Share
MGM Resorts CEO Bill Hornbuckle recently cited a multi-million dollar advertisement as a mistake and shared that the company, which owns 50% of BetMGM, has diverted marketing resources to improve customer experience with new features. Those comments come in the wake of staffing cuts at BetMGM and about a month after MGM shared full-year 2024 earnings that showed increases in most expenses.
MGM is redeploying assets as economic concerns rise and political environments sour toward gaming. More resource diversions to improve products, like Hornbuckle alluded to, could benefit players.
Hornbuckle discusses emphasis on digital business in 2025
Speaking at the J.P. Morgan Gaming, Lodging, Restaurant, and Leisure Management Access Forum in Las Vegas on March 13, Hornbuckle called the “inflation” of BetMGM and MGM’s other digital properties “priority No. 1” for 2025. During that conversation, Hornbuckle pointed to $13 million spent on a television commercial for BetMGM and stated that “probably wasn’t a great idea.”
Hornbuckle stressed that MGM has cut back on promotional spending to focus on product improvements, such as enhancing omnichannel play and consolidating payment channels into a single wallet. Considering other circumstances for BetMGM and MGM, that resource diversion is understandable.
Staffing reduction in concert with higher expense report
On March 8, the Press of Atlantic City reported that BetMGM would reduce its staff in New Jersey. Those cuts came less than a month after MGM’s Q4 and full-year 2024 earnings showed nearly across-the-board increases in expenses.
For example, the financial statement shows an increase of about 13% in casino costs compared to 2023 for 2024 while administrative and general expenses went up about 2.6%. Reductions in costs for BetMGM also come when economic concerns are on the rise.
Financial analysts at Goldman Sachs and JP Morgan Chase have escalated their recession probabilities, and stock prices have fallen to levels not experienced since the COVID-19 pandemic was in full swing.
Economic concerns are not the only force that BetMGM and MGM are reacting to. Political headwinds are also currently unfavorable in some ways.
Political environment shifting away from aggressive expansion of gambling
On both the national and state levels in the United States, there is evidence of a shift in the political landscape that does not always favor the interests of companies like BetMGM and MGM. This evidence includes increases in gambling revenue taxes, proposed advertising restrictions for gaming, and the defeat of measures that would regulate more types of gambling.
Reductions in marketing spend by companies like BetMGM and MGM might alleviate negative political sentiments, help meet increased expenses elsewhere, and improve customer experiences simultaneously. Improved customer loyalty could be one of a small number of paths to improve profitability.
The narrow path to better margins for US gaming companies
Without significant expansion in the near future, prospects for companies like BetMGM to gain access to swaths of new players are dim. Proposals to restrict trade or raise tax rates pose a threat to current profit margins for these enterprises.
As the frequency of gambling marketing has been a public complaint that has turned into a political issue in the US, a voluntary reduction in such marketing might address those complaints. At the same time, promotion for gambling companies is broader than media on the Internet or television.
Player credits are also part of gambling companies’ marketing efforts. Reducing the value or frequency of such offers risks forfeiting market share to competitors that are more generous with player bonuses.
Once a brand like BetMGM sets an expectation for bonus delivery, failing to meet that standard could alienate players. However, another way to attract new players and retain existing customers is through product improvements, as Hornbuckle discussed.
The intent of such improvements is that the increase in customer satisfaction will serve as a marketing device. However, some level of publicity is necessary to inform current and prospective customers of upgrades.
Ultimately, companies like BetMGM and MGM are facing pressure to deliver greater value to customers and investors amid higher costs and a political environment that is currently working to either maintain or reduce revenue growth. MGM is treating innovation in product as its path to confronting those challenges.
