As gaming revenues level off or decline in many U.S. states, legislators are expected to consider the addition of retail gaming, that is a small number of slots or video gaming terminals (VGTs) in bars, restaurants and taverns, according to conference panelists.
Illinois is considered the leading market, with its video gaming business generating $913.5m in revenue last year and growing much faster than the Prairie State’s riverboat casino industry.
Retail gaming is currently legal in seven states, including Nevada, but participants on a conference panel at the East Coast Gaming Congress Thursday in Atlantic City tipped others to authorize the activity.
Pennsylvania is among several states that have recently considered legalizing video gaming terminals.
“More states are looking at this form of gaming amid flattening casino revenues,” said Joseph Weinert, executive vice president of consultancy Spectrum Gaming Group. “It’s a fast growing and under the radar segment of the industry.”
During the panel Weinert noted revenues from six states that offer retail gaming were $3.2bn in 2015, up from $2.9bn in 2014. He said that Nevada was not included in the total because they do not break out retail gaming revenues.
Illinois legalized VGTs in 2009 permitting licensed establishments to have up to five terminals if they also have a liquor license.
The first machines became available in late 2012 after the Illinois Gaming Board spent three years evaluating applications and selecting a computer system to monitor all of the state’s terminals.
Under the law, individual communities get to choose whether to allow video gambling in their communities.
But what has been the impact on the state’s $1.5bn casino industry that has previously cited VGTs for a decline in their own gaming machine revenues?
Those who participated in the panel discussion Thursday believe the effect on casino revenues has been minimal at best.
If anything, route operators and legislators believe the total gaming revenue base has increased dramatically in the seven states where retail gaming is legal.
“We have not seen a lot of cannibalization of casinos revenues from retail gaming,” William Stanford, route operating manager with Illinois’ HyperActive Gaming said.
Stanford said video gaming machines do not pose a threat to the casino industry because “they can’t do the same high volume of revenue.”
Perhaps anticipating future growth, casino firms Penn National Gaming and Delaware North have both recently acquired Illinois video gaming operators.
Earlier this month, Delaware North acquired Gaming and Entertainment Management (GEM), the third largest video gaming terminal route operator in Illinois. Terms of the deal were not disclosed.
GEM operates nearly 1,800 VGTs at 438 locations state-wide.
Penn National in July acquired Prairie State Gaming, a VGT route operator with more than 1,100 terminals in some 270 sites and generating $10m in annual revenue.
“You can expect more expansion in retail gaming,” James Breslo, president and director of slot route operator Diamond Game, said. “The growth of retail gaming will out-distance the growth of casinos in Illinois.”
Breslo urged casinos to embrace the retail side of the business instead of fighting it.
“It’s about finding a balance,” said Eddie Day Pashinski, a Democratic member of the Pennsylvania House of Representatives who has sponsored legislation to authorize VGTs in the Keystone State’s bars and taverns. “We need to preserve the casino industry and the revenue they generate.”
Pashinski’s legislation would have allowed three VGTs in bars or restaurants in an effort to reduce the 40,000 VGTs that currently operate “under the radar.”
“We tried to protect the casinos, but collect our due from illegal operators,” Pashinski said.
Pashinski said the bill set aside 33 percent of the revenue for the bar or restaurant owner, while 27 percent would go to the VGT operator, 30 percent to the state, 5 percent to the local community, and a 5 percent giveback to the casinos “for doing nothing.”
“It is here to stay,” Pashinski said of video gaming. “It’s a balance. Neither one should destroy the other one. There is a market in Pennsylvania for VLTs.”
The panel also featured Michael Bond, operations manager with Tap Room Gaming in Illinois.
Bond agreed with his colleagues that retail gaming was not hurting casinos, but instead was “creating new players.”
“Retail gaming is attractive to a certain group of people who love their corner bar and don’t frequent their local casino,” Pashinski said.