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How the Coronavirus Has Affected the Gaming Industry
The COVID-19 pandemic has wreaked havoc on the global economy, and some industries have been hit harder than others. The gaming and casino industries are especially suffering because of strict social distancing policies put in place to stem the tide of coronavirus.
The economic numbers describing the gaming industry’s lost jobs and lost revenue are staggering. If casinos stay closed for the next eight weeks, the U.S. economy will lose an estimated $21.3 billion in direct consumer spending, according to a report from the American Gaming Association.
All the nation’s commercial casinos have temporarily closed and only a handful of tribal casinos remain open, according to Casino.org. With nearly every professional sports league suspending their season, revenues from legal sports betting have also taken a tremendous hit.
The gaming industry will receive some economic relief as part of the $2 trillion stimulus package recently passed by the U.S. Congress. Still, the industry (much like retail, restaurants, and tourism) finds itself in a very uncertain position as the nation waits for the worst of the COVID-19 pandemic to pass.
Casinos Taking a Big Hit
Looking at casino revenues in Atlantic City, New Jersey, can help us get a better picture of how the gaming industry is feeling the effects of the COVID-19 pandemic.
Atlantic City casinos and racetracks earned $287 million across all forms of gaming revenue in February, according to Motley Fool. Most of that revenue, though, came from slot machines and table games. With casinos closed for the time being, that loss of revenue will be huge.
About 18% of the Atlantic City casino revenue came from internet gambling and another 6% came from sports betting. Expected increases in internet gambling will help, but it may not be enough. Sports betting has also taken a major hit now that professional sports leagues have suspended play.
Many Atlantic City casinos have increased their internet gambling presence. But a closer look at the numbers shows the casinos’ online gaming revenue accounts for only a small share of their total revenue stream. For example, MGM’s Borgata is New Jersey’s most profitable casino and 86% of its total revenue ($57 million) comes from the retail casino. Just 12% of the Borgata’s total revenue comes from online gaming.
Will Online Gambling Expand?
Only six U.S. states have legalized online casino gambling, including New Jersey, Pennsylvania, and Nevada. Fourteen U.S. states have pending legislation to legalize online casino gambling, but their legislative sessions have been suspended because of the COVID-19 pandemic.
iDevelopment & Economic Association is an online gambling trade group that’s pushing state governments to allow more online gaming during the pandemic, according to The Wall Street Journal. The industry group says expanding online gambling now that retail casinos are closed will help shore up the revenue losses casinos are facing nationwide. The industry group wants governors to use emergency powers to quickly allow online casinos to operate.
Unfortunately, the push for more legalized online gambling may not bode well during the pandemic. The Wall Street Journal notes that lawmakers likely won’t focus on expanding gambling during the nation’s dire public health and economic crises. In other words, they have bigger fish to fry.
The National Council on Problem Gambling has also raised concerns that people isolated at home during the pandemic are more prone to resorting to online gambling as an emotional escape. It’s another reason why expanding online gambling right now could be complicated. Online gaming is a natural fix to shore up casino revenues during the pandemic – but instituting that fix may not be so easy.
Sportsbooks Getting Creative
The impact of COVID-19 has been just as drastic on sports betting. Twenty states and Washington, D.C., have legalized sports gambling since the Supreme Court’s landmark decision on sports betting in May 2018. Sports gambling has exploded in the U.S. since then, so the sudden suspension of major sports league seasons has been jolting for sportsbooks.
In mid-March, the American Gaming Association said the sports gambling industry may have lost a staggering $140 million in just one weekend because of the cancellation of the NCAA Men’s Basketball “March Madness” tournament.
Just like casinos looking to expand online gambling, sportsbooks are getting creative to make up for their big revenue losses. Some sportsbooks have tried to book games in the KHL Russian Hockey League and Turkish and Mexican Soccer Leagues. Sportsbooks have also expanded choices for “proposition bets,” such as a popular one that placed odds on what team NFL legend Tom Brady would sign with as a free agent.
Perhaps the most unusual idea has come from a sportsbook company based in Costa Rica, which started taking bets on the maximum temperatures in various U.S. cities. A smartphone app called BetOnWeather.io launched in mid-February and did the same thing – and it drew about 10,000 visitors per week!
Salvaging Revenues for Now
Many U.S. industries are facing tremendous uncertainty right now because of the COVID-19 pandemic. Stay-at-home orders and social distancing have crippled industries like gaming, retail, airlines, and tourism that have had to essentially shut their doors and close operations.
For casinos and sportsbooks, they’ll have to salvage any revenue they can for the moment – and much of it will come from online sources or, in the case of sportsbooks, creative betting. It’s unclear how long pro sports leagues will be M.I.A. or how long casinos will be closed. Many economic experts, though, say the gaming industry will bounce back strong when the pandemic is over.
The million-dollar question, though, is when will that be?