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Ch-Ch-Changes

Will online gaming transform the casino industry?

Ch-Ch-Changes

We’ve been talking about online gaming now for years. Most of us expected that it would be a nice little addition to the business, but that we would continue to operate as always, just with a little more cash.

Even today, there seems to be some question about what online gaming could be. Steve Wynn told me recently that he, like his pal Sheldon Adelson, remains skeptical about it.

“I just don’t know if there’s a business there,” he said.

Well, there is some kind of business there, and I’m not sure how it’s going to play out, but I believe it’s going to transform this industry within 10 years into something none of us will recognize.

But let’s back up. The U.S. is late to the table when it comes to online gaming, and the way it is progressing is a bit confusing. Online gaming in Europe and other parts of the world is a big business.

After the federal government has failed, during the last two sessions of Congress, to legalize online poker, three states have legalized their own versions of online gaming. And while I don’t wish to denigrate the efforts of Nevada or Delaware, it took a large state (population-wise, that is) like New Jersey to really create a game-changing moment.

If you haven’t been paying attention, Governor Chris Christie signed a bill last month that legalized the full raft of online gaming—minus, of course, sports betting. He did so in his continuing quest to aid the recovery of Atlantic City, and required that online gaming operators in the state must own a casino in Atlantic City. The clause caused the online gaming giant PokerStars to agree to buy one of the struggling casinos on the Boardwalk, the Atlantic Club, formerly the Atlantic City Hilton, formerly Bally’s Grand and the Golden Nugget.

And because New Jersey left out a “bad actor” clause in the legislation (one that banned the participation of any company that accepted illegal wagers in the U.S.), PokerStars is able to compete for a land-based gaming license in the state, which would of course turn into an online gaming license.

Caesars Entertainment, which owns four casinos in Atlantic City, isn’t happy. After all, the company’s World Series of Poker brand stands to be the dominant player in the state, absent the presence of PokerStars. Caesars objects to allowing a company that blatantly broke U.S. laws to operate in New Jersey. And Caesars isn’t alone. Most of the other members of the American Gaming Association agree, and joined together in an unprecedented motion to intervene in the regulatory investigation of PokerStars. 

Now, whether this is appropriate or not isn’t the point. This is only the first salvo of online gaming companies coming ashore in the U.S. to participate in the market one way or another. How long will it be before one of the powerful online gaming companies buys one of the major land-based casino operators? MGM Resorts and Boyd Gaming already have a partnership with online gaming supplier bwin.party entertainment to run their online casinos (with the lion’s share of the revenue going to bwin.party, by the way).

Look at the slot manufacturing business: There are now at least four companies that are a blend of lottery providers, online gaming suppliers and slot-makers. That’s a trend that is bound to continue.

And what about tribal gaming? The big tribes are hard at work trying to determine how online gaming will impact them. The smaller tribes, with smaller resources, are wondering what it means for them. But make no mistake. Online gaming is going to affect land-based gaming at all levels, and those who are not prepared are going to have to pay the consequences.

As more states begin to consider online gaming—and there are already more than half a dozen states where legislation has already been filed—the federal government will come under intense pressure to act. But how will that impact states that have already passed online gaming laws? Will they be grandfathered in, like the states that are permitted to offer sports betting after the federal ban? No one knows, but that is coming down the road as well.

We are in the midst of a transformation of the gaming industry into something that few of us have considered. How will it look in 10 years? Is this good or bad? Who will be the winners and losers? I wish I could tell you, but all I know is that it’s going to be a bumpy ride.

Roger Gros is publisher of Global Gaming Business, the industry's leading gaming trade publication, and all its related publications. Prior to joining Global Gaming Business, Gros was president of Inlet Communications, an independent consulting firm. He was vice president of Casino Journal Publishing Group from 1984-2000, and held virtually every editorial title during his tenure. Gros was editor of Casino Journal, the National Gaming Summary and the Atlantic City Insider, and was the founding editor of Casino Player magazine. He was a co-founder of the American Gaming Summit and the Southern Gaming Summit conferences and trade shows. He is the author of the best-selling book, How to Win at Casino Gambling (Carlton Books, 1995), now in its fourth edition. Gros was named "Businessman of the Year" for 1998 by the Greater Atlantic City Chamber of Commerce, and received the Lifetime Achievement Award from the American Gaming Association in 2012.

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