It’s still early days for online casino in newly regulated US states, but already we are seeing several verticals gaining significant momentum and generating revenue that could one day rival that of sports betting.
With many new entrants still learning the ropes and exactly how to engage the right audiences as more states come online, SBC Americas asked some of America’s most influential providers what the rest of 2022 holds for igaming in the US?
- Daniel Lechner, VP Sales and Marketing at White Hat Gaming (DL)
- Victor Araneda, Chief Business Development Officer at GAMING1 (VA)
- Kent Young, CEO of Bragg Gaming Group’s Spin Games (KY)
- David Stoveld, COO at EveryMatrix’s Armadillo Studios (DS)
Looking at the markets in which online casino is now live, what igaming verticals are really taking off, particularly in the states beyond New Jersey?
KY: Propelled by the ongoing growth and success that established igaming markets like New Jersey are enjoying, other new North American markets are moving rapidly to enter the igaming space and leverage numerous technologies to improve their performance. Using proven advancements like precise geolocation and KYC technology, and building on the growth of credit card and other payment processing tools, new igaming market operators and their affiliates are using these verticals to build their online business while ensuring they are protecting transactional and game integrity.
VA: Live casino is an extraordinary product that is unrivaled in terms of helping the conversion funnel of brick-and-mortar players that prefer the traditional experience. We are looking forward to seeing it approved in West Virginia as we prepare to transition that market to the Gaming1 platform later this year.
DS: It is common knowledge that in the US, the land-based casino environment has a cultural resonance that is more powerful than in any other market worldwide. It naturally follows that many players will want to recreate the excitement of brick-and-mortar experiences digitally, through slots that have similar mechanics, themes, and IP.
However, we are also seeing that feature-rich international casino products have been very successful in the states that have so far gone live with igaming. It is still an evolving market and you can expect to see a coexistence of the simple three-reel, one-line slots with (for example) five-reel, dynamic ways content with wide-area progressives. It is an exciting time to be involved in the industry, where suppliers can help to shape the future direction of travel.
DL: It’s safe to say that this is going to be an incredible year for slots in the US market. Particularly in the world of branded games and progressive jackpots. With an increasing number of states opening up to audiences that probably aren’t that engaged with online slots yet, operators are going to quickly see the benefits of a familiar brand as a powerful acquisition tool. Titles with instantly recognizable IP, such as Ted, Sausage Party, and Deal or No Deal, have struck a chord, and once those players become familiar with the game mechanics in one game, they will more readily explore titles that are pure studio creations.
Brands and progressive jackpots look sure to make a formidable combination for any operators targeting the US market.
Given the broad diversity of states now online – and casino’s heritage across the US – how do you see individual states’ evolution being shaped by localized player preferences?
DL: Regardless of what kind of slots player they are, all will be drawn to the idea of an eye-catching jackpot and the fundamental promise that there could always be a bigger prize just around the corner.
It is also vital that the local operator gets to announce the win and award it to the player. Ensuring that this happens will be an important and influential dynamic in the nascent US market. Word of mouth is possibly the most important marketing tool and inspiring those local conversations about an operator’s offering is invaluable.
This is what makes our Jackpot Royal unique, the funds are generated from the local player base, giving operators the control to do this. Initially, we will launch with 10 games that will feed into a single jackpot, creating the potential for huge prizes to build up for the operator to offer. We’ll add new games each month to capture and maintain player interest and help grow the overall jackpot prize.
VA: In terms of a purely regulatory framework, we’ve already seen a number of different models put in place in the US. This is sensible and respectful of the idiosyncrasies of each individual state with respect to the gaming industry. Moving forward, I’m eager to see more state-focused product evolution as we take market feedback in the development of new iterations.
DS: Vegas-style stepper slots will continue to be popular across the board, particularly in those states that have a strong land-based heritage. The narrative isn’t that simplistic though, as we have seen that players across the US have responded well to games with high production values that have been brought across from Europe.
As a games studio, we look carefully at an extensive range of data points to work out what might and might not work when developing a new title to roll out across the country. For example, when creating a sports-themed slot it is important to consider that a title based on a particular NFL or NBA franchise from the east coast might perform very well in New Jersey, but fall flat further west. Localization is important, but so is the mass-market appeal. We have also seen that state-by-state differences in regulation are translating to the popularity of one particular game type over another.
KY: Respecting localized player preferences is critical to building and maintaining online market share, and we’re seeing considerable success in local casinos cross-marketing their online products to their existing player databases. High-performing land-based slot titles are assisting with this as they are performing very well online, increasing appeal for existing players. Michigan and Connecticut, for example, were the first tribal jurisdictions to incorporate a more mature type of product that allowed non-commercial casino player preferences to be incorporated, and as a result, are enjoying more repeat play than transient product models.
How does the revenue created by online casino currently compare with that of sports betting in corresponding states? What does this tell us about igaming’s prospects stateside?
DS: If we look at the official figures from the American Gaming Association, we see that across the six states where igaming is currently permitted – Connecticut, Delaware, Michigan, New Jersey, Pennsylvania, and West Virginia – it generated $399.5m in revenue in January 2022, up 83.6 per cent year-on-year. Sportsbooks, both online and retail, generated $538m in revenue across 26 states in the same period. Those figures alone show the potential for igaming to ultimately eclipse the performance of sports betting as it rolls out to new states.
VA: The evolution of the split in favor of online casino in states like Michigan confirms what we’ve seen overseas: markets that have embraced both verticals will continue to experience record growth for the foreseeable future. We expect this trend to widen as more (and better) content becomes available in different states. Both Gaming1 and our partners at Delaware North have been championing the importance of introducing online casino in the states where we operate and it’s our sincere hope that more regulators will see the importance of rolling out igaming regulation in their states.
