Two markets, two states, two different ways of making vast sums of gross gaming revenue (GGR) – yet markets that are seeing phenomenal success compared to the rest of the US (outside of Las Vegas, of course). Pennsylvania’s journey with casinos and gambling began with Act 71, which passed in 2004 and established the Pennsylvania Gaming Control Board – allowing racetracks to be legalised for the first time in modern US history.
Over the course of the next 20 years, the state saw casinos come into being, while online betting was signed into law in 2017 and sports betting legalised in May 2019. To say that the state took to gambling as a duck does to water may not be a stretch, as the huge figures reported by Pennsylvania every quarter are comparable to anywhere in the US behind the ancestral hub of US gambling, Nevada. But, of course, Pennsylvania doesn't have to look far for a competitor. Indeed, it is geographically placed right next to another US gambling hub: New Jersey, the home of Atlantic City. In its time, New Jersey has seen many casinos come and go – with stars such as Frank Sinatra and Sam Cooke playing the gambling halls across the decades. Sinatra even allegedly once grabbed Donald Trump by the tie over a disputed contract at the Taj Mahal Atlantic City. So, New Jersey’s gambling history is steeped in rich history.
New Jersey and Pennsylvania both have land-based casinos, online sports betting and online casino – and have been live for a number of years – making them a very useful case study in the typical US gaming market that has access to all the major verticals. Bucking the historical trend, in recent times, Pennsylvania has been slightly outperforming New Jersey in terms of revenue but figures vary month to month in an intriguing tussle of GGR. So, Gambling Insider looks into how the two states are performing, how they got to where they are today – and where their next sources of growth lie.
Players & market trends
Speaking to Gambling Insider about the trends seen in players across both states, Diane Spiers, VP of Marketing & Public Relations at operator Bally’s, highlighted the changes seen since the Covid-19 pandemic, as normality is resumed for land-based gambling. She said: “As the gaming industry returns to normalcy, gaming and non-gaming experiences are being reintroduced to the market, as well as many new offerings aimed at appealing to shifting player trends and tastes. Today’s players are seeking new and exciting experiences that offer more opportunities to win, including new high-tech slot machines, tableside bets and progressives for slot machines and tables.”
Diane Spiers, VP of Marketing & Public Relations, Bally’s
Meanwhile, Kambi’s Head of Commercial Pre-Sales, Kevin Cunningham, also commented on both states’ attitude towards sports betting and how New Jersey’s stake size has grown significantly larger than Pennsylvania’s in the last year. He explained: “On a player behaviour level, one of the biggest surprises we have seen on the Kambi network is that the average stake size in New Jersey in the last 12 months is approximately twice that of what we have seen in Pennsylvania. We’ve also seen more live betting turnover in New Jersey than we have in Pennsylvania, with live accounting for 44% of New Jersey’s turnover in the last year compared to 34% in Pennsylvania.”
And as we have seen with other industries post-Covid, some portions of the population have moved away from the large metropolitan areas such as New York and Philadelphia, which certainly feed both markets. Even if a handful of larger players relocate, it could have a relatively larger impact on your table volumes
Cunningham’s comments are no surprise to anybody that looks at the monthly sports betting figures for both states, as New Jersey’s sports betting market dwarfs that of Pennsylvania. For July 2023, sports betting handle in New Jersey totalled $587m, while Pennsylvania posted $338.5m. What this indicates is that players in New Jersey are significantly more committed to the market than those in Pennsylvania.
Cunningham also stated that he believes New Jersey is likely to stay ahead of Pennsylvania: “Despite the proximity, there are a few key nuances as to why New Jersey will likely stay ahead of Pennsylvania. The first is that online sports betting in New Jersey launched nearly a full year before Pennsylvania and they benefit from having more operators for bettors to choose from. New Jersey offers customers 22 online sportsbooks compared to 12 in Pennsylvania.”
He further added: “Pennsylvania’s growth story continues to push forward. Over the last 12 months, Pennsylvania has grown at a higher rate than New Jersey in revenue. With a population of nearly four million more people, there is greater growth upside for the state, but New Jersey’s propensity to wager still appears to be amongst the strongest in the US.”
Casinos
When it comes to both markets, one of the biggest increases is found in the iGaming vertical.After the pandemic ravaged the land-based casino market, players had to find other ways to play their favourite casino games – and the internet provided the perfect solution to such a problem. However, now that the pandemic is over and casinos are once again welcoming visitors, some are struggling to see the in-person footfall that was seen before Covid. That said, the extent of the impact this is having on land-based casinos is disputed by Jody Madigan, Mohegan’s COO.
