The Future of Internet Gaming in the U.S.: Notes from iGaming North America Conference
The bricks-and-mortar gaming industry wants in, the States want in, Native American Tribes want in, service providers want in . . . the list goes on. But, what is actually on the horizon for Internet Gaming? In the search for answers, I recently attended and participated in iGaming North America. This is the first post in a series where I will discuss the future of Internet Gaming.
The iGaming North America conference got off with a bang with a “bootcamp”, followed by networking sessions, and a packed calendar of expert panels. Held in Las Vegas on March 4-6, it covered Internet Gaming topics such as: Five-year predictions for the US market; economic impact; taxation models; pending and potential legislation; social media; marketing; construction of regulations; the implications of i-gaming on Tribal gaming enterprises; funding of accounts; and the recent Department of Justice Opinion. Whew!
In this blog post and in subsequent posts (too much to include in just one!), I’ll attempt to highlight key points and insights gained from this intensive conference and networking experience.
1. State level, not federal, legalization of Internet Gaming will occur first
The general consensus among gaming company executives, lobbyists, attorneys, and other experts assembled was this: Federal legislation isn’t moving anywhere, and the states are going to have to go first with intra-state Internet gaming. While the state-by-state model for Internet Gaming has a lower revenue potential than the federal model and will likely prove to be complicated, it is the most probable scenario. Owners, operators, and service providers for Internet gaming should expect states such as Nevada, California, Iowa, Illinois, and Massachusetts to be first in the i-gaming business.
The state-by-state model for legalization is expected to benefit smaller, more local operators of existing bricks-and-mortar casinos. Drafts of potential legislation include preferences for casino operators that already do business in the individual states. In this intra-state model, a more level playing field is created for small and large operators. In the federal model (inter-state), a competitive advantage would be held by the big companies such as Caesars Entertainment and MGM.
2. From a business perspective, Internet Gaming has great potential
As illuminated by Jonathan Halkyard, Executive VP and CFO of Caesars Entertainment, the business model for i-gaming is very attractive. Internet Gaming has relatively low operating costs and many of the constraints associated with operating bricks-and-mortar casinos are absent from the i-gaming model, including: capacity (unlimited in online gaming, but limited in physical facilities); hurdle of getting players to your casino (none to cross in online gaming); and capital investments (building casinos, hotel rooms, etc. is very expensive).
The market for Internet Gaming is also different from bricks-and-mortar casinos. As a number of panelists and experts noted, visiting a casino is not as attractive to those in the 21-45 age bracket, as it is to older generations. As the core customers of casinos age, it is increasingly important to attract younger gamers. Internet Gaming is a way to draw play from younger gamers – generating revenues from their online play, while also driving visitation to bricks-and-mortar facilities.
3. Tribal entities will have to be proactive with regard to state-level bills on Internet gaming
As seen in the case of bill pending in California, state-level legalization could be problematic for Native American Tribes. While the CA legislation appears to open up Internet Gaming to a number of entities (compacted Tribes, horsemen associations, card rooms, advance deposit wagering providers), the realities aren’t so welcoming. The CA legislation sets high up-front licensing fees, fees that some private entities and only a handful of Tribes could pay. The bill also includes clauses which require Tribes to waive sovereign immunity in exchange for a license. Native American Tribes interested in Internet gaming will, therefore, have to be proactive and work with state legislatures to ensure that their interests are represented and they aren’t left out of the game.
My next blog will continue to outline thoughts on Internet Gaming and important take-aways from the conference. Discussed will be the recent Department of Justice opinion, brand recognition in Internet gaming, social media’s role in Internet Gaming, and Internet Gaming’s revenue potential.
Suzanne Perilloux Leckert
Director of Gaming, Feasibility & Land Use
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