President and Chief Executive Officer of Boyd Gaming, Keith Smith, joined a chorus of voices in destroying the myth that online gambling could have a negative impact on land-based casino revenue. Opponents of internet gambling in the US are pushing hard for a ban and argue that regulated online gambling revenue will come directly at the expense of land based casino revenue. According to Smith, the results from Borgata’s properties in the New Jersey online market demonstrate the true potential of online gaming and the opportunity for the company to expand its businesses. Smith said around 85 percent of its online customers have not rated play at Borgata for at least two years, indicating little overlap with their land business.

Borgata’s online gaming revenue in the Garden State grew by 15% in January. According to figures released by the New Jersey (NJ) Division of Gaming Enforcement, Borgata retained its lead over other operators with online casino winnings of $3.9 million in January. Caesars Interactive was close behind with $3 million in taxable online revenue. Smith confirmed that online gaming created a long term opportunity for Borgata to market its products to a whole new market of people. Earlier in January, COO of Borgata, Tom Balance shared similar views and considered the online customer as “a different customer.”

Several other casino executives with interests in New Jersey backed Smith’s opinion, which is an indication that online poker and other casino games have significant potential for growth. Regular customers do not represent a majority at online casinos operated by the same company. Other casino executives to state their case in favor of online gaming include Thomas Winter, VP of online gaming at Golden Nugget, who expects 60 to 70 percent of players to comprise of customers who never visit or do not frequently visit Golden Nugget’s land based operation. Earlier in November 2013, Mitch Garber of Caesars Interactive told CNBC that the U.K. and Australia have already proved that online gaming does not cannibalize offline gaming.

Delaware also had a slow but steady start to their internet gambling sites with wagering worth about $3.8 million dollars reported by Dec. 1, 2013. Dover Downs CEO, Ed Sutor was also of the opinion that its existing customer base was not likely to take to online gambling full time. Sutor said online gaming was a new market and a new demographic where some may try virtual gambling for fun. However, since its existing customers were more familiar with the personal touch and customer service provided by Dover Downs, they are not likely to stop visiting the casino. Besides, many were still going for the spa treatments and other hands on amenities.

Adelson Backed The Anti-Online Gambling Coalition Attempts To Smite Its Opponents

On the other side is the coalition backed by Sheldon Adelson. Their claim, which they say is backed by an analyst’s projection, is that online gambling will “cannibalize $25 million to $50 million of land-based revenues at New Jersey’s land based casinos”. The Coalition to Stop Internet Gambling (CSIG) backs analyst Chad Beynon of Macquarie Capital prediction but conveniently left out the first part of the analysts statement, “With 7 million adults in New Jersey, and others who may ‘stop in,’ we estimate the market to grow to $200 million to $300m by 2015, cannibalizing $25 million to $50 million of land-based revenues”. From Beynon’s complete statement, it is clear that online gambling is merely a step to improve the industry as a whole where only some revenue will be drawn from land based casinos. Regulated online gambling has the potential to enhance all casinos revenue, tax revenue and generate employment as well. For the most part, online gambling will compliment land based revenue, if not add directly to it.

The CISG’s message backed with monetary support from Sheldon Adelson. With the CISG it seems to be a case where gambling on terra firma is considered a virtue while its online version a vice. Former Denver Mayor Wellington Webb (D) said internet gambling can spread like a disease and lead to job losses. Former New York Governor George Pataki (R) is convinced that online gambling will lead to terrorism while U.S Sen. Blanche Lincoln (R-Ark) was of the opinion that it could destroy the lives of children forever.

The backup army comes in the form of the Coalition for Consumer and Online Protection (C4COP). The organization is backed by major casino operators including MGM Resorts International, Caesars Entertainment, and Boyd Gaming, to name a few. They also have the support of the American Gaming Association, the casino’s industry’s main lobbying voice which ironically Adelson is also a member of. However, it’s all about financial muscle, which could result in fierce lobbying back and forth. More than the possibility of online gaming taking away jobs or attracting money launderers and terrorists, Adelson may be more concerned about online gaming eating to the profits of his massive empire’s revenue share.

Ten states are likely to follow Nevada, Delaware and New Jersey in legalizing online gambling in some form. Congress hasn’t shown much interest in fervently backing either side, which is understandable since it is election year for many. This is evident from the two recent bills, one for and the other against online gaming, which have failed to find sufficient backing.

The case for online gaming remains strong with evidence to prove that online gaming can only compliment land based revenue. In a survey by the American Gaming Association in 2012, several experts were of the opinion that online gambling would assist growth in land-based revenues. Online poker has been active for almost a year in Nevada with no evidence of it having a negative impact on land based revenues. In addition, a 2012 survey of American poker players found a majority of respondents not willing to change their pattern of playing at land based casinos if online poker was legalized in their state. Proponents of online gambling are sure to use a growing body of evidence in the days ahead to prove that the off line gambling industry should not be adverse to the expansion of online gaming.

Sources:

www.nytimes.com/2013/11/27/nyregion/new-jersey-opens-up-for-online-gambling.html

www.lehighvalleylive.com/breaking-news/index.ssf/2014/01/new_jersey_predicts_internet_g.html

www.forbes.com/sites/nathanvardi/2013/11/22/sheldon-adelson-says-he-is-willing-to-spend-whatever-it-takes-to-stop-online-gambling/