Jody Madigan, COO, Mohegan
He argues that whilst iGaming is growing, it doesn't signal the death of the casino floor. “The impact on retail gaming in the markets we operate or manage is minimal. IGaming and online sports betting are still relatively new, but they have added more excitement and promotional opportunities for players.”
Madigan continued: “While they are convenient and enjoyable, they lack the atmosphere, thrill and social experience that comes with visiting a resort casino. Therefore, many guests still enjoy both iGaming and casino experiences. This trend is likely to continue, especially with the integration of online and retail rewards programs.” It appears that those who work within the land-based casino market do not see why iGaming and retail can’t work hand in hand, rather than being fierce rivals. Of course, common sense would say iGaming will have a long-term impact on casinos, though casinos themselves will never become obsolete due to the communal nature and destination excitement that can only be felt in property.
SCCG Co-Founder and CEO, Stephen Crystal, also comments on the impact iGaming is having on casinos, as he told Gambling Insider: “The effect this is having on places such as Atlantic City – the hub of New Jersey’s casino industry – is causing many operators to invest heavily in online partnerships and focusing on having a diversified offering to players both online and retail. On a macro level, the overall gaming wallet is going up with online and retail. On a micro level, some operators who have not been able to provide the full 360-degree experience find the brick-and-mortar wallet declining a bit. But, overall, it’s a growing wallet for both retail and online.”
In New Jersey, a place that the famous Atlantic City Boardwalk calls home, the history of land-based casinos runs through the streets. More than the aforementioned famous names such as Sam Cooke and Sinatra, it was a city that had significant connections to organised crime and mob links – now, in 2023, that is all in the past – but the city is still home to gambling on the East Coast and is proud of it.
In discussing Atlantic City and whether or not it can push harder to close the land-based casino GGR gap that exists between New Jersey and Pennsylvania, Madigan stated: “To be honest, we predict that both states will maintain their high rankings in the US regarding casino GGR. Market trends can change rapidly and these changes can significantly affect a casino hub like Atlantic City, as the casinos are located close to each other. Pennsylvania has an advantage because it has more casino destinations spread out across a large state and competition and market trends differ in this landscape.”
However, Madigan was still keen to highlight the ‘robust’ New Jersey market. He said: “New Jersey’s robust tourism industry will likely continue to be a market strength, especially given the state’s reliable seasonal tourism. In particular, Atlantic City, with its beach, ocean and boardwalk attractions, will continue to attract a range of tourists, especially as the city continues to invest in capital improvements.”
Table games in decline?
There is one area of concern for land-based casinos across both New Jersey and Pennsylvania, though. And it might just be an area of concern across the US: declining table game revenue. The decline has been seen across the board, with the American Gaming Association (AGA) reporting that table games has fallen by 2% in Q2 – though the practice has still drawn in $2.46bn.
Jacob Claesson, CEO North America, Evolution
Madigan highlighted the impact of Covid and how people moving away from urban areas has affected the ‘volatile’ table games figures, saying: “There is always more volatility in table games vs. slot machines – both in volume and in win. Some of the bigger casino guests tend to lean towards tables, so macroeconomics always plays a part in table revenues. And as we have seen with other industries post-Covid, some portions of the population have moved away from the large metropolitan areas such as New York and Philadelphia, which certainly feed both markets. Even if a handful of larger players relocate, it could have a relatively larger impact on your table volumes.”
Every state and jurisdiction also comes with its own set of regulatory frameworks that each operator and supplier must abide by
The impact that this could have on Pennsylvania over New Jersey could tip the balance from one to the other, as Pennsylvania has more of a reliance on table games than New Jersey – although, both report huge figures in table games every month. Spiers spoke of this issue in her comments to Gambling Insider and stated that staffing levels has had a severe impact on table games as a whole: “One of the biggest issues concerning table games is the lack of available dealers nationwide as a result of the pandemic. It is likely, however, that the demand for table games could rebound when staffing returns to pre-pandemic levels. Regional competition has also played a role in any softness, particularly in the northeast market, with the expansion of gaming into new markets over the last few years.” She added: “We also recently partnered with Stockton University to create a Dealer Training School program and local dealer training school.”
