if Casino A introduced an online product that detracted from its core business, but – with some exception – that’s not exactly what’s happening. And it’s definitely not how the conversation is being framed.
Consumer consumption habits are shifting with time. It’s a natural progression, and it’s not exclusive to the gambling industry. In this case, land-based casino databases skew significantly older, and this makes sense since casinos existed well before the internet. Cue the introduction of new technology, cue the introduction of new options, cue a new reality.
Consider this. If I’m a new consumer and I want to watch a movie, perhaps I’m faced with the option of getting in my car to drive and rent a VHS tape from Blockbuster, or the option of sitting on my couch and streaming video on my phone via Netflix. Take it a step further and consider what might happen if Netflix offered more entertainment options at cheaper prices. Would anyone be surprised if I chose Netflix over Blockbuster?
Online gambling offers an entertainment value proposition in a different way, same as this example with movie rentals. An online platform might be able offer 5,000+ different games, while a land-based casino might be able to offer 500. The same as a retail hardware store might be able to offer 500 products, while Amazon might be able to offer 5,000,000. Virtual “floor space” is just more scalable.
Just yesterday Spectrum Gaming Group sent out a newsletter titled, “iGaming Slots Offer Players Much Better Payouts Than Casino Slots,” citing that the hold percentage for the 12 months ending May 2025 at retail (land-based) casinos is more than double the iGaming hold percentage in each of the three states it referenced.
Well, that’s a bit damning, isn’t it? Not only is casino hold higher offline, but oftentimes minimum bet sizes in a physical casino are exponentially larger than those of online platforms. Whereas I may visit a physical casino and reasonably expect a $25 minimum bet on a blackjack table, I might be able to play online for $1 or less. If I’m a player – new or not – I’d suggest the latter is a lot more interesting.
Now consider this. If Blockbuster offered the same exact value proposition as Netflix, but also offered a different/enhanced experience in its retail environment, would anybody be surprised if I chose Blockbuster over Netflix? And would anybody be surprised if Blockbuster was able to continue to engage its existing consumers if – say – they didn’t want to drive to the store during a blizzard, but still wanted to watch a movie?
Look, let’s be real. If I’m a land-based casino operator 10 years ago, I’m sitting at my desk looking at the online gambling sector and I’m worried about what it might mean for my business. But if I’m still sitting in the same seat 10 years later and I haven’t taken any steps to prepare my company for the future, that’s on me.
Famously, 25 years ago Netflix was laughed out of the room by Blockbuster after Netflix offered themselves up for sale for $50M. It’s now considered to be one of the biggest corporate blunders of any industry, and in some ways it’s starting to feel a little closer to home. Looking at the potential M&A landscape 10 years from now, I’m starting to wonder which side might be buying and which side might be selling.
At this point we’ve all seen various studies opining on online gambling’s impact relative to the land-based casino market. Like you, I’ve watched people on both sides of this conversation try to tell whatever story might suit their business interests. Regardless of your opinion, and with the understanding that both sides have flaws in their studies, the simple fact of the matter is this.
Together, the land-based and online gambling markets create a larger addressable gambling revenue opportunity, and engage a wider consumer base.
Period, full stop. It’s a larger, more inclusive total market.
This doesn’t mean that the same companies are addressing these differing segments, and it doesn’t mean that there aren’t winners and losers. But it does mean that it’s not cannibalisation; it’s something else entirely. It’s the better prepared groups taking a more holistic approach to their revenue composition, and it’s the less prepared groups seeing their revenues slide in the wrong direction. And it’s the online-only companies that have emerged to address a different kind of consumer than their land-based peers, as a simple function of many of those land-based peers glazing over the opportunity.
Of course this is heavily nuanced. Of course there are great arguments about why different markets might be structured in different ways. Generally, though, what we’re seeing play out is no different than any competitive landscape in any industry. Some incumbents might adapt, some might not, and blank space becomes filled. After that it’s politics, and that’s a different conversation entirely.
If I’m a progressive land-based organization and an early adopter like MGM, Caesars Entertainment, or Rush Street Gaming, LLC, for example, and I’m executing on both market segments well, I feel like I’m in great shape. I’m continuing to build my omni-channel gaming experience, and I’m excited about the future. In this case, using the word cannibalisation might actually be relevant as their respective gaming revenues shift over time. But I doubt they’ll care much if – on aggregate – that revenue is growing.
However, if I’m an operator that has been pounding my fist on the desk saying, “These darn kids and their internet!” while I watch my database age out, and without putting in any work to adapt to changing macro realities, then, well… I’d suggest it isn’t cannibalisation. It’s just… losing the game.
So, I suppose I’d be squirming in my seat at NCLGS too.
Growing up and talking about business, I can’t tell you how many times I heard my father say to me, “Nobody is going to hand you the world on a silver platter,” along with many different variations of, “Nobody cares about what you did yesterday.”
Today, both seem fitting.
