The Gaming Industry and the Casino Gambling Strategic Group

The gaming industry has seen a significant expansion in the United States. Gross gambling revenue (the amount wagered minus the winnings returned to players), has steadily increased over the past 10 years, and with the bulk of the revenue going to traditional commercial casinos (37.49 billion). With one out of three American households indicating that they have gambled at a casino, Industry experts expect the industry to continue to experience significant growth.

UNITED STATES INDUSTRY [1]	2014 GROSS REVENUES	PERCENT OF REVENUE BY GAMING SEGMENT
iGaming	$134.7 million	.2%
Tribal Gaming	$28.10 billion	40.8%
Limited Stakes Gaming (video lottery terminals)	$2.95 billion	4.4%
Commercial Gaming (casinos riverboats racetracks)	$37.49 billion	54.6%

Important growth trends in the gaming industry include gaming at Native American owned casinos which boast the ambiance of a traditional commercial casino but in a more convenient location and gambling on the Internet. These establishments, which are in 28 states and have 449 casinos, gained .2% of overall revenue. The other winner was limited stakes gaming which is in 6 states and has 13,312 outlets, gained 13.9% of revenue. Traditional commercial gaming, which is in 23 states and has 514 casinos, lost .6% of overall revenue. iGaming, which is a new innovation is only in three states, has 8 operators but is up 777.2% of overall revenue.

Online gaming, which is a separate category of gaming, had a market volume of $37.91 worldwide in 2015 and this is expected to grow to 59.79 billion worldwide by 2020.[2]

While alternative forms of gambling are gaining in importance in the United States, the commercial casino gambling strategic group remains the largest revenue generator. The states with the largest gaming revenues in 2015 were Nevada with $11,018.69 million and New Jersey with $2,619.25 million. Both of these states experienced a decline with New Jersey seeing four casinos close and losing $10.6%.[3]

The leading companies in the casino gambling strategic group are Caesars Entertainment which operates 44 casinos, follow by Penn National Gaming with 27, MGM Resorts operates 22 casinos as does Boyd Gaming. Rounding out the top five is Station Casinos with 21 establishments. Some of the better-known companies such as Las Vegas Sands only operates nine casinos, Hard Rock has a mere seven casinos and Wynn Resorts, which operates high-end hotels and casinos has three casino properties in the United States.

TOP FIVE CASINO COMPANIES BY NUMBER OF ESTABLISHMENTS[4]	NUMBER OF CASINOS
Caesars Entertainment (Ceasars, Bally, Harrahs, Linq, Margaritaville, Paris, Planet Hollywood, The Wild West Casino, Tunica Roadhouse Casino, and Hotel)	44 casinos
Penn National Gaming (Argosy Casino, Boomtown Casino, Hollywood Casino, Off-Track Wagering, Tropicana Resort, and Casino)	27 casinos
MGM Resorts (Aria Resort and Casino, Circus Circus, Luxor Hotel, Mandalay Bay, MGM Grand, New York-New York, The Mirage)	22 casinos
Boyd Gaming (Fremont Hotel, Gold Coast Hotel, Jokers Wild, Sams Town Hotel and Gambling Hall, The Borgata Casino)	22 casinos
Station Casinos (Barley Casino and Brewing Co, Boulder Station, Palace Station, Red Rock Resort, Wildfire Casino)	21 casinos

While there is differentiation in the casinos less is known about the casino suppliers. Typically suppliers are independent firms and to date, there has been little consolidation in the supply side of the business. There are a series of licenses, issued by the individual states, which vendors must obtain in order to be an authorized supplier. In Nevada and New Jersey, the process of obtaining a license can take one to two years and costs between $500,000 and $1,000,000.

Online casino websites contend they are legal because they have gotten a license in one or more jurisdictions. The online casinos thus contend that they are legal gaming enterprises, not illegal gambling operations. Being licensed supposedly adds legitimacy and credibility to the business that has received a license. Most online casinos are registered outside of the United States where costs are lower.

JURISDICTION[5]	LICENSE FEE	TAX RATE	TIME	LEGAL FEES
Anjouan	$17,500	0%	1 week	$10,000
Grenada	$40,000	0%	2-3 weeks	$20,000
Antiqua	$75,000	3%	4-5 weeks	$10.000
Mohawk Territory (Canada)	$10,000	0%	2-4 weeks	$15,000
Costa Rica	$100	0%	1 week	$5,000
Dominica	N/A	5%	3 weeks	$20,000
Alderney (Channel Islands, UK)	$75,000	20%	1 month	$10,000

While gaming is clearly a lucrative industry, many local groups are opposed to the opening of casinos in their local area. The arguments against the legalization of casino gambling include fears of addiction, organized crime, and that additional revenues above what is already being generated, will not be realized by the legalization of casino gambling. However, we see casino gambling making in-roads in many states where it was previously not allowed. In 2004, the first of three casinos were built in Niagara Falls, NY, overriding the efforts of concerned citizen groups. Possibly motivated by the revenues lost to gambling in Connecticut the Massachusetts legislature recently voted to allow three casinos to be built in that state. Therefore we can conclude that while casino gambling remains controversial, casinos are making in-roads into new markets in the United States.

Using the Five Forces industry analysis model, analyze the strategic group (subgroup) Commercial Gaming within the context of the larger gaming industry.

What (and why) is the.

1. Rivalry among existing firms. High Medium Low

2. Threat of New Entrants High Medium Low

3. Bargaining Power of Suppliers High Medium Low

4. Bargaining Power of Buyers High Medium Low

5. Threat of Substitutes High Medium Low