Don’t Count on the Rich

The age-old debate about taxes has reared its head in the cradle of capitalism, New York City. The newly elected mayor, a democratic socialist, has proposed increases to taxes on businesses and folks making over $1 million annually to fund social programs. The proposed tax increases would further entrench New York City among the highest taxed cities in the nation at a time when state and local taxes are not deductible for federal taxes, meaning there would be no tax shield to any increase and rich taxpayers would eat the entire increase.

But here’s the rub. You can’t count on the rich. They just aren’t predictable when it comes to paying taxes.

Any well-run government or highly leveraged business relies on a predictable set of revenues or cash flows to fund its obligations. Predictability is the key.

Consumers are in a bad place, but they continue to spend despite consumer sentiment falling to its lowest levels since the great recession of 2008-2009. Our own indices of gaming spend show that spending on gaming throughout the U.S. was up 8.6% through August of 2025, with the month of August posting even stronger results. 33 of 38 brick and mortar markets are up year to date, a remarkable turnaround from 2024 when 22 of 38 markets were declining. Collective spending on casinos and sports gaming was up $4.2 billion through August 2025 with brick and mortar markets accounting for approximately 25% of that growth.

Does payroll equal wins?

A quick look at major league baseball salaries suggests that spending on talent will get you good results in the win column. Six of the seven highest salaried teams posted at least 90 wins in 2025. The seventh team, the New York Mets, well, let’s just say they should never have traded Tom Seaver. Low salaried teams performed as expected, with nine of the ten lowest salaried teams posting losing records. Of the tenth through 19th ranked teams in terms of total active salaries, one (the Brewers) had the best record in baseball, and eight of the ten won at least half their games. Smart spending might signal a winning formula.

We also looked at team payrolls as a percentage of their local MSA income, and here is where it gets interesting. Of the fourteen teams that spent above average relative to their local income base, ten had winning records and nine made the playoffs compared to only three of the sixteen underspending teams. The implications are clear: teams that spend a higher percentage of their local income base on salaries reward both their players and their fans. I think every business can learn from that.

The chart depicts U.S. imports and exports since June of 2023. Imports surged starting in December 2024 through March of 2025, and clearly there was some hedging going on, with some betting on an increase in tariffs. Inflation has thus far been slightly elevated, but tame. As companies work through these inventories, we could see a marked increase in prices.

Like I said, things are about to get interesting.

Back to the Future!

The chart below depicts inflation based on the the personal consumption expenditures index. Inflation seemed to be under control in March and April but has ticked up in May through July. So much conflicting data recently: lower housing starts, low employment growth, possible higher inflation. Is stagflation in our future? Calling the ghost of Arthur Burns to find out.

Getting our Ford Pinto out of mothballs . . . we will be studying the 1970s for a sense of the potential impacts of stagflation on consumer spending.

New Car Prices Remain Relatively Flat Despite Tariffs

The average price for a car increased by 1.5% year over year in July 2025. This reflects the outsized influence of a few larger car sellers: Toyota, Ford and Stellantis have thus far kept price increases low and Tesla has seen its prices plummet for market and other reasons. But, a few companies reported much higher increases including Volkswagen, Mazda, Mercedes and even GM. Ford reported a 5% increase in revenue in the second quarter of 2025 despite holding prices steady but saw its adjusted EBITDA fall by 25%, partly due to $800 million in tariff impacts that it apparently chose to eat. A key question going forward is whether tariffs will eventually force large manufacturers to raise prices.

At some point this has to impact inflation and potentially consumer spending including in the gaming sector. The question is when.

Tariffs booming. Jobs? Not so much.

Customs duties are booming as the new tariff regime takes hold: customs collections were up almost 260% in the most recent quarter ending June 30. But, this boom in collections may be coming at a price. Monthly job growth is declining from prior levels, trending to below 1% annual year over year increases. It will be interesting to see what the scorecard looks like going forward with a new US Bureau of Labor Statistics chief in place.

Where can you find a more powerful in person experience than on Broadway? There is something special about the energy of live theater especially in New York, in the world’s most famous venues.

Broadway economics encapsulate the power of a brand, combined with a one-of-a-kind experience. From 1980 through 2019, attendance on Broadway rose 34% while gross revenue rose by 826%. Broadway grosses were driven by ticket prices which rose by 590.3% during that period with a compound annual rate of  5.2%, compared to inflation during that period of 2.8%. Exclusivity apparently comes with a price tag. Broadway also rivaled college and healthcare in terms of price inflation, and some might argue that a night out on Broadway feels something like a mortgage payment. 

The COVID pandemic changed those economics, and it has taken a few years for Broadway to get back to its 2018-19 revenue levels. Tickets sold were still slightly behind the 2018-19 peak for the most recently completed season in May 2025, and prices have only risen by 0.7% since the pandemic. As a result, revenues have just barely exceeded the prior peak.

Things are looking up however, as Broadway attendance grew by 19.3%, gross revenue by 23% and revenue per attendee by 3.1% in 2025. Broadway might just be on its way again. 

Housing starts are considered an indicator of the health of the economy. Previous housing start declines coincided with the 1973–1974 and 1979–1982 recessions, the 1987 stock market meltdown and the 2007–2009 housing-induced great recession. Recent trends are not encouraging. Despite a national housing shortage, housing starts have trended downward as interest rates have remained elevated, especially in southern states (where inventories are admittedly high). Just one data point among many, but maybe a sign that it might be time to lower interest rates?

