Several years ago, Atlantic City casino executives abandoned their strong opposition to legalized online gambling — only to find that the first-year revenues of $111 million were less than half of the more optimistic forecasts.
Now, however, modest signs of hope have emerged as New Jersey joins Delaware in passing the 18month mark as the first states to sanction the sort of electronic gambling that has been legal for years in Europe and Asia. Online betting produced $12.6 million in revenues for the casinos in April, up from $11.4 million in April 2014, with the state collecting a 15 percent tax on that income. And experts say the online games do not appear to have siphoned off loyal casino patrons.
“We haven’t seen any cannibalization — in fact, it’s the other way around,” Thomas Winter, vice president for online gaming for the Golden Nugget casino, said last week at the East Coast Gaming Conference, the national casino industry event.
Both Winter and Tom Ballance, the chief executive officer of Borgata, said that 80 percent to 85 percent of their online customers — who can play dozens of different traditional casino games on their smartphones or laptops — are not regular visitors to their casinos.
The fear among casino leaders once had been that their core gamblers — those who spend hundreds of dollars per weekend on hotel rooms, meals and drinks as well as on slots or blackjack — instead would stay home and pay only to gamble.
The introduction of legal online betting in November 2013 represented one of the most significant developments in Garden State gambling since voters approved a referendum item in 1976 that allowed casinos but restricted them to Atlantic City.
Although Nevada began offering online poker in April 2013 and Delaware debuted a full range of online casino games a few weeks before New Jersey, the much larger population in New Jersey — 10 times that of Delaware — and its broad array of offerings drew the attention of the national online gambling industry as its first key proving ground.
The main reason for the shift among Atlantic City casino executives in their stance on online gambling, industry executives have said, was the realization that online players represent a potentially large target audience for marketing and advertising.
The news about online gambling in New Jersey isn’t all rosy, however.
The reluctance of most major banks and credit card companies to accept the deposits that the casinos require of first-time online gamblers — as well as initial problems with new technology designed to guarantee that bets were placed only within New Jersey by people over age 21 — contributed to the lackluster first-year revenue figures.
Online gambling officials said that issues with geolocation technology have eased, and in the past month it appears there have been breakthroughs with Visa and MasterCard that will greatly reduce the number of rejected online gambling deposits.
The modest monthly online gambling revenue numbers don’t tell the full story of why casinos are involved in it, said Chris Grove, the editor of onlinepokerreport.com.
“Online play isn’t a standalone product — it’s an amenity to offer; a marketing and acquisition asset for land-based casinos and a tool for protecting the revenue and jobs generated by their land-based property,” Grove said.
But Grove and Adam Krejcik, director of digital and interactive gaming at Eilers Research, added that it’s important to separate two aspects of online gambling: poker and all other so-called e-games.
“It’s probably fair to objectively call poker — from almost any forecast or metric — a disappointment,” Krejcik said. “It looks like this state-by-state rollout is not working for poker.”
The challenge for online poker is a need for what industry analysts call “liquidity.” Unlike players of other online games, poker players must find others who also want to play their version of the game at a particular time and at a particular price point. Without a compact with larger states to expand the player pool, New Jersey e-poker players sometimes have found their options limited.