AGA research shows executives caution on industry future despite “strong growth” in Q1

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Gaming industry executives are growing increasingly uncertain about the short-medium term economic health of the industry with a number of key growth metrics feared over the next six months, according to new research from the American Gaming Association (AGA). 

CEOs, whilst generally positive about the current outlook of the industry, are growing more cautious about the future, with revenue growth, customer activity, and the pace of recruiting staff all expected to slow down in the coming months. 

The research comes from the AGA’s Gaming Industry Outlook report for Q1, in which it partnered with research body Fitch Ratings to produce a “timely measure of recent growth and future expectations”.

Utilizing its “Current Conditions Index” and the “Future Conditions Index”, where flat economic performance is 100.0 – provided by Oxford Economics – the research aims to provide stakeholders a snapshot into the health of the industry both in the most recent quarter and in the future as economic outlooks develop. 

Gaming CEOs cautious on the future but investment plans continue

The Future Conditions Index within the report is 97.1, meaning that according to Oxford Economics’ model, the gaming industry will endure a 2.9% decrease in economic activity over the next six months as the US is anticipated to experience a mild recession. 

Whilst naturally, this would appear to be weak business conditions, executives told researchers that they would expect capital investment to continue, with a 21.4% net positive share of responses from executives on this as opposed to negative responses. 

This infers that there is long-term strength in the industry despite short-term fears of high interest rates, tough inflationary comparative pressures, and the potential recession. 

While 97% of respondents described the current economic outlook of the industry as “good” or “satisfactory”, only 20% anticipated that the situation would improve over the next six months. 

Key concerns of executives were inflationary and interest rate pressures, with 69% labeling that as their top concern, as opposed to labor shortages, which was the top concern for 31% of executives. 

Increasing global tension was also a major concern for operators, as uncertainty continues to grow globally in the wake of Russia’s invasion of Ukraine, China’s increasing aggression towards Taiwan, and instability across Africa

The top five concerns were rounded off with shortage of labor and shortage of skilled labor.

In terms of growth expectations, there was a 30% net negative response on the level of customer activity in the next six months, compared to around 20% net positive in Q3 of 2021. 

The pace of hiring new employees garnered a 23% net negative response, whilst the pace of revenue growth was also a key concern with 23% net negativity. 

It would be expected that there would be a more cautious approach from operators in a recession, with consumers having less disposable income and tightening their belts as a result. 

Analysts observed that the Global Economic Crisis of 2007-2009 rebuked the notion that gaming is recession-proof, but with growth in online casino and online sports betting continuing, it is uncertain whether a recession this year would have a similar impact. 

Current conditions generate positive response 

Despite fears of the future as the US economy falters, gaming executives are generally positive about the industry in its current guise, with 97% of respondents noting that conditions are at least satisfactory for growth. 

The Current Conditions Index shows 106.0 with annualized growth of 6% over the last quarter. This is down slightly from the 108.4 recorded in Q3 of 2022, but nevertheless shows that gaming continues to grow. 

This notion of growth rings true when looking at the AGA’s Commercial Gaming Tracker, which revealed that the industry generated $5.12bn during February, up 14.5% YoY, whilst January generated record industry revenue of $5.5bn.

“Gaming’s record momentum has continued into 2023 and that is clearly reflected by the attitudes of gaming executives around the country,” said AGA President and CEO Bill Miller

“While projections of slowing growth across the American economy are muting expectations for gaming in the medium term, our industry is well-positioned to weather any potential headwinds.”