Is Internet Gaming Affecting New Jersey Land Casinos?

Updated on April 22, 2014

Is Internet Gaming Hurting the Atlantic City Casinos?

Internet gaming opened November 21, 2013 to mixed fanfare. The issue of whether internet gaming will be detrimental to Atlantic City is a hard nut to crack. It’s not something that can be easily isolated with statistics or figures. To further complicate the analysis is that the Atlantic Club Casino, despite its memorable comeback, ultimately fell prey to its poor debt structure in January. So with one less casino, it’s harder to tell where the marker is at. Also, the Revel has changed its player philosophy since opening two years ago and caters more to gamblers so their gaming numbers have improved 21% since last year and they haven’t even entered into an internet gaming compact yet.  Take into account the increase in nearby gaming competition and the slow recovery from Super Storm Sandy in the Atlantic City area it’s even more complicated.

Internet Gaming numbers have been consistently Increasing

Since its creation five months ago, we have seen steady increases in month to month internet gaming win despite the unrealistic expectations of Governor Christie whose administration originally projected $180 million in Internet gaming Taxes.  Keep in mind that Internet gaming is taxed at 7% while the land based casinos in Atlantic City are taxed at 14%.

According to the Division of Gaming Enforcement February gaming revenue results,  Internet gaming win increased 8.9%, from $9.5 million in January 2014 to $10.3 million for February 2014 despite three fewer calendar days. However, comparing February 2013 to 2014, total gaming win only decreased 1.5% for Atlantic City.  Five casino resorts in Atlantic City reported increases in gaming win for February 2014 from 5.8% to 25.6% compared to February 2013. Looking at these numbers it looks like the recent Atlantic City gaming decline has stabilized but then again the Atlantic Club is out of the picture so this could be an aberration.

248,241 internet gaming accounts have been created as of February 28, 2014, up 25.5% from the 197,782 accounts as of January 31. Many of the internet companies did soft launches in November and have since been improving their systems and adding new games and options.


It’s a whole new ball game

Many of the Online casinos are still in progression like Gamesys who are partnered with Tropicana. Gamesys is developing a poker site through their Virgin brand. Virgin Poker is currently on Facebook in Beta testing while Virgin Casino is currently online with slots and table games.  Because of the short time period in which many online-gaming providers had to operate in, we find some operators taking their time in perfecting a better product while some are more concerned with having a product available on November 21 to begin capture of the market. Some were ready and some were not, but will reward options trump ease of use in the player’s mind? Market analysis is still smoke and mirrors because the industry is so new and market development is still being built up.

As many Atlantic casino operators are discovering, the playing field is different, and what worked in Europe for many of these internet gaming companies doesn’t work here. Another caveat is that many of the online casinos have several different sites that share the profits in different percentages to the land based casino and the Internet gaming provider. This is why you see several sites for the same partnership with different games and options. In the meanwhile the better profits fall toward the land based providers because they usually reap the benefits of being the benefactor of NJ gaming for their on line endeavor.

Are the same players who play at the casino, playing online? 

The demographics are changing monthly so this is a hard statistic to ascertain. Most internet gaming sites would attribute less than 50 % of their online clientele to their online gaming database.  Keith Smith, President and Chief Executive Officer of Boyd Gaming, said: “Our market-leading performance is testament to the quality of our online product and the power of the Borgata brand. These results also once again demonstrate online gaming’s potential to expand our business. 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.”  Borgata is destroying the competition and reaping the benefits of their lucrative database while expanding their reach into a new market.  Despite the worldwide recognition of Caesars International they are second to Borgata since online gaming has started.  Could the branding of slot manufacturer games online through sites like Borgata and Tropicana be an advantage? It’s very possible; the brand recognition of games from manufacturers like IGT could be part of the difference. The brand recognition these games possess have loyalty that transcends what the casinos offer and if one site has easier accessibility than another for the same slot game, then fans of that slot will go to that site.

Relocation and Depositing Problems

One of the biggest obstacles to internet gaming so far isn’t player interest but the problems with Geo Location and lack of functional depositing options. No online casino wants a hesitation in the process to where a customer can just be frustrated and not play.

Geolocation requires certain triangulations from signal responders and works better with Wi-Fi connections. There are also problems in certain state locations that are close to bordering states or near barren areas where triangulation is harder to discover and operators are wary of discovering a false negative. Some operators like Party Poker, 888 and others have even sent out wifi Adaptors called wifi “dongles,” to solve Geo-location issues; these adaptors strengthen a wifi signal.

The depositing problems are a big deterrent to ceaseless gaming for online casinos. Most credit card companies, especially Visa and MasterCard will not authorize internet gaming transactions. There was a short period in February where TD bank would not authorize any banking transactions going towards online gaming but that has since been resolved.

As time goes on, most experts agree that credit cards will become less trepidacious with on line gaming, but until that time, the best methods are using bank accounts and pre-paid debit cards. Services like Skrill, which act like an E-wallet similar to PayPal, are becoming a strong option to depositing online.

Pay-Near-Me is a deposit option available at 7-11 and Family Dollar stores where you make deposits into your gaming accounts that some sites like Tropicana Online Casino are accepting. The problem is the inconvenience of getting your paper money withdrawn and travelling to a store to make a deposit.

Despite these problems, there is a steady improvement to the geolocation and depositing challenges facing internet gaming. The number of on line gaming of player accounts has increased every month since its inception so the atmosphere is good for positive growth.

So Far So Good

The evidence so far is showing that internet gaming isn’t a serious obstacle to the land based casino progress. It could be predicted that the hopes for stabilization of losses that has plagued Atlantic City for years may be at an end with Internet gaming. If the majority of players on line aren’t the same players that go to land based casinos then a patronage could be developed for the land based side and make a new kind of player demographic.  It will be interesting to see how the Atlantic City casinos and their internet gaming partners will develop their relationships. This could will be more important than anything else because if the strategic objectives of these gaming partners aren’t aligned, the progress of this new industry and Atlantic City may hang in the balance.

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