New Jersey could nearly double its casino revenue taxes in one year by legalizing Internet gambling, Gov. Chris Christie says.
But the state also will be one of the country’s first to offer gambling in casinos as well as online, making some in the industry nervous about what to expect.
“It’s so new and unproven that it’s a flip of a coin,” said Ed Spotts,cq a former Atlantic City dealer and 27-year industry veteran who works as a tourism instructor at Temple University in Philadelphia. “There’s no model. We’re going through uncharted territory here.”
One year after Christie projected that the addition of Atlantic City’s 12th casino, Revel, and tourism revitalization efforts would trigger a rebound in what the state takes in through casino revenue, his administration is acknowledging that revenue will end trending downward for a seventh straight year.
In the budget plan he presented last week, Christie has decreased by $50 million his estimate of gambling revenue taxes for the fiscal year ending June 30.
The governor’s administration is saying the rebound now is expected in the new fiscal year starting July 1, with gambling revenue estimated to increase by $200 million. Ninety percent of that will come from Internet gambling, according to his administration.
But lawmakers and Wall Street analysts have come out against the estimates, calling them overly ambitious. That is because to generate $180 million in tax revenue, Internet gambling in Atlantic City would have to generate $1.2 billion in first-year revenue. Andrew Zarnett, cq an analyst for Deutsche Bank, said in a research note that he estimates the market to be only about $250 million.
Dealers are particularly concerned there will be fewer jobs for them in the future because they see visits to Atlantic City eventually decreasing, Spotts said.
“The majority of dealers are unhappy with this, scared about it and don’t understand how it’s going to bring gamblers to the bricks-and-mortars casinos,” he said. “They are very nervous, very worried.”
Lawmakers and advocates of Internet gambling have argued jobs are being saved in Atlantic City because without a new source of revenue, casinos are finding it hard to compete with those in Pennsylvania, New York and Maryland.
“They are competing — they are just not making as much money,” Assemblyman John Burzichelli,cq D-Salem, Gloucester, Cumberland, said of Atlantic City’s casinos, adding that Internet gambling will allow New Jersey to lure back gamblers. “We’re going to recapture some of those people.”
The Atlantic Club Casino Hotel is an example, lawmakers and casino executives said, of a casino that may have closed had the parent company of PokerStars, a major Internet gambling business, not agreed to purchase it. Casino officials have said that, should the sale be approved by regulators, the Rational Group plans to invest in the property, including building a new poker room.
Legal Internet gambling does not yet exist in any state, although Nevada, Delaware and New Jersey are all in various stages of developing regulations, licensing and testing systems.
There are 85 jurisdictions in the world that offer some form of Internet gambling, but few have the same proliferation of casinos as in Atlantic City and neighboring jurisdictions, state Division of Gaming Enforcement Director David Rebuck cq said. That makes it hard to predict whether Internet gambling will keep people at home who normally would go to Atlantic City or serve another segment of the gambling public, he said, adding he believed it was the latter.
“It’s a different kind of person who is doing the convenience gambling on the Internet, and that is only a personal opinion,” Rebuck said. “Time will tell. ... No one has a basis to make a determination one way or another.”
Gene Johnson, senior vice president for market research and online studies for Linwood-based Spectrum Gaming Group, said that because Internet gambling will be operated by Atlantic City casinos, there will be cross-marketing opportunities.
“It will be much more connected to land-based gaming than we see in Europe,” he said. “We strongly believe it will drive some incremental business to the physical casino.”
Atlantic City casinos may be able to offer online gamblers incentives that bring them to the resort, Johnson said.
“This is a way to leverage the Internet to also touch their current players,” he said. “You can earn credits that you can also redeem at the casino.”
Spotts said the skepticism is whether the Internet will become so convenient that it will keep players from visiting Atlantic City or at least delaying the trip.
“If you live in Cherry Hill, why would you drive down?” he asked. “Are you really generating an additional visit, or are you substituting or delaying their visit to Atlantic City?”
But Johnson said the thrill of playing at a table game with fellow gamblers will still prove to be a draw. Many online poker companies, including PokerStars, hold in-person tournaments that draw hundreds of gamblers who normally play on the Internet but enjoy the live competition.
“Poker players who play online, they still look forward to sitting down at the table and looking at the other guy and asking if he is bluffing,” Johnson said. “Sometimes they make more money off a poker player when they are in the casino.”
Staff Writer Donald Wittkowski contributed to this report.
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