Betting the Minimum. Gaming in the U.S. and State Revenues

Oregon Office of Economic Analysis1

Betting the Minimum

Gaming in the U.S. and State

Revenues


Overview

• Consumer Spending Reset

– Entertainment dollar stabilized, gaming too

• Regional and State Differences

– Increased competition driving growth

– Underlying demand for gaming lower

• Public Revenues

• Outlook


Methodological Notes

• Publicly available data

– Thus incomplete coverage within states and across states

• See Excel file for documentation

• Focus primarily on slots

• Focus on net revenues, or casino win

– Gross sales minus prizes, effectively

• Focus on revenues as share of local personal income

– Misses wealth impact


Entertainment Dollar Stable, But Down

3%

4%

5%

6%

1985 1995 2005 2015

Entertainment as Share of IncomeConsumer Expenditure Survey, BLS

Overall

Middle 20%

-20%

-16%

-12%

-8%

-4%

0%

Bottom20%

2ndQuintile

Middle20%

4thQuintile

Top20%

Entertainment Expenditures 2008-2013


U.S. Gaming Stabilizing as Well

• Resetting of gaming expenditures post recession

• Stabilized since mid-2010

• Different patterns across games and across country

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1960 1970 1980 1990 2000 2010

U.S. Gambling Expenditures as Share of Disposable Personal Income

BEA, Tables 2.1, 2.4.5U

Pari-Mutuels

Lotteries

Casinos


Spending Primarily at Casinos

Lotteries Flat

Peaked as share of income in mid-

1990s. Traditional lottery sales

generally flat.

Casinos Keep Some Gains

Exceptional growth ‘90s thru housing

bubble. Keeping 40% of housing

bubble gains even after recession.

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

0.8%

0.9%

1960 1970 1980 1990 2000 2010

Lotteries as Share of Disposable Income

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

0.8%

0.9%

1960 1970 1980 1990 2000 2010

Casinos as Share of Disposable Income


U.S. Gaming Data

Northeast

Midwest

+ Ohio, Michigan

Gulf

Southwest

Data Available


Vegas, Baby.

• Visitors are back… … and spending money…

74%

76%

78%

80%

82%

84%

86%

88%

90%

92%

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

1990 1995 2000 2005 2010 2015

Las Vegas Visitor StatisticsSource: Las Vegas Convention and Visitors Authority

Visitors, lhs Hotel Occupancy Rate, rhs

$7.0

$7.5

$8.0

$8.5

$9.0

$9.5

$10.0

FY2005 FY2007 FY2009 FY2011 FY2013

Bill

ion

s

Leisure and Hospitality Taxable SalesClark County, NV, Inflation-adjusted 2013$


-30%

-25%

-20%

-15%

-10%

-5%

0%

2007 2009 2011 2013 2015

Nevada Slots and the Great Recession Slot Machine Win, 4 Qtr Average

Reno

Las Vegas Strip

Downtown Vegas

Other NV

…on everything except gaming

Vegas, Maybe?


Northeast

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2002 2004 2006 2008 2010 2012 2014

New Casinos Cannibalize ExistingNortheast Slot Revenue by State

Connecticut

DelawareNew Jersey

New York

Pennsylvania

Rhode Island

Maryland

0.18%

0.21%

0.24%

0.27%

0.30%

0.33%

0.36%

$4

$5

$6

$7

$8

$9

$10

2000 2002 2004 2006 2008 2010 2012 2014

Bill

ion

s

Northeast Slot RevenueSum of CT, DE, MD, MA, NH, NJ, NY, PA, RI, VT

Slot Revenue

Share of Personal Income


Where Do Mature Markets Land?

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

2000 2004 2008 2012

Bill

ion

s

Mature Gaming Destinations SufferSlot Machine Win

New Jersey

Connecticut

State Peak

Year

Peak Slot

Revenues

(Net)

2014

Slots

%

CT 2007 $1.722 b $1.096 b -36%

DE 2006 $0.652b $0.354 b -46%

NJ 2006 $3.804 b $1.921 b -50%


Even Pennsylvania Slowing

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

Bill

ion

s

Pennsylvania Gross Terminal Revenue

Initial 7 Casinos Newer Casinos (5 total) Share of Income, rhs

-6.3% past2 years


And Here Comes Massachusetts

• MA accounts for ~12% of regional personal income & population

• 3 casinos on the way

• How much will the market grow compared with cannibalization?– Rhode Island Study

• MA casinos lower FY17 revenues by 30-42%

http://massgaming.com/about/expanded-gaming-act/

http://massgaming.com/about/expanded-gaming-act/


Midwest

• Most of region avoided big recessionary losses, but sales as share of income continue to fall

• Illinois the exception with large declines

• Indiana and Missouri seeing large declines in 2013 and 2014 (Ohio impact?)

