Atlantic City’s Next Big Bet: Legalized Online Gambling

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Business has been on the decline in Atlantic City casinos for six years and running. To stop the bleeding, casinos are betting big on online gaming—an option that, of course, gives gamblers an easy way to avoid Atlantic City entirely.

If people can gamble legally online, it seems like a fair assumption that they’ll have less need to hit the casinos. Hence, the physical casino business would take a hit. It’d be logical, then, that casino interests would be opposed to legalized online gambling. And indeed, some casino honchos have come out against it. “As an industry leader, and more importantly as a father, grandfather, citizen and patriot of this great country, I am adamantly opposed to the legalization and proliferation of online casino gaming,” Sheldon Adelson, the CEO of the Las Vegas Sands wrote in Forbes recently.

Adelson’s editorial was prompted by the passing of laws making online gaming legal in Delaware, Nevada, and New Jersey, and similar measures under consideration in Pennsylvania and California. He referred to online gambling “a societal train wreck waiting to happen,” and said he worries about the possibility of children gambling via the Web. “When gambling is available in every bedroom, every dorm room and every office space, there will be no way to fully determine that each wager has been placed in a rational and consensual manner.”

He swears that he’s not concerned at all about his own business interests, which should be fine with or without competition from online gaming, but is worried about other land-based casinos, and the people they employ. “While the impact on my company’s business would be limited,” he wrote, “the hit on other commercial casinos, Native American casinos, and racetrack-casinos across the land could be substantial and even lead to their eventual demise.”

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Atlantic City casinos know how difficult it can be to compete for customers when gambling options expand. The Jersey Shore casinos took in $5.2 billion in 2006. Since then, Atlantic City has had to compete with casinos that have opened in Pennsylvania. Last year, according to the Associated Press, A.C. casinos grossed a little over $3 billion, a huge decline since the mid-’00s.

And yet, Atlantic City casino companies are welcoming online gambling—because they’re partners in the e-gaming operations, rather than competitors. Through the spring and early summer, casino companies have been negotiating to partner up with online operations, many of them based overseas. Tech partners must be finalized by June 30, and applications for casinos setting up online gaming operations have a deadline of July 29.

Rather than seeing online gaming as more competition, Internet gaming should be viewed as a “lifeline” to Atlantic City casinos, Dennis Farrell Jr., a Wells Fargo analyst wrote earlier this year. He estimated that online gambling would boost casino revenues by $650 million to $850 million in the first year it’s legalized, according to the Star-Ledger.

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But what about the physical casinos, as well as other businesses in Atlantic City? The law in New Jersey will allow adults to gamble online anywhere within the state. As the Las Vegas Review-Journal pointed, out, “A New York City resident, for example, can sign up for online gaming with Borgata, drive five miles via the Holland Tunnel to Hoboken, N.J., pop into a Starbucks and log into their account on a laptop.” With such possibilities, it would seem less likely that people would actually go to the Atlantic City, potentially harming restaurants and other local businesses, as well as revenues from slot machines and gaming tables.

Farrell’s report predicted that nothing of the sort will happen. “Opponents of the bill believe online gaming will lead to job losses at brick-and-mortar casinos,” he wrote. “We beg to differ, as we believe online gaming sites operated by state casino operators will lead to job creation and drive visitation to Atlantic City.”

The Asbury Park Press published a story comparing the possible fate of casinos to that of bookshops and stores selling music and movies, which have suffered greatly in the age of Amazon and Netflix. If handled artfully, however, casinos could use the online gaming options to build customer loyalty and increase visitation, one expert told the paper:

“The extent to which this behavior online will translate to people saying, ‘I like playing at XYZ’s website, I have so many points for meals and drinks,’ it can be a positive,” said Patrali Chatterjee, associate professor of marketing at Montclair State University, who has studied the potential impact of Internet gambling. “That’s the big challenge that casinos face: to what extent can they make the transition from bricks-and-mortar to online seamless?”

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In light of the demise of brick-and-mortar-based businesses like Borders and Tower Records, however, it’s pretty clear that this isn’t an easy transition to make.

1 comments
superdealer
superdealer

It's about time NJ woke up! All the Atlantic City casinos have to do is start giving comps to their online players for shows and meals, etc and these players will take those comps right to AC. Comps have been a major part of casino marketing and now they can place those comps right in their customer's hands while their fingers are on the keyboard. It does'nt get any better than that. Of course, there are endless promos that can be feed right to the online player that will drive traffic to the casino. They should have passed this into law years ago, instead of letting all these billions of dollars go to the off shore casinos. Now let's see Atlantic City Kick ASS. DOACOnline.com