MGM's New Innovation Goals
MGM Resorts’ Chief Executive Officer Bill Hornbuckle recently delivered a candid assessment of the company’s approach to marketing and digital business, acknowledging that a significant $13 million television commercial campaign for BetMGM may have been a costly misstep. In the wake of increased operational expenses, a reduction in staff at BetMGM, and the challenging economic and political environments surrounding the gaming industry, MGM appears to be recalibrating its strategy. The company is redirecting resources away from expensive promotional initiatives toward enhancing the digital user experience, aiming to strengthen customer loyalty and address a potential slowdown in future revenue growth.
The Shifting Priorities of MGM Resorts
Hornbuckle acknowledged that the $13 million spent on a BetMGM commercial was “probably not a great idea.” The comment reflects the growing trend within the gaming industry to scale back on marketing expenses and reinvest in more tangible product enhancements. As Hornbuckle emphasized, MGM has already reduced promotional spending to concentrate on improving customer experience. This includes streamlining omnichannel play, enhancing integration across platforms, and consolidating payment systems into a single digital wallet for easier transactions.
Staffing Cuts at BetMGM and Rising Expenses
Hornbuckle’s comments come amid staffing reductions at BetMGM, the joint venture between MGM Resorts and Entain, which recently confirmed cuts to its New Jersey workforce. These staff reductions are part of broader efforts to curb operational costs, which have surged in recent quarters. MGM’s Q4 and full-year 2024 earnings report, released in early March, highlighted notable increases in several cost areas. For instance, casino costs saw a 13% jump compared to 2023, while administrative and general expenses rose by 2.6%.
These increased costs come at a time when economic concerns are mounting across the United States. Both Goldman Sachs and JP Morgan Chase have raised their recession probabilities, reflecting broader concerns about the sustainability of the economic recovery. Additionally, stock prices for MGM and other major gaming companies have dipped to levels not seen since the height of the COVID-19 pandemic, compounding the pressure on the company to adjust its financial strategies.
MGM and BetMGM are not only grappling with economic uncertainty but also with a shifting political landscape that may hinder their ability to expand further. On both state and national levels, there is increasing resistance to the rapid proliferation of gambling, particularly sports betting. Proposals for higher gambling taxes, advertising restrictions, and the defeat of expansion measures at the state level all signal a growing skepticism toward the gaming industry.
In light of these political challenges, MGM’s decision to cut back on marketing expenditure could be seen as a strategic move to avoid exacerbating negative political sentiment. As gambling revenue taxes rise and public complaints about the ubiquity of gambling ads grow louder, reducing promotional activity could help mitigate backlash from regulators and lawmakers. At the same time, it allows the company to redirect resources into areas that could benefit players directly—such as product enhancements and user experience improvements.
The Narrow Path to Profitability
For companies like BetMGM, the current environment is particularly challenging. The prospects for significant market expansion are diminishing, with fewer opportunities to attract large numbers of new players. With political restrictions looming and market saturation setting in, the company’s ability to grow revenue will rely heavily on its ability to maintain its existing customer base and improve profitability.
This creates a narrow path to higher margins. Companies like BetMGM face pressure to maintain or grow their customer base while managing costs and meeting increasingly stringent regulatory demands. Historically, marketing initiatives like player credits and bonuses have been central to attracting new players and retaining existing ones. However, these marketing tactics, while effective, come with significant financial risks. Reducing the frequency or value of such offers could lead to customer churn, as competitors might offer more generous incentives.
As a result, the key to navigating these challenges lies in the ability to deliver a more compelling product that keeps players engaged without resorting to costly and potentially ineffective marketing tactics. MGM’s shift toward improving digital features, enhancing the user experience, and streamlining payment systems are early steps in this direction.
Innovation as a Path to Growth
Hornbuckle’s comments highlight MGM Resorts’ strategic shift towards innovation as a response to economic and political pressures. Rather than rely on traditional marketing to attract new customers, the company is betting on the notion that improved products and seamless user experiences will naturally drive word-of-mouth marketing. The idea is that, as customer satisfaction rises, so too will loyalty and retention—key metrics in an increasingly competitive and restricted market.
MGM Resorts spent $13 million on a television commercial for BetMGM, which CEO Bill Hornbuckle later acknowledged as a mistake, leading the company to redirect resources towards improving customer experience and digital product features.
The Future
Staffing reductions, and political opposition to aggressive gambling expansion, MGM Resorts seems to be charting a course that emphasizes operational efficiency and customer satisfaction over traditional growth strategies. As the gaming industry navigates an uncertain future, the company’s commitment to product innovation may offer a crucial edge in maintaining its market position.
Ultimately, MGM Resorts' focus on enhancing its digital business may not only help address immediate financial concerns but also position the company for long-term success. By diversifying its marketing strategy and focusing on innovation, MGM aims to offer players more value and improve its financial stability in a landscape that is becoming less favorable for the gaming industry as a whole.
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