Five years after legal online casino gaming was introduced in New Jersey, the jury is still out among industry experts about whether it was a good play or a bad bet.
Since its launch Nov. 21, 2013, online casino gaming has generated $938.4 million in revenue for Atlantic City casinos and their internet partners. The market has continued to grow annually and now collectively generates more than $20 million a month for operators in the Garden State.
In 2018, monthly online gaming revenue eclipsed the $25 million mark three times — March, July, September — and every month this year has experienced double-digit percentage growth over the same period in 2017.
The online gambling market in New Jersey has not experienced a year-to-year decline in any month since it was introduced five years ago, and its continued, steady growth has caught even the most ardent supporters off guard.
“I’m surprised that it’s still growing at such a rate,” said Steve Ruddock, lead analyst for PlayNJ.com. “People expected full maturity at maybe the three- or four-year mark.”
Between 2014 and 2016, five casino hotels in Atlantic City closed. Over the same time period, internet gaming grew by 62.5 percent.
Whether online gaming has boosted the gaming revenue bottom line for Atlantic City casino operators is not in dispute. But some question whether the convenience and accessibility of online gaming in New Jersey has helped Atlantic City as a tourist destination or the casinos generate non-gaming revenue.
Steve Norton, an industry consultant and former Atlantic City casino executive, supported online gaming initially, but now believes it to be a mistake. Besides concerns that online gaming has contributed to an increase in problem gambling behaviors, Norton said it has removed the need for customers to actually visit a casino.
“The likelihood of online gaming reducing attendance at our casinos and racetracks means operational downsizing, which leads to job and tax losses, reduced company earnings and dividends, and the likelihood of more bankruptcies,” Norton said. “Not a pretty picture for a once-healthy industry.”
Norton is not alone in his concern that online gaming will eventually lead to fewer people spending money in Atlantic City casinos on food and beverage, rooms, parking, retail and other amenities throughout the resort.
This summer, two new casinos — Hard Rock Hotel & Casino and Ocean Resort Casino — opened in Atlantic City, bringing the total number of properties in the resort to nine. Wayne Schaffel, an industry consultant and former Atlantic City casino executive, noted that, through September, overall land-based gaming revenue was down at six of the seven casino properties that were operating last year.
“As these revenue figures continue to drop, states will become ever more desperate to recoup the lost tax revenue and will seek to expand online gaming, sports betting, mobile betting and more,” said Schaffel. “This will further undermine brick-and-mortar casinos, leading to a spate of closures over the next decade. This will be especially dire for New Jersey, which, in my opinion, has no real way to ever recoup the shortfall.”
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Ruddock said that despite a lot of “sky is falling rhetoric” about online gaming contributing to the cannibalization of the Atlantic City market, those concerns have not materialized.
“I think what’s very clear is the cannibalization concerns were not only overstated, they were flat wrong,” he said. “Online gambling hasn’t negatively impacted visitation or customer spending, despite what some of the naysayers say. It’s not an untested theory that we need to speculate about anymore. We have five years of evidence suggesting it’s beneficial across the board for Atlantic City casinos.”
Golden Nugget Atlantic City, the internet gaming market leader, has generated more than $228.53 million in revenue since 2013. Thomas Winter, senior vice president and general manager of online gaming at Golden Nugget, said a strong online gaming presence has benefited the brick-and-mortar property by exposing more people to the brand while also attracting a younger player.
“Not only do I not think there’s cannibalization, personally, but, more importantly, the data says otherwise,” said Winter. “The growth of our internet gaming business came along with a big growth as well at our land-based business.”
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According to revenue figures from the state Division of Gaming Enforcement, Golden Nugget generated $129.8 million in land-based casino win and $10.8 million from internet gaming during the first nine months of 2014. Through the first nine months of this year, the Marina District-based casino has generated $172.1 million in casino win and $75.7 million from internet gaming.
David Rebuck, director of the state Division of Gaming Enforcement, said the gaming market has changed along with societal shifts in behavior, but he is “still amazed” that internet gambling continues to trend upward.
“It’s a growing industry,” Rebuck said. “I thought we would have peaked by now, and (October revenue) numbers are coming out in a week and it’s going to be another good month for internet gaming.”
Rebuck disagreed with the idea that online gaming has negatively impacted Atlantic City, contending the state has done its part to give the industry the “opportunity to offer its best product” to the gaming public.
“There’s no doubt in anybody’s mind in the United States right now that we, the state of New Jersey, are the leader in online casino gambling,” he said. “Nobody matches what we do, anywhere.”