There is a new kid on the block, online on the block; As there has been every month for the last couple of years, the gaming news is filled with stories of gambling’s expansion. Ohio is closing in on its fourth casinos, Maryland is adding table games, Massachusetts is still in the initial phases, but it still offers a story a day on developments, Pennsylvania just licensed one resort casino and is the process of selecting an operator for the last license in Philadelphia, New Hampshire is close to a bill and the governor New York is pushing aggressively for casinos in that state. As important as each of those developments is to the narrative of the gaming industry in its final expansion phase, they may all prove to be just back-page stories in the industry’s expansion.
Back-page or front-page they still tell an important story. For example, Revel, the $2.8 billion casino in Atlantic City, declared bankruptcy in February, less than a year after it opened. Revel may turn out to be a metaphor for all of the expansion taking place now. Revel was conceived in better times, before anyone understood the extent of the impact of Pennsylvania on Atlantic City and before they realized just how many casinos were going to be built in the Northeast. Revel was built too late and at too great a price; it stood little chance of succeeding in today’s competitive environment. It is failing, not because it was not good enough, but because there are not enough customers to go around for the casinos in Atlantic City.
It is an old story in gaming, the last casino into a market spends too much to make a profit. It does not grow the market, instead the existing customers are divided among the casinos. Each casino is left with fewer customers than before and less revenue. In the worse case scenarios the new casino cannot make a profit, but with its existence neither can the older, existing casinos.
That may be the case with many casinos and jurisdictions in the future. There is a new casino coming to town. It will be the last casino to be built and it does not even need a building. That is if the 800-pound gorilla, online gaming, takes hold and it very much looks likes there is no way to stop it. Currently Nevada, New Jersey, Delaware, Iowa, Illinois, Pennsylvania, Hawaii, California and Mississippi are exploring online gaming. There is no common model, except each thinks they will have a major source of revenue and some control over the way it is regulated and controlled. It appears that online gaming will become the dominate theme in 2013; at least it has been a very, very big story in February.
The Nevada Legislature unanimously approved an online gambling bill Thursday, sending the bill to Gov. Brian Sandoval on a fast-track effort to retain the state’s status as the leader in gambling regulation… Lawmakers in 2011 passed a bill that put Nevada in position to legalize Internet gambling if the federal government sanctioned it. But when those efforts failed in Congress, Sandoval said Nevada would work toward agreements with other states. Matt Woolbright, Associated Press, 2-22-13
The iGaming North America Conference is introducing brick-and-mortar casinos to the global Internet gaming business. Online poker is the first casino game legalized within Nevada’s borders, but the innovators are already looking to bring all types casino games to the computer and mobile devices. Conference organizer Sue Schneider says when it comes to online gaming, the accomplishments in the U.S. are way behind foreign efforts. “iGaming is very long overdue to come here,” Schneider said… Around the world, online gaming has been around since 1995. Sergio Avila, KSNV, 2-22-13
Besides Moak in Mississippi, lawmakers in California, Hawaii, Illinois and Iowa have introduced online gaming bills this year. And Jonathan Griffin, policy analyst with the National Conference of State Legislatures, expects more to be introduced. For legislator Bobby Moak, getting his bill to legalize online gaming through Mississippi’s Legislature and signed by its governor is only part of the difficulty. Associated Press, 2-22-13
The Florida House of Representatives opened its examination of state gambling laws Feb. 19 as a state senator gave more details on his plan for a moratorium on so-called Internet cafés. Brandon Larrabee, Florida Baptist Witness, 2-22-13
International Game Technology Chairman Philip Satre said the world’s largest slot-machine maker has to invest online because young people don’t gamble as much as their parents. Christopher Palmeri, Bloomberg, 2-22-13
