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.

Given the increase in streaming that occurred during the COVID pandemic, is streaming the source of this decline? Possibly not. From 2011 through 2019, Netflix subscriber growth increased dramatically year on year, but box office revenues continued to increase. What is more likely is that the change in box office revenue is the result of a fundamental change in consumer behavior during the pandemic combined with changing Hollywood economics and a move away from green-lighting marginal releases to focus on a very specific customer segment, leaving the margins to other distribution channels.

So you ask, what does this have to do with casinos? Well, the answer is a lot.

First, the pandemic did not change bricks and mortar casino consumer behavior significantly, because once casinos re-opened, higher spending patrons flooded back even with social distancing, new forms of gaming distribution, and other changes driven by pandemic concerns. The chart below shows aggregated bricks and mortar revenue with online casino revenue for states with online gambling. During a period when online casino growth has been on its own upward trajectory, bricks and mortar revenues have flattened but have not experienced anywhere near the significant declines that the movie theatre industry has.

The takeaway? During a period of significant disruption, the motion picture industry reacted by reducing supply and doubling down on new distribution channels. The gaming industry has taken a different tack. While casinos in states with online casinos have reduced the size of their gaming floors, they have continued to fight extremely hard to maintain their brick and mortar customer base. Through slot floor improvements and optimization, enhanced dining amenities and more targeted marketing to higher spending guests, they were able to maintain their revenue base and demonstrate their responsiveness to changing consumer expectations. This demonstrates that bricks and mortar casinos and gaming customers continue to show resilience in the face of monumental change.