Supporters of Internet gambling see it as a way to transform Atlantic City into the high-tech “Silicon Valley” of gambling.
Critics, however, believe customers will stay away from Atlantic City’s casinos in droves, choosing instead to gamble in the comfort of their homes.
“All of a sudden, the need to come to Atlantic City becomes less and less and less,” said Steve Norton, who was part of the executive team that opened Resorts Casino Hotel, the city’s first casino, in 1978.
Gov. Chris Christie vetoed a New Jersey Internet gambling bill Thursday in a way that encouraged the bill’s backers: He said he would sign a revised bill if it limits online wagering to a 10-year trial period. Gambling supporters in the state Legislature say they are willing to accept that condition.
“This is the future of gaming. It will give the Atlantic City casinos the opportunity to be the Silicon Valley of Internet gaming by positioning them to be the hub of future expansion into other states,” said state Sen. Raymond Lesniak, D-Union, one of the primary sponsors of the legislation.
Lesniak and other lawmakers are predicting swift passage of a revised bill. Casino regulators would then have to grant Internet licenses, meaning it could be months before the first online bets are placed in New Jersey.
In the proposed legislation, Internet gambling would occur on servers and other equipment based in Atlantic City casinos, which also would be the only ones authorized to accept wagers. New Jersey would tax Internet gross gambling revenue at 15 percent, under the governor’s proposal. Gross gambling revenue currently is taxed at a flat 8 percent in New Jersey.
Early estimates of the amount of revenue that Internet wagering will generate have ranged broadly, from $230 million to $850 million annually. Some analysts predict online betting will be a $1.5 billion enterprise within five years.
State Sen. Jim Whelan, D-Atlantic, who also supports Internet gambling, argued it would be foolish for New Jersey to let other casino states get the jump on an emerging trend and gain a competitive edge on Atlantic City. Nevada and Delaware have authorized Internet gambling. Other states, such as California, are considering it.
“The solution is not to put our heads in the sand and pretend that it’s not going to happen somewhere else down the line,” said Whelan, a former Atlantic City mayor.
Whelan and other supporters say Internet gambling will be a catalyst for jobs and investment in Atlantic City, helping to reverse a six-year casino revenue slump caused by the sluggish economy and competition from neighboring states. Internet gambling companies that want to operate in New Jersey will have to build and staff data centers in Atlantic City, where equipment to host online wagering applications must be maintained, according to proposed legislation.
“The revenue raised through Internet wagering will have a real impact on the economy of Atlantic City — not only helping to keep struggling casinos afloat, but also ensuring the continuous employment of thousands of residents,” Whelan said.
The Rational Group, parent company of online gambling giants PokerStars and Full Tilt Poker, has agreed to buy the Atlantic Club Casino Hotel for an undisclosed price. There is speculation that the deal would have died if Christie had been staunchly against the Internet bill.
“PokerStars is an Internet company, so the idea that an Internet company would buy a brick-and-mortar casino when there is no Internet gaming would be very unlikely,” Whelan said.
However, Eric Hollreiser, a spokesman for the Rational Group, said the company is anxious to complete the purchase of the Atlantic Club now that the governor has indicated his willingness to legalize Internet gambling under revised legislation.
“The distinctive environment that I-gaming can create for New Jersey is unprecedented, and we are pleased that Gov. Christie sees the significant benefits of mixing online and offline gaming,” Hollreiser said.
Joe Lupo, senior vice president of operations for Borgata Hotel Casino & Spa, Atlantic City’s dominant casino, also believes Internet gambling will help fuel the industry’s growth in coming years.
“It will no doubt drive revenue and opportunities in New Jersey. We can market it promotionally and open the door for greater things to come,” Lupo said.
Resorts Casino Hotel also intends to offer Internet gambling, subject to the governor and Legislature legalizing the activity, spokeswoman Courtney Birmingham said.
Other casinos did not explicitly say whether they would offer Internet gambling but applauded the governor’s embrace of it.
“We are confident that with the governor’s recommended changes and New Jersey’s longstanding commitment to the highest standards of integrity, this legislation will expand the ways in which customers can interact with us,” said Jan Jones, executive vice president of Caesars Entertainment.
Caesars Entertainment operates the Bally’s, Caesars, Harrah’s Resort and Showboat casinos in Atlantic City as well as other properties across the country, including in Las Vegas, where Internet gambling is legal. One day after Christie’s announcement, the company’s stocks rose 38 percent to close at $13.91.
Atlantic City’s newest casino, Revel, also did not say whether it would offer Internet gambling but expressed support for the measure.
“We believe that Internet gaming can play a very positive and meaningful role in the economic evolution of Atlantic City by generating new revenue, jobs and taxes and, importantly, by creating diversification in the overall Atlantic City business model,” Revel CEO Kevin DeSanctis said.
Even critics of Internet gambling acknowledge it will generate new profits for the casino industry. They also say it could be a lifeline for struggling properties, such as the Atlantic Club and Trump Plaza Hotel and Casino.
“The flip side of online casinos is that marginal properties, like the Atlantic Club and possibly Trump Plaza, might be saved by companies looking for a cheap entry into owning and operating a New Jersey Internet casino,” said Norton, the former Resorts executive who is now a casino consultant.
However, Norton and other doubters of Internet gambling don’t see online betting being good for the casinos. In their view, customers will simply stay home to gamble on their personal computers. New Jersey’s Internet legislation will allow them to use casino websites to place bets on the slot machines and table games. Critics claim there will be no need for customers to visit the casinos if they can do the same type of gambling at home.
“I can assure you that online gambling will do nothing to create new customers or business for Atlantic City,” said Wayne Schaffel, a public relations consultant and former Atlantic City casino executive. “The problem with Internet gambling is that the convenience factor will definitely hold sway among locals. There will be no reason to come to Atlantic City — period.”
Norton and Schaffel both fear that business volumes for the casinos’ nongambling attractions — hotel rooms, restaurants, nightclubs and retail shops — will drop precipitously once Internet gambling begins. They predict mass layoffs will follow, because there will be no need for workers to staff empty businesses.
“This is a pure jobs-killer for Atlantic City, depending on how effective it is,” Schaffel said.
Dismissing those gloomy scenarios, Whelan estimated that about 20 percent of Atlantic City’s customer base will opt to do Internet wagering at home instead of visiting the casinos for the full gambling experience. He envisions casinos building even more nongambling attractions to provide a greater incentive for customers to come through the door.
“The answer to that is to provide more of those amenities,” Whelan said of ways to get gamblers out of their homes. “The piece we need is the nongaming — the retail, the dining, the entertainment, etc. Conventions are a big part of that, too.”
Norton wants New Jersey to use some of the tax revenue from Internet gambling to subsidize new air service to Atlantic City. He said Atlantic City must extend its reach beyond the traditional drive-in markets in the Northeast to tap new feeder markets in the Southeast, including Atlanta, Charlotte, N.C., Richmond, Va., and Jacksonville, Fla.
New air service, in turn, would make Atlantic City more attractive for conventions. Those conventions would fill hotel rooms and generate extra business during the city’s normally slow midweek periods, he said.
“The key thing is air. What air does (is) it opens new markets,” Norton said.
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