DL: Sports betting has had more of a head start but everything we are seeing points to customers in the US taking to online casino. Currently, the focus is on acquiring sports players, which can involve massive acquisition costs that cannot be sustained long term, as those losses inevitably mount.
When operators need to concentrate on profit, they will change strategies from acquiring to cross-selling sports players with casino. The best way to do this is will the unbeatable combination of branded slots content and generous jackpots. Quite simply, big-prize potential attracts customers. For the players, frequent, achievable jackpot drops create an engaging win/win dynamic for them and for the operator.
KY: Revenue for online casinos is generally significantly higher than that generated by sports betting: for example, in January, New Jersey’s internet gaming win was $137.8m, while sports wagering gross revenue was only $60.2m. Pennsylvania and Michigan’s numbers tell similar stories, with online gaming revenue of $108.3m and $121.2m versus sports betting revenue of $53.4m and $34.7m respectively. These numbers suggest that although sports betting is a popular online offering generating billions of dollars in handle each month throughout North America, the greater revenue opportunity lies with online casino-style gaming.
To what extent will sports betting need to remain an acquisition tool? Will online casino alone be enough to attract significant player numbers online without sports betting?
DS: With sky-high acquisition costs being a hot topic in the US now, it makes perfect business sense for operators to look to cross-sell existing sports bettors into casino. For land-based casinos moving into the online space, they also have the chance to leverage their long-standing marketing power to bring players who know and love their brand across to online games.
As mentioned earlier, the revenue figures we are seeing for igaming – even at this early stage of the market’s development in the US – are highly encouraging. At the same time, in an ultra-competitive marketplace, no supplier can afford to rest on their laurels and the smart application of data will be vital in attracting and retaining new audiences. One vital question operators need to ask themselves is, how effective are their retention tools and cross-platform marketing strategies? If the answer is ‘not very’, then they risk missing out on huge revenues.
KY: Given the nature of traditional casino products and their appeal as a separate product category to sports betting, online gaming has its own target market appeal and can certainly stand on its own. As a result, sports betting is more of a long-term value-add in terms of player acquisition rather than a necessary element, especially given online gaming’s higher profitability. Cross-marketing online casino services to sports betting customers definitely can assist with player acquisition and retention in markets where both types of online gaming are allowed, as it provides a greater long-term value for players. Right now we’re seeing a significant amount of marketing/player acquisition dollars being spent in new markets that have initially opened with sports betting, and if these markets further expand to include online casinos, this should benefit the market’s long-term performance given the highly competitive sports betting market.
DL: Given casino’s performance so far, it looks like it will be a strong performer on its own. However, relying solely on one vertical for marketing is rarely the best approach and a cross-sell strategy will deliver greater engagement and better experiences for players and operators. Both sports and casino are going to perform differently state to state, and a synergistic relationship where they are both used as acquisition and retention tools for each other will deliver the best results for all.
Sports betting customers are becoming more specific about what sports and tournaments they bet on. When the Super Bowl comes to an end, they have slots for entertainment until March Madness starts.
VA: States are slowly coming around to the realization that a complete online offering must include both verticals. Fundamentally, sports betting and casino cater to different, yet complemental, drives. Not having one only allows for unlicensed operators to take advantage of that product gap, with all the negative effects that brings with it in terms of taxable revenue and player protections.
Looking to demographics – the ‘casino tourist’ who values their annual trip to Las Vegas or similar will always be a challenge to convert online. How can the digital space appeal more to this player?
There will always be a place for both, and different customers want a range of different experiences. But there is no reason why players cannot take their device with them while they go on a holiday and enjoy casino away from the floor. A robust platform that can cater to players as they travel is key here.
DS: For those players who enjoy a long, sociable weekend in Las Vegas, they will seek a digital environment that goes as far as possible in recreating the bells and whistles of that casino experience. It’s about stimulating the sort of excitement that on the gaming floor sees entire crowds gather around machines.
That’s a very difficult goal to achieve on a mobile device, but there are strategies you can undertake to heighten the player experience. One aspect is what some in Europe might consider a relatively new innovation, of bonus buying. In the US, these features have been integral in slots for a decade, and I imagine they will soon become similarly popular within online casino. I would also expect that in the coming years, we see a greater emphasis on the social aspect, with group play dynamics coming to the fore.
I also think that a careful and considered approach to branded content could prove to be very powerful in the digital realm in the US. As a country, it is the natural home of the larger-than-life superstar and by selecting the right IP, suppliers can tap into a ready-built set of positive values. At Armadillo Studios, we believe we have chosen a winning brand with widespread appeal in the shape of UFC star Amanda Nunes, and later this year we will be releasing the first game bearing her image.
VA: We’ve found the opposite to be true. In our experience, players that enjoy periodic trips to our casinos are offering their undivided attention during their time of leisure which, more than a challenge, presents an invaluable opportunity for us to introduce our mobile offer and the benefits players receive from spending their time with us in both environments. This type of player is a captive audience that tends to be loyal to our brand allowing us to reward that loyalty.
In order for an omnichannel strategy to be successful, operators must leverage as best as they can that physical touchpoint by setting up the right processes and technology enablers. We see an event-driven strategy as a key differentiator, allowing our partners to create a virtuous cycle that cannot be matched by purely online competitors.
KY: We have found that simple, less complex online products hold more appeal for ‘casino tourists.’ Products like traditional reel ‘stepper’ slots and licensed and branded popular content is more enticing to casual players than more advanced and complex online products. Additionally, table games like blackjack and roulette are more appealing to transient players while repeat, more frequent players tend to value other online table gaming options.