Sports betting
The impact that sports betting has had on the US gambling market has been seen in the sheer sums that it has been reporting. In New Jersey, sports wagering revenue hit $501.8m for the year so far in July, representing a 42% annual increase. This is now ahead of the $426.4m table game win reported by the state for the same 2023 period, which fell by nearly 2%. The rise of sports betting is continuing, too. Every month the growth figures in New Jersey are in the double digits and it shows little sign of slowing down.
As for Pennsylvania, its sports wagering revenue doesn’t compete with New Jersey’s, as stated earlier. For July 2023, it reported $32m in revenue, which is a rise of 26%. When comparing that to Pennsylvania’s table games revenue, table games is still handily ahead at $83.4m (with New Jersey’s July sum totalling $72.2m) – however that sum is still down by 4% annually. So, while sports betting is growing nicely in Pennsylvania, it is nowhere near the levels of New Jersey, which posted $61m in sports wagering revenue in July.
On whether New Jersey and Pennsylvania’s sports betting growth will continue in the long term, Cunningham said: “With Pennsylvania and New Jersey being two of the more mature states, we are still in a phase of growth; however, I think we are seeing signs of maturation within both states. New Jersey saw a 13% decrease in handle, and Pennsylvania only increased 2% in handle over the last 12 months. However, a major portion of this is attributed to the growth of bet builder products and as margins increase, there is a natural squeeze on handle.”
But the question must be asked: ‘Why isn’t Pennsylvania’s sports betting revenue of a similar size to New Jersey’s?” Well, a reason for that is presented by Cunningham, as he noted some differences in the framework of sports betting in both markets: “Every state and jurisdiction also comes with its own set of regulatory frameworks that each operator and supplier must abide by. A specific example between Pennsylvania and New Jersey is the NFL Draft. In New Jersey, regulators allow markets for bettors to wager on draft picks, whereas bettors are not allowed to wager on that specific event in Pennsylvania.”
Kevin Cunningham, Head of Commercial Pre-Sales, Kambi
Although it is a small difference, it shows that New Jersey is slightly more tailored to the sports betting market than Pennsylvania – and showing why the Garden State consistently records higher figures month-on-month. Sports betting has become a source of income for both online and land-based operators in New Jersey and Pennsylvania, and the growth statistics show that it hasn’t finished maturing yet.Madigan also commented on the markets in the long run and which has an advantage over the other: “Both markets are robust, and it remains to be seen which one will perform better in the long run. While New Jersey has a higher income base, Pennsylvania boasts a larger population.”
Regulation
Of course, regulation has a large impact on the bottom line in both states – and while Pennsylvania and New Jersey both have similar levels of regulation, there are some differences. Jacob Claesson, CEO North America at Evolution, highlights the contrasts found in the tax rates of both states: “Operators in New Jersey pay 17.5% tax on gross revenues regardless of the type of online game. Operators in Pennsylvania, meanwhile, pay 16% on table games like blackjack, roulette and baccarat, but as high as 54% on gross revenues from slots. But in most other respects, aside from branding, our licensees’ casinos in these states have similar specifications.”
The future
Looking at both New Jersey and Pennsylvania as a whole, Gambling Insider can't help but ask which will become the more dominant in the next 10 years – will New Jersey’s superior sports betting market push it ahead of Pennsylvania or will Pennsylvania’s strong iGaming and casino market eventually win out? Claesson highlights that both markets are very similar in scale. He stated: “Looking at online casino, New Jersey and Pennsylvania are roughly the same in market size, withPennsylvania slightly higher in total gaming revenues each month. Table games are much more significant in Pennsylvania given the more favourable tax treatment in comparison to slots. It’s too close to call. Both have a lot of headroom for growth.”
Meanwhile, the SCCG founder dove straight into his Crystal ball... “Pennsylvania, as it is the less penetrated and less mature market and has the larger population.” Madigan was less committal when asked the same question, stating: “It’s a tough decision to make, but we believe both states will continue to be major players in the casino industry. They are likely to remain among the top five states when it comes to casino revenue in the country.”
Finally, Spiers was keen to highlight New Jersey’s strengths going forward. She concluded: “We believe the state will serve as an important model, as other states begin to adopt online as a vehicle for offering sports and casino entertainment. Along with this, we envision that New Jersey casinos will band together to support the state as a first-class gaming destination.” In the end, only time will tell which market pulls ahead in the near future – but, for now, the two states will remain directly in competition, in the pursuit of greatness.
