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Gaming and payment executives believe concerns over the potential cannibalization of brick-and-mortar business from internet gambling are outdated as new forms of gaming have helped New Jersey’s market rebound since the coronavirus pandemic.

“I don’t think there is a lot of evidence to support the theory of cannibalization as much as there is data coming out of New Jersey that adding additional capabilities in our industry, in different channels, certainly grows the overall opportunity for the operators,” said Chris Justice, CEO of Pavilion Payments.

New Jersey’s gambling revenue matched its record high of $5.2bn in 2022, but only about half of that total came from gamblers at brick-and-mortar casinos in Atlantic City.

The last time that revenues were $5.2bn was in 2006 just before Pennsylvania legalized casino gambling and the economic recession of late 2008 that eventually led to the closures of five of the 12 Atlantic City casinos that were operating at the time.

In contrast, last year’s record revenues were reached with an assist from internet gambling and sports betting.

New Jersey legalized internet gambling in 2013 and launched sports betting in 2018 following a U.S. Supreme Court decision to overturn the federal ban in a case brought by the state.

“So, I think the data would support the opposite conclusion,” Justice said of cannibalization. “I can understand why folks would believe that. They have invested significant amounts of money in a brick-and-mortar infrastructure, and they want to maximize that opportunity to the fullest extent.”

Justice noted there are also examples from other industries to consider as gaming companies look to develop omni-channel opportunities in the gaming space.

“The one thing they have in common is that it is around consumer preference and how people want to spend their money,” Justice said Thursday (May 25) during an hour-long iGB webinar on how gaming companies can create an interconnected ecosystem.

Justice was joined by Matt Sunderland, senior vice president of iGaming at Caesars Entertainment, and Rikki Tanenbaum, president of gaming at 1/ST Racing and Gaming.

One of the examples Justice used as a cautionary tale was Circuit City, a U.S. electronics retail company founded in 1949 that once had 155 stores nationwide.

“Their success was we want people to come into our stores and shop with us. They are going to get an incredible experience,” he said. “All the while, there was this little upstart competitor Best Buy … with a similar footprint but they decided they were going to engage in an omni-channel platform and meet customers where they were.”

By November 2008, Circuit City announced it would close all its stores by the end of the year. That was followed six days later when the company filed Chapter 11 bankruptcy in federal court, but two months later converted its Chapter 11 bankruptcy to Chapter 7 bankruptcy to liquidate its assets.

“Circuit City is considered to be one of the epic meltdowns in the retail space because they were so committed to retail that even though their customers wanted other options, they weren’t willing to give them those options and needless to say Best Buy continues to be the dominant player.”

Justice also stressed that the U.S. gaming industry can learn a lesson from the gas station industry, which initially balked at the cost of installing expensive payment mechanisms at their pumps, but quickly realized that if they failed to offer pay-at-the-pump options then customers would find those stations that offered the payment method.

“That’s another industry that quickly found that … meeting the customer where they are was a core and critical component to their ongoing success,” Justice said.

Caesars' Sunderland described his business as the digital arm of the Las Vegas-based casino giant but added that within the company, “we are seen as one business.”

“Look at New Jersey as the template if you like,” Sunderland said. “Obviously, COVID changed things as people weren’t going to retail casinos, they were participating online. That changes everything. That’s not just in our industry, it’s across the board.”

Sunderland stressed that brick-and-mortar and digital exist together in a complementary way. He added that it is the operators that need to present an experience across the whole business.

When asked if there were any drawbacks to rolling out new payment or gaming technology, Justice cautioned that it can certainly add to the wariness of consumers.

“The challenge is, we all want to deliver the Amazon experience, but we forget that Amazon has been around for 30 years and spent billions of dollars developing their systems and infrastructure,” Justice said. “And candidly, the casino industry is just not that far along.”

He said part of the challenge is trying to figure out how to deploy omni-channel solutions because whatever is deployed must work.

“If it is clunky and friction-filled and a terrible experience … your guests will gladly switch brands and gladly pay more for an incredible experience,” Justice said.

He also cautioned operators that they cannot offer so much change that they create change fatigue and ultimately lose the customer.

“This is like stepping into a warm bath,” Justice added. “You let the customer slide right in because it is something that is warm and embracing … instead of throwing them into an ice bath because so many things have changed, it is hard to figure it out. So as a result, they go back to the old way.”