Are Land-Based Casinos the Next Blockbuster

At the Global Gaming Expo (G2E) this week, John Connelly, CEO of Interblock, drew a provocative comparison between the evolving gaming industry and the entertainment world. He posed a rhetorical question: Could land-based casinos end up like Blockbuster in a world where online casinos are the “Netflix” of gaming?

In a presentation titled “Evolution of Casinos: Merging Digital and Physical Gaming for Enhanced Engagement,” Connelly raised concerns about whether brick-and-mortar casinos are keeping up with the digital revolution, much like how Blockbuster struggled to compete with Netflix's rise. His remarks grabbed the attention of land-based casino executives, setting the stage for a larger discussion on the future of gaming.

Connelly’s analogy to Netflix was apt. The streaming giant didn’t start as the dominant force it is today. Netflix began by mailing DVDs to customers, only to shift to an entirely digital service in 2011. At the time, Netflix was valued at around $3.2 billion. By 2022, the company's value surged to $31.6 billion, and it officially discontinued its DVD rental service.

Blockbuster, on the other hand, peaked in revenue in 2004 but filed for bankruptcy just six years later, unable to adapt to the changing market dynamics. The comparison raised an uncomfortable but necessary question: Are land-based casinos following Blockbuster’s path, failing to adjust to the rise of digital competition?

Online Casinos: A Growing Powerhouse

The data Connelly presented underscored a compelling point. The U.S. online casino market, currently only available in six states, has seen its revenue double in just two years, reaching $6.5 billion. This rapid growth stands in stark contrast to traditional table game revenues, which took 18 years to double. Online casino revenue is growing by 5% monthly in states where it’s legalized, and this figure could increase as more states embrace iGaming.

In January 2024, online casino revenue had already surpassed 70% of table game revenue in North American casinos. This growth trajectory, according to Connelly, mirrors that of online sports betting. But Connelly sees iGaming as even more profitable, with greater returns on online slots and table games compared to sportsbooks.

Connelly’s message wasn’t just a cautionary tale. He offered three potential scenarios for the future of gaming:

1. Online casinos could overtake land-based venues.
2. Land-based casinos might dominate the online market.
3. The two sectors may merge, creating a stronger, hybrid gaming industry.

Connelly argued for the third option, suggesting that the two segments must find a way to coexist and reinforce each other. He cited the example of New Jersey, where online gaming revenue has exceeded land-based slot revenue for eight consecutive months. Overall, online casinos now represent 44% of New Jersey’s total gaming revenue, highlighting the potential for digital gaming to complement physical venues.

“Are land-based casinos evolving quickly enough, or are they, like Blockbuster, failing to adapt to the digital revolution?”

The Future

Connelly's presentation posed an existential question for land-based casino operators: Are they evolving quickly enough to keep pace with the digital shift? He noted that more than $6 billion is now flowing into online gaming, while traditional casino revenue remains flat.

While Connelly believes that land-based casinos should be the dominant force in the gaming industry, he warned that if they don't adapt, online gaming may continue to siphon off players and profits.

In conclusion, Connelly’s speech was a wake-up call for the traditional gaming industry. As online casinos continue to grow, land-based venues must rethink their strategies to remain relevant. Whether the two segments merge or continue to compete, the industry’s future will hinge on how well it adapts to the digital era. The fate of land-based casinos, like Blockbuster before them, may depend on their ability to embrace the change.