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

2000 2002 2004 2006 2008 2010 2012 2014

Midwest Slot RevenuesRevenue as Share of Personal Income

Illinois, Indiana, Iowa, Missouri, Wisconsin


Buckeyes Rising, Wolverines Slowing

• Detroit’s commercial

casinos were doing

relatively well

– Windsor helping

• Ohio voters

approved casinos in

2009, opened in

2012

– Likely to grow further0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

0.30%

0.35%

0.40%

0.45%

2000 2002 2004 2006 2008 2010 2012 2014

Ohio and Michigan CasinosShare of Personal Income


West Virginia SqueezedCountry Roads Don’t Take You Home

West Virginia Casino

Atlantic City

New Casinos & Racinos


West Virginia Feeling the Impact

$800

$900

$1,000

$1,100

$1,200

$1,300

$1,400

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Mill

ion

s

West Virginia Video Lottery (Gross Sales)

-18% from peak

Now -23%

Neighboring Casinos Opened: PA MD OH


Gulf Coast

• Louisiana sales

eroding as share of

sales

• Mississippi seeing

larger declines

• Florida racinos in

2007 added some

regional competition0%

1%

2%

3%

4%

5%

2000 2002 2004 2006 2008 2010 2012 2014

Gulf Coast RevenuesShare of Personal Income

Mississippi

Louisiana (Riverboats, Casino, Racinos)


Southwest

• Colorado’s mining

town casino’s seeing

slow erosion

• Arizona’s boom and

bust not limited to

housing

• New Mexico

performing relatively

well…0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

2000 2002 2004 2006 2008 2010 2012 2014

Southwest RevenuesShare of Personal Income

New Mexico

Arizona

Colorado


…But Even New Mexico is Flat

• For mature

market, New

Mexico is a

success

• Casino win is

effectively flat for

7 years

• Growth driven

by new casinos– Take market share

$0

$50

$100

$150

$200

2003 2005 2007 2009 2011 2013

New Mexico Tribal Casino Net WinMillions of Inflation-adjusted 2013$, 4 Qtr MA

11 Tribal Compacts in Place in 2003Jicarilla Apache, Ohkay Owingeh, Pueblos ofAcoma, Isleta, Laguna, Sandia, San Felipe,Santa Ana, Santa Clara, Taos, Tesque

Mescalero Apache & Pueblo of Pojoaque

Navajo Nation


Oregon Is No Exception

$8

$9

$10

$11

$12

$13

$14

$15

$16

$17

$18

Jan-01 Jan-05 Jan-09 Jan-13

Mill

ion

s

Oregon Video Lottery SalesWeekly Net Sales, 52 Week Moving Average

Line GamesIntroduced

Great Recession+ Smoking Ban

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

0.8%

2000 2005 2010 2015

Oregon Video Lottery Share of Personal Income, 4 Qtr Avg


Northern Plains

• Even states that have outperformed economically see losses and/or slower growth

• Montana has regained about half of losses

• South Dakota at or near all-time high, but flat past 7 years

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

2000 2002 2004 2006 2008 2010 2012 2014

Sales as Share of Personal Income

Montana Video Gambling Machines

South Dakota Slot Revenues


Public Revenues

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

1950 1960 1970 1980 1990 2000 2010

Bill

ion

s

States' Reliance on GamingTax Collections, 2013$, 1951-2013, U.S. Census

Pari-Mutuels

Amusements

0.0%

0.5%

1.0%

1.5%

2.0%

1950 1960 1970 1980 1990 2000 2010

States' Reliance on Gaming Share of All States Total Tax Collections, U.S. Census

Pari-Mutuels

Amusements


Commercial Casino Taxes

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

1999 2002 2005 2008 2011

Commercial Casino Tax RevenuesMillions of inflation adjusted dollars, $2012

American Gaming Association: State of the States

Existing States in 1999CO, IA, IL, IN, LA, MI, MO, MS, NJ, NV, SD

New States DE, FL, KS, ME, MD, NM, NY, OH, OK, PA, RI, WV


Gambling Revenue as Share of

State’s Own-Source Revenue, FY09

> 5%

3.5 – 4.9%

2 – 3.4%

< 1%

1 – 1.9%

Source: Rockefeller Institute


Outlook, General

• Stagnant incomes

• Consumer preferences– Gaming vs other entertainment

– Table vs Slot

• Slow gaming pop growth

• Intensity to fall with aging pop

• More of an upper bound due to possible generational trends

$50,000

$70,000

$90,000

$110,000

$130,000

$150,000

1985 1995 2005 2015

Median Family StrugglingInflation-adjusted 2013$, Census, Federal Reserve

Income

Net Worth

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

20.5

21.0

21.5

22.0

22.5

23.0

1970 1980 1990 2000 2010 2020 2030 2040

Demographic Impact on Gaming IntensityBarnes et al (2011) and U.S. Census Bureau

Average Lottery Gaming Days per Year

Lottery Gaming Population Growth


Outlook, Scenarios

• Scenario 1: Optimistic• Stronger economy results in more broad-based gains.

Consumers are confident, increase discretionary spending. Return to previous growth path.

• Scenario 2: Some Improvements• As consumer budgets repaired, increase spending on

entertainment and gaming. Growth rates pick up, however remain below gains in income.

• Scenario 3: Slow Growth• No acceleration in gaming growth rates. Increase more

in-line with the adult population than macroeconomic variables like jobs or income.


Outlook, Oregon

• No real increase in establishments or video lottery terminals since 2008

• Video lottery sales as share of income back to pre-line game period

• Previous forecasts more in-line with Scenario 2. Some growth rate improvement, but still below income gains

• Possible forecast change to Scenario 3. Tie sales outlook to growth in adult population and/or recent years’ sales.


Summary

• Increased competition drives sales higher

– Final shakeout in market share unknown

• Masks underlying industry trends

• Key factors

– Stagnant incomes

– Consumer preferences

– Demographics

• Tax revenue outlook follows sales


Contact Information

www.OregonEconomicAnalysis.com

@OR_EconAnalysis

Josh Lehner, Economist

[email protected]

(503) 378 - 4052

mailto:[email protected]

Betting the Minimum. Gaming in the U.S. and State Revenues

Economy & Finance

Transcript of Betting the Minimum. Gaming in the U.S. and State Revenues