Online gaming still faces political challenges
Groundhog Day has become a theme in American politics. For proof, the gaming industry need look no further than Internet gaming, which is again fighting for itself in Washington, where the latest roadblock to the American gaming industry’s attempt to join the rest of the Western world is called the Graham-Chaffetz bill. As you know, one of the leading opponents to Internet gaming is the industry’s own Sheldon Adelson, who is putting plenty of money into Republican coffers where his mouth is on the topic. Adelson’s opposition is bolstered by the fact that online gaming in the U.S. has moved forward courtesy of a Department of Justice letter on the Wire Act written by President Barack Obama’s Department of Justice.
It would all be a pretty good show if there weren’t so much at stake. The online gaming issue has been around for 20 years, but it’s not a nice-to-have anymore, it’s a need-to-have for American gaming operators. The sluggish start in New Jersey is not the biggest story here; gaming was sluggish everywhere in the first quarter this year. If you’re running one of these businesses, the big story was new players, not weak revenue. Keith Smith’s statement earlier this year after three months of online gaming in New Jersey still holds true: “These results also once again demonstrate online gaming’s potential to expand our business,” the president and CEO of Boyd Gaming said in a statement. “About 85 percent of our online players have not had rated play at Borgata in at least two years, showing there is little overlap with our land-based business. Online gaming is growing our database, creating a long-term opportunity to market Borgata to an entirely new group of customers.”
New players are obviously essential for a couple of basic reasons: Older players have to eventually be replaced and, even though year-after-year research shows that two-thirds of the country never visits a casino, the overall supply of brick-and-mortar gaming keeps increasing in many areas of the country. More supply is being added than subtracted and, even when lawmakers consider doing the prudent thing, the realities of passing legislation take over and the industry often ends up with more supply than the market may warrant.
Consider the Illinois state legislature, which is again considering gaming expansion, and where Rep. Bob Rita floated the idea of a Chicago-only option, which was met with protests from central and southern Illinois, even though half the tax revenues from the up-to-10,000 gaming position Chicago property would be earmarked for education and construction projects around the state; not enough for towns that have long lobbied for a casino and obviously prefer the jobs and the other direct benefits that would accrue. A second proposal, which would create a 4,000-position Chicago venue, four new casinos and slot machines at a number of racetracks has been met with less opposition, and it comes from the racing side, which objects to the 600- and 450-machine caps that would apply to racetrack gaming operations. By the way, we’ll be examining the outcome of this debate and gaming in the Midwest generally at the Midwest Gaming Summit next month in Rosemont, Ill. (Visit www.midwest gamingsummit.com for details)
Rita has obviously absorbed the arguments of existing licensees in Illinois, and said the Chicago-only option was a way “to capture the revenue in the Chicago market without creating the cannibalization and the oversaturation.” Gaming analysts who have examined the issue are generally favorable to a Chicago venue plus two more casino licenses, in Danville and Rockville, not four, and, in many cases, they take a pretty negative view of adding racetrack gaming. But supply creep happens, and with it comes mission creep for brick-and-mortar operators, who need to keep adding to their arsenal if they’re going to keep up. And one of those weapons must surely be online gaming.