Online Casino industry thrives despite COVID-19 lockdown
The coronavirus pandemic has affected every industry, with social distancing measures being enforced and businesses shutting down. Now, more than ever, people are searching for new ways to keep themselves entertained and with traditional casinos nonoperational, online gambling has become more popular.
With bricks-and-mortar casinos heavily affected by the pandemic, casino operators are now turning to online gambling—offering slots casinos—as an opportunity to recover their losses, making huge investments into their online operations.
In the U.S., casino operators recorded as high as a 97 per cent loss in revenue in the second quarter of the year due to the lockdown measures and social distancing. In comparison to last year’s data published by the American Gaming Association (AGA), the industry’s trade group, gambling revenue for table games and slots in traditional casinos declined by over 80 per cent by the end of Q2.
However, while traditional casinos recorded heavy losses, poker and online casino witnessed nearly 300 per cent growth to the tune of $403 million, said the report.
In April, online gaming company, DraftKings Inc., had a successful debut at the stock market, drawing the casino industry’s attention to the profitability of online gambling. With an initial valuation of $3.3 billion, the gaming company has now more than triple that value, attaining a $12 billion market capitalization. This figure surpasses long-standing casino giants Caesars Entertainment Inc. and MGM Resorts International.
According to Chris Grove, an Eilers & Krejcik Gaming analyst, online gaming is witnessing a steady growth in the U.S., especially since there are very limited opportunities for growth within the retail casino industry.
Last month, DraftKings announced a $161 million revenue loss at the end of the second quarter, largely due to the cancellation of sports. Chief Executive Officer of DraftKings, Jason Robins said that the company has found ways to cover up for their losses, launching a new application focused on casino gambling in July. He noted that this was “a bigger opportunity than we or others were giving it credit for.”
Sports betting took quite a hit due to the cancellation of sports events, but sportsbook still has a solid future with online betting as it is bound to witness growth, according to some analysts. Today, of the 50 states in America, 23 states including Washington D.C., have legalized sports betting, while about eight others are considering its approval, according to the AGA. According to experts, sports betting in the U.S. could be worth almost $8 billion, an increase from $833 million in 2019.
Whilst only legal in six American states, online casino players grew with many of these players in search of a new form of gambling due to social distancing and closed casinos.
So far, the online gambling industry has also continued to grow significantly inother parts of the world. In the U.K., the Gambling Commission reported a 38 per cent and 25 per cent growth in poker and online slots respectively, whilst live sports betting took a considerable plunge due to the cancellation of sporting events.
Casino operators are now taking advantage of this trend by making a series of investments this year. According to Robins, with the spotlight now on the online gambling industry, this will help build enough momentum to persuade more states to legalize online and sports betting.
In June, the billionaire owner of five Golden Nugget casinos, Tilman Fertitta, made the digital arm of his company public. Fertitta’s digital company, Golden Nugget Online Gaming Inc. was valued at approximately $745 million during the transaction, though his brick-and-mortar casinos don’t publicize financial information.
Mr. Fertitta, who equally owns the Houston Rockets and Landry chain of restaurants, admitted that he hadn’t considered publicly trading his company before DraftKings debut.
“We realized that we have an online gaming business that is worth a lot more than we thought it was worth,” he said.
Now, other casino operators might follow suit with Tom Regg, CEO of Caesars Entertainment — the largest U.S. casino operator after its merger with Eldorado Resorts Inc.—noting that online betting presents a great opportunity to grow. But he warned that the company wasn’t going to react spontaneously to “those valuations.”
Generally, while the pandemic has crippled stock markets globally, online gambling companies are still experiencing an increase in valuation since the start of the lockdown.