Betable CEO Chris Griffin recently told the New York Times, Silicon Valley is :A kind of ground zero for the developer community,” and is the place to be with the potential for American legalization. Recent reports indicate that Silicon Valley is betting on online gambling for the next billion dollar boom, as gaming firms increasingly move to set up shop in the world’s dominant hi-tech region. Silicon Valley-based gaming developers in Silicon Valley – from Facebook and Zynga to hundreds of smaller start-ups – are increasingly turning their social games into real-money gambling games…As this grows in popularity around the world, they believe, US legislation will have no choice but to keep up. John W, Online Casino Reports, 2-22-13
In position to be a large player in the US online poker market, the state of California has been presented with yet another path to legalization. A bill introduced on Friday by State Senator Lou Correa, who has pushed for online poker since 2011… Correa’s bill tasks the California Gambling Control Commission with establishing a regulatory framework for Internet poker licenses and operating sites within the state’s borders. He has said online poker could create as many as 1,300 jobs and help the state reign in as much as $1.4bn in revenue. Dave Ferrara, Poker Fuse, 2-26-13
Zynga CEO Mark Pincus said the company is not trying to cash in on the existing hardcore gambling market with its foray into online gambling in the U.K. Instead, Zynga will focus on what it knows best — making gambling games social…He wouldn’t say when the company would launch into real-money gambling, but in the past the company has said it would start within the first half of this year…Instead of aiming for serious gamblers, Pincus said Zynga wants to introduce real-money gaming to a mass market in the same way it introduced social gaming to the general public. Donna Tam, CNET, 2-26-13
In the major storyline of the month, the governor of New Jersey signed an online gaming bill. Now Nevada and New Jersey have joined Delaware and all three are off to the races. All three states, as well as the other states considering online gaming, believe it online gaming will be a cash-cow for their states. Governor Chris Christie has put $200 million addition tax revenues from gaming in his budget for 2014 – the money will come, in his mind from online gaming in New Jersey. Without any further evidence, Wall Street analysts, casino operators, slot manufacturers, regulators and politicians seem suddenly to be convinced that online gaming will be better than sliced bread.
The race is on among states who want to become dominant players in the Internet gambling market. With the rapid advent of online gambling, New Jersey and Nevada are expected to slug it out to become top dog in the fledgling online betting market in the U.S. New Jersey Gov. Chris Christie signed a law Tuesday legalizing Internet betting, not long after Nevada did the same. And Delaware could have its online betting operation up and running by late September. Industry executives say a key to who will dominate the industry will be how online betting is regulated by different states. That, in turn, will affect the interstate compacts that are likely to quickly expand the market. Wayne Parry, Associated Press, 2-27-13
The budget proposal Christie unveiled Tuesday assumes that much of a $200 million projected increase in casino revenue taxes in 2014 will come from the introduction of Internet gambling. Hoa Nguyen/ Donald Wittkowski, Press of Atlantic City, 2-27-13
In a move that could ultimately lead to both live and online poker in the state, Vermont lawmakers have filed a bill to establish the Vermont Gaming Commission. Vermont bill H.186 was filed by state Representative Clem Bissonnette (D- Chittenden 6-7) and is currently a simple one form bill that calls for the establishment of the Vermont Gaming Commission. The purpose of the proposed VGC normally be seen to regulate live gaming in the state, which would include poker halls…While not stated as the intent of the bill, one has to assume that at least part of the motivation of this bill would be to eventually setup the framework for online gaming within the state. Legal Poker Sites, 2-27-13
There are two forces at work as the online gaming issue moves forward, the states and the industry. The states are trying to find new sources of revenue, trying to protect their casino industry and/or the lotteries are seeking to strengthen their lottery by using the internet.