Movie Industry vs. Casino Industry Comparison – Part 2

A few weeks ago we evaluated the plight of the movie industry and its recent decline compared to bricks and mortar casinos and retail. Let’s dive a little deeper.

The domestic box office grew considerably from the late 1970s through 2019, topping out at $11.9 billion in 2018. Further, box office growth was closely correlated to the number of movie releases each year.

The COVID pandemic hit the movie industry like a sledgehammer: the number of yearly new releases declined and has not recovered. New releases are down 32% from their 2018 peak, and box office revenues declined by 28% during the same period.

U.S. Dollar on Downward Trek – What Does This Mean for the Gaming Industry?

When measured against other major currencies, the U.S. dollar has declined almost 7% since the new administration took the reins of the economy. Although many reasons for this shift have been postulated, perhaps the most plausible is a reallocation of reserves away from treasuries as U.S. economic policy has become less predictable and the rule of law less certain. Additionally, ballooning U.S. debt and deficits and poor governance may be making investors skittish.

Convergence of Sports, Entertainment and Gambling

In recent months, much speculation has been made about the convergence of sports, entertainment and gambling, and a good example of the power of this convergence can be seen in the British football club, Wrexham AFC.

In November 2020, movie and TV stars Ryan Reynolds and Rob McElhenny (entertainment) took over the Wrexham Football Club in Wales (sports), and within around a year and a half, launched a streaming series Welcome to Wrexham(entertainment). Now in its fifth season, the series has posted 50 episodes and is currently the 86th most popular streaming show according to televisionstats.com.

This merging of sports and entertainment has had a significant impact on related sports betting (gambling). Notably, the betting company Entain reported in 2023 that wagering activity on Wrexham games increased 781% in Australia and 3818% in the US, mind-boggling numbers. 

A high-level look at the U.S. and Europe’s gambling markets is revealing. Both regions spend almost the same amount on gambling as a percentage of GDP  – 0.40% in the U.S. and 0.39% in the EU  – but that’s where the similarities end.

Restaurant demand has strengthened considerably after a choppy 2024. Monthly seated diners across major U.S. cities has increased by over 5% in every month since November of 2024.

Of course, there are winners and losers: Brooklyn, Houston, Tampa, San Francisco, San Diego, Minneapolis and Dallas have all seen significant increases while Kansas City, Pittsburgh, Las Vegas, and New Orleans have all slumped. Although it might seem strange to see popular tourism destinations like Las Vegas and New Orleans lumped in with Kansas City and Pittsburgh, these trends do comport with weakness in the Las Vegas Strip gaming market and regional markets in Missouri, Kansas and Pennsylvania.

The good news is that people still like eating out and apparently can still afford to. A cautionary note, that spending might be close to home.

This week we look at the relationship between live sports attendance and sportscast viewership. In doing so we highlight the power of the NFL brand relative to all other sports but also explore the growing clout of the Premier League brand relative to other US sports leagues. This is of particular interest with the FIFA World Cup headed to North America next year.

An economic thought experiment?
In the U.S., consumer spending is responsible for 67% of economic output, investment 18%, government spending 17% and we have a trade deficit of 3%. This has not always been the case.

Recession on the horizon?

We live in a risk-on environment with lots of indicators pointing to a near-term recession. What does this mean for regional casinos?

Unfortunately, the data surrounding the last recession is limited and significantly variable. Through our research, we identified 25 casinos that were operating in reasonably stable competitive conditions and which had no significant expansion during the Great Recession in 2008-2010:

• The mean decline in revenues from 2007-2010 was 4.8% but the median decline was only 2.1%.

• Variability was significant. The range of results included a worst case 22.6% decline, but a best case increase of 17.2%.

• 17 of the 25 casinos experienced declines in revenues over the three-year period ranging from 0.6% to 22.6%.

• 8 of the 25 experienced increases in revenues ranging from 3.9% to 17.2%.

• 68% of the casinos experienced declines.

It’s all about the experience.

Lots of folks these days are talking about the growth of online gaming and the demise of brick and mortar casinos. But hold your horses.

A comparison of the retail and movie industries might be instructive. While online retail revenues have grown to a $1.4 trillion industry, brick and mortar retail continues to chug along, managing to grow every year (except 2020) despite the spectacular growth of online channels. That is likely because successful retailers have innovated, created omni-channel distribution and provided reasons to come into the store.

Tourism from western Europe plummeted  in March of 2025. Travelers from Asia, Oceania and Africa also declined. Eastern Europe had a small increase and the Middle East saw a significant increase. The large decline in Western Europe could reflect the current level of uncertainty around trade policy and changes in the relationships between the US and its allies. Overall, travel from these overseas regions declined by over 208,000 or 10.2%.

The biggest decliners were Germany, the UK and Spain with declines of 54,580 (28.2%), 47.673 (14.33%), and 20,687 (24.6%) respectively. The average percentage decline among these top 20 decliners was 19.3%.

One month is not a trend but if these declines persist, this could spell trouble for the tourism and gaming industry in several U.S. destinations.