How online gambling affects offline gambling

With all of the recent changes (and proposed changes) in the U.S. online gambling landscape, I have received a few inquiries about what kind of effect that this may have on existing – land based – gaming operators. I have done a bit of research in this area (see here and here), and the general response I like to give is that it really depends on the game.

In my work with Ingo Fiedler, we found a pretty clear complementary relationship between online poker and brick and mortar casinos, running counter to some of the brick and mortar industry claims. Intuitively, this makes a lot of sense. Participation in online poker (often at stakes well below any available in a casino) has gone a long way to reinvigorate interest in the game overall. And, online poker sites often partner with casinos through promotions – for example, winning seats to a major poker tournament through an online qualifier. In many cases, poker sites will offer seats to casino tournaments without even formal partnerships in place. With developments like Pokerstars’ move into the brick and mortar poker World, these effects may get even stronger.

In some other forms of gambling, it seems pretty likely that there will not be this same complementary relationship between the offline and online gambling worlds. Lotteries are a good example. They can usually be grouped as much more of an aspiration (wealth increasing) type of gambling. This is in opposition to poker, which is generally considered to be much more recreational and less about a sudden change in wealth. The convenience of being able to either buy lottery tickets on your computer or at the corner store will surely increase overall lottery sales, which may be appealing to lottery groups. But it seems quite unlikely that in-store sales will increase from expanding sales online. Unlike poker, I expect that the net relationship between online and offline lottery sales will be substitutionary rather than complementary.

With all the other types of gambling, the net effects probably lie somewhere between lotteries and poker. Sports betting may be a little closer to lotteries, since the activity is still placing a wager on a future event that does not require the player to be in the casino – although with so few states having any legal form of sports betting, cannibalism is less of an issue. Casino-style games may be a little closer to poker, since familiarity and comfort with the games may create new gamblers that are less intimidated with unknown rules at the casino, and I expect more opportunities for cross-marketing.

One final comments is that most of the markets where I have looked at these effects have been where online operators were different entities from offline operators. I would certainly expect more integration and positive effects to occur in the states where offline and online casinos, poker rooms, etc. are run by the same companies.

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