Why iGaming is Beating Brick-and-Mortar Casinos

A new study from the well-respected Spectrum Gaming Group is bound to stir debate on why iGaming, especially slot play, is surging, while brick-and-mortar slot revenue remains flat. And the answer is simple: online slots appear to have a much higher Return To Player (RTP) than their land-based counterparts.

While trade unions and politicians have accused online gaming of killing jobs not just in casinos but also in adjacent travel and restaurant businesses, it would appear that those jobs come with a hidden cost: significantly higher slot machine hold.

Pennsylvania offers a rare apples-to-apples comparison in slot shopping, as it releases both coin-in and revenue for land-based slots and online slots, which allows us an easy way to determine hold, which is just the amount a player loses, divided by the amount they bought in, or in this case casino revenue/coin in.

In the case of online slots, we can see that they did an impressive $52 billion for the fiscal year that ended in May. Still, revenue was $2 billion, which works out to a roughly 3.6% hold, while the land-based slots did only $34 billion in coin in, and the casinos kept $2.6 billion, or about 7.6%.

A $1 bet on a slot machine with a 3.6% hold and the industry average of 600 spins an hour will set you back $21.60 over that time on average, but a machine keeping 7.6% will quietly empty your pockets of $45.60 on average. So driving that hour to the casino, paying for gas and tolls, and maybe grabbing a quick bite to eat at the casino cafe will set you back an additional $24 an hour vs. just staying home, playing on the couch, and having to mix your own drinks?

If I play for slightly over four hours, I’m out an additional $100 bucks, risked my life, and spent $8 on the I-76, and will still probably have to buy my dinner? Perhaps the increase in at-home slot play isn’t being driven by ease of use or advertising after all, but instead by value-conscious gamblers knowing a bad bet when they see one?

As Matt Roob, SVP at Spectrum, pointed out, these online servers take up a closet somewhere, not a billion-dollar lot in downtown Philadelphia. They don’t need AC or maids, and they certainly don’t need slot attendants expecting a tip after every handpay. Their electric bill is smaller by a factor of over a hundred, so it’s only logical that they can get by on much smaller margins.

However, what should make trade unions and politicians nervous is the fact that prioritizing casino jobs over better payouts, or attempting to legislate or tax online casinos to the point where they are less competitive and more in line with what is offered by their brick-and-mortar counterparts, can only work for so long.

There are countless unlicensed and untaxed offshore casino sites waiting to step in once slot players begin to realize the huge disparity that visits to those huge neon palaces are costing them in terms of RTP.  If licensed and regulated means taxed and prohibited from offering players the best odds, then perhaps land-based casino jobs will be saved, or possibly consumers will vote with their wallets and just play elsewhere.

And in the hypercompetitive Northeast, where most licensed casinos are concentrated, it may only take one state to break ranks and begin offering online slots with better payouts, scooping up not just their own citizens’ play but also traffic from across state lines.

Protecting jobs is important. But forcing players to subsidize them by accepting worse odds? That’s a gamble too.