Casino Companies Invest in Online Gambling

As In-Person Gambling Struggles, Casinos Seek Alternatives

The casino industry has been battered by the COVID-19 pandemic. At US casinos last quarter, revenue from in-person gambling tumbled as much as 97% due to closures and sluggish reopenings. In contrast, online gambling revenue increased more than three-fold last quarter to hit $403 million.

For some time, casinos have been hesitant to move operations online because of concerns that they will lose revenue from drinks, food, and other purchases people make at brick-and-mortar casinos. Now, companies are investing heavily in online gambling, which could change the casino landscape permanently.

DraftKings Leads the Way

DraftKings (DKNG), an online sports betting company which made its public debut in April, has been at the center of many conversations about online gambling. The company currently has a market capitalization of $12 billion—higher than traditional casino companies like MGM Resorts International (MGM) and Caesar’s Entertainment (CZR). In July, DraftKings rolled out a casino games app to add to its sports-related offerings.

Due to live sports cancelations, DraftKings posted a $161 million loss for the three months ending June 30. However, investors have high expectations for the company’s long-term growth.
Sports betting is now legal in 22 states and in the District of Columbia, and eight more states are in the process of evaluating legislation to legalize sports betting. Online casino-style games are allowed in only six states. In those states, online gambling’s popularity has surged, which could mean more states could see the potential for revenue and may legalize more types of online gambling.

The Race for Dominance in a New Sector of Gambling

Casino companies are aware of a historic opportunity for growth as more and more states legalize online gambling. Tilman Fertitta, owner of the famous Golden Nugget casinos, has made moves to take his digital gambling company Golden Nugget Online Gaming Inc public through a blank-check company. Caesars Entertainment said that it is considering a spinoff of its online gambling business. Last week, MGM Resorts International announced that IAC/InterActiveCorp (IAC) bought a 12% stake in the company for $1 billion with plans to help MGM grow its online operations.

The US online gambling sphere is heating up and getting highly competitive. Companies are spending billions of dollars vying for dominance and investors will be carefully watching to see who comes out ahead.

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