Gov. Chris Christie signed a landmark bill authorizing Atlantic City casinos to start offering Internet gambling, ushering in what supporters called a new era for Atlantic City. “This is a historic moment for Atlantic City and the state of New Jersey,” one of the sponsors of the bill, Sen. Raymond Lesniak, D-Union, said prior to the Senate passing the legislation 35-1. “This is good news for Atlantic City that it hasn’t heard in years.” Hoa Nguyen/ Donald Wittkowski, Press of Atlantic City, 2-27-13
“Internet gambling holds the potential to provide a boost to the city’s casino operators as they rebound from the effects of the economy and increased competition, while adding another dimension to efforts to reinvigorate the city,” Casino Control Commission Chairman Matthew Levinson said. Hoa Nguyen/ Donald Wittkowski, Press of Atlantic City, 2-27-13
A state Senate panel has approved a bill legalizing and regulating Internet poker. Members of the State Government Subcommittee approved the bill, agreeing with Cedar Falls Sen. Jeff Danielson’s argument that the state needs to keep up with an emerging trend. The bill calls for the Iowa Gaming Commission to regulate Internet poker in homes and casinos with hopes of generating up to $13.2 million in annual tax revenue. Associated Press, 2-28-13
“This is part of the overall goal of having the Lottery continually evolving its product to meet the demands of its players, and continually adapting to the current technology to meet those needs.” The Michigan Lottery plans to sell online subscriptions for games such as Mega Millions and Powerball starting this spring. The state said the move will bring in more revenue for schools and improve the lottery experience for players, but some businesses are concerned it will hurt in-store ticket sales. Associated Press, 2-28-13
Delaware state lottery issued a request for proposal in order to implement the technology for internet gaming, intending to offer real money online gambling “no later than September 30.” “All proposed components of the Solution must be delivered, installed, implemented, acceptance tested and ready to be operational by the agreed-upon schedule,” the request stated. The proposal seeks suppliers in four areas: Backend Technology Platform Provider, Operations Management Provider, Game Content Vendors, and Support Services Vendors. Dave Ferrara, Poker Fuse, 2-6-13
On the industry side, all of the major slot manufacturers have online strategies and have licensed their products in at least one or two foreign jurisdictions; no harm in making a little money and building the brand while you wait for the U. S. to get it is act together. On the operational side, Caesars is leading the charge, after all who is better prepared? Caesars has 30 million customers in its data base and a total rewards system that will give it a huge advantage over other gaming companies.; Still there areother companies which are interested; Stations, Boyd, American Casino and Entertainment Properties, Golden Nugget, MGM, Monarch and Golden Gaming are all licensed and ready to go online in Nevada. But for Caesars it is more important, Caesars is viewing the internet like the governor of New Jersey, as its salvation.
Social casino games have raised considerable funding. And slot machine maker IGT bought Double Down Interactive for $500 million in early 2012. Double Down had just 70 employees at the time. Aristocrat bought Product Madness in November for an estimated $40 million. And earlier this month, Scientific Games bought WMS for $1.4 billion. Morgan Stanley Research estimates that annual revenues for social casino games will hit $2.5 billion by 2015. Venture Beat, 2-27-13
“They won’t sit at a machine for two hours or three hours,” Phil Satre said. “It is to me one of the biggest single challenges for the gaming industry, having products that are relevant to this new generation.” IGT’s slot-machine business and its move into online games are the focus of a battle coming to a head at the March 5 annual meeting…Baby boomers, who make up the core player constituency for Las Vegas-based IGT, are gambling less than they used to, Satre said…Satre said the acquisitions of online companies provided needed technology. Bloomberg, 2-22-13
Williams Interactive LLC, a wholly owned subsidiary of WMS Industries Inc. (WMS), announced today that the Company has entered into an online content licensing agreement with Malta-based Bonnier Gaming. Bonnier Gaming will have access to WMS’ online library of authentic slot games on their various gaming websites, further expands WMS’ premium video slot gaming content to new consumer audiences. Business Wire, 2-26-13
Caesars Interactive Entertainment has partnered with leading developer Electronic Arts (EA) to launch a World Series of Poker (WSOP) social poker game on Facebook…Caesars Interactive declared that the new WSOP Facebook game gives players the ability to challenge friends, family and opponents from around the world to ‘hone their skills and win virtual prizes anytime [and] anywhere’. Yogonet, 2-27-13
Caesars Entertainment Corp. has been crafting a complex plan to use online gambling and a few other growth assets to pull itself out of a financial tight spot…the first step in Caesars’s plan is to spin off its online gambling business to raise equity…The proposed gambit from Caesars’s owners is controversial and complicated. Alexandra Berzon, Wall Street Journal, 2-27-13
Mountaineer Casino, Racetrack & Resort in West Virginia, which begins its 2013 meet March 1, has been cleared to offer mobile wagering…The service will be offered through Sportech, the tote provider at Mountaineer, via the track’s wireless Internet system. Tom LaMarra, Blood-Horse News, 2-27-13
As I said, this may be the major storyline of 2013, but even if it is not, it is likely that 2013 will be a watershed year for Internet gambling. Not necessarily the year people in the United States could legally begin making wagers online, but the year it was first legalized in the major gaming jurisdictions. There will be no turning back now – the American gaming industry and the American gambling public have stepped across the line into that brave new cyber world.