Borgata Online Casino Growing Company’s Business

Keith Smith is President and Chief Executive Officer of Boyd Gaming. Tom Ballance is Chief Operating Officer of the Borgata Casino in Atlantic City, New Jersey, owned by Boyd. They say that Sheldon Adelson and others who predict a cannibalization of brick-and-mortar casino business by virtual casinos and poker rooms have their math all wrong. And they have hard data to back up their argument. Ballance was interviewed by CNBC this January, and very pointedly stated that the online players that the Borgata virtual casino is seeing are a different style of casino gambler than the one who walks in the front door of one of the land-based Atlantic City Casino Hotels. Put quite simply, he stated that the two are different customers.

NJ legislation dictates that its virtual casinos must be run through physical casino operations already in place. The Borgata online gambling properties are handled by Party Poker, and the partnership is definitely a successful one compared to the others involved in the New Jersey online gambling industry. Recent numbers show that the Borgata’s virtual casino offerings claim more than 45% of the entire Internet casino marketplace in NJ. So when two major players involved in that operation said they are actually growing, and not cannibalizing, their business, they must know what they are talking about. Smith even backed up his opinion with hard facts. He said recently that approximately 85% of the online players frequenting his company’s cyber casinos had no rated play at the physical Borgata casino in two or more years.

That is a significant figure to say the least, and it shows that there is “little overlap” between the online and real-world gambling operations of that company. Not only does this fly in the face of Sheldon Adelson’s recent gloom and doom proclamations concerning Internet gambling as a land-based casino business-killer, but it has led some to investigate the Las Vegas Sands CEO’s recent gambling industry study which he says backs up his claims. The Coalition to Stop Internet Gambling, funded by Adelson, recently reported that their findings showed online gambling would cannibalize from $25 million to $50 million of land-based casino revenue in New Jersey. While that sounds significantly negative, and actually the numbers are correct, what Adelson did not have CSIG report is the whole picture. There are no figures available that track any affect that the legally licensed offshore Atlantic City online casinos have on the brick and mortar casinos in NJ.

CSIG basically only revealed of that part of their research which would support Adelson’s unfounded hatred of Internet gambling. The analyst (Chad Beynon of Macquarie Capital) projected that an additional $200 million to $300 million of revenue would be generated in New Jersey casinos by the year 2015, “cannibalizing $25 million to $50 million of land-based revenues.” With roughly 7 million adults of legal gambling age by 2015, that would mean an additional $21.43 to $39.29 per adult of extra revenue for the brick-and-mortar casino business. Hardly proof of cannibalization at all, and numbers that any burgeoning industry would be ecstatic about. And when you dig further, it appears that Adelson is having a tough time finding anyone to agree with his negative prognostication concerning Internet gambling in New Jersey, and in the rest of the United States as well.

Landry’s Inc, owner of the Golden Nugget casinos with online operations in both New Jersey and Nevada, hired Thomas Winter to run its Internet offerings. He recently stated that the company believes roughly 60% to 70% of their online customers are people who almost never visit the brick-and-mortar Golden Nugget casino. And in Delaware, Ed Sutor openly refutes any ideas of cannibalization. The Dover Downs CEO, like Boyd’s Smith, says that his existing physical casino customer base “is not going to go to the Internet.” And Mitch Garber, the Caesars Acquisition chief, in an interview with CNBC back in November pointed out that in the United Kingdom and Australia online gaming has not cannibalized off-line gaming. Those two gambling markets have been around for some time, and their continued growth only adds to the mounting pile of evidence that Adelson’s cannibalization argument is far-fetched at best. That’s good news for New Jersey’s cyber gambling marketplace, as well as its boardwalk-based casinos.

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