Pennsylvania Casino Revenue Falls for First Time; Harbinger for Online Gambling

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Pennsylvania’s gambling revenue dropped for the first time since the state expanded gambling in 2006 with slot casinos, and later in 2010 when table games were added to the mix.

Could this drop be a potential rallying cry for online gambling legislation?

What do the numbers tell us?

Unlike New Jersey, where land-based casino performance is approaching historic lows (gambling revenue for Atlantic City casinos dropped below $3 billion for the first time in 22 years and has dropped nearly 50 percent since its high water point of $5.2 billion in 2006 according Wayne Parry of the AP), Pennsylvania’s casino revenue slide was on a far more gentle gradient, with total revenue down just 1.4 percent.

A deeper look at Pennsylvania’s revenue numbers shows table game revenue increased 6.2 percent in 2013, with the hit coming from slots revenue, which fell 3.5 percent.

The increase in table games revenue is shouldn’t come as a surprise since table games are relatively new, having only been offered since 2010.

The latest revenue numbers raise a myriad of questions, ranging from what impact competition from nearby states has had, to whether the novelty of casinos is starting to wear off in Pennsylvania.

HB 1235

Like a number of other states, Pennsylvania has flirted with online gambling in the past.

While these overtures never made it past the courtship phase, the previously introduced bill sponsored by Representative Tina Davis (D-Bucks County) known as HB 1235 could easily be reintroduced in 2014.

SR 273

In more positive news, back in early December of 2013 the Pennsylvania State Senate passed SR 273, a resolution calling for a study on what effect online gambling would have in the state, including on the brick and mortar casino industry’s revenue and employment.

SR 273 would study not only Pennsylvania but also other states in the region, including New Jersey.

To be clear, SR 273 is not an online gambling bill. SR 273 is simply a senate resolution authorizing the study of “current condition and future viability of gaming and the industry’s potential for growth in this Commonwealth.”

You can read our full report and commentary on SR 273 here.

The conservative approach

Some Pennsylvania lawmakers have expressed their desire to take a wait and see approach, letting New Jersey’s online gambling market play out a little bit before deciding if online gambling is something that might be a good fit for the Keystone State.

As state Representative Mauree Gingrich (R-Lebanon County), who happens to be the chairwoman of the House Committee on Gaming Oversight, told back in October of 2013, online gambling is not a priority or under consideration, adding:

“We do not have any estimates on potential additional revenues resulting from Internet gaming. Of course, before that could be accomplished, a tax rate, license fees, the regulatory structure would all have to be a part of the equation.”

As goes New Jersey

As the study called for in SR 273 moves forward, it is extremely likely that New Jersey’s online gambling industry will weigh heavily into how this issue plays out in Pennsylvania.

So far there is only a single month’s worth of data from which to extrapolate, but the overall mood is positive that online and brick and mortar gaming can not only coexist, but can thrive together.

According to Boyd Gaming President and CEO Keith Smith [bold mine]:

“When matching our online and land-based databases, we found that 60 percent of online casino customers had not been to Borgata in over a year, and over 75 percent had made fewer than two trips to Borgata in the past year.

And on a combined basis, online and land-based poker revenue at Borgata was up more than 40 percent from our land-based play in December 2012. Clearly, online gaming is complementary to our land-based business, not competitive.”

That last bolded bit is of course the lynchpin for this whole debate.

If New Jersey can demonstrate that online gambling won’t cannibalize the land-based casino industry, and furthermore, could be complimentary, then the only remaining argument from dissenters would be on moral grounds, and I don’t think moral objections to gambling in 2014 are going to win over the populace.

The Adelson roadblock

The major stumbling block for online gambling expansion in Pennsylvania will be the presence of Sheldon Adelson in the state.

Adelson’s Las Vegas Sands Corporation has a casino in Bethlehem, Pennsylvania; a casino that just happens to be the biggest moneymaker in the state’s casino industry and accounts for a full 20 percent of the Pennsylvania’s gambling revenue – which is about 40 percent more than its closest competitor.

Adleson has already demonstrated a willingness to fight against online gambling on the federal level, and that money could easily be redirected to Pennsylvania should the state make a serious attempt at legalizing online wagering.

On the bright side, Adelson’s presence in Nevada didn’t stop a bill from passing there.

But I still feel that Pennsylvania could very well be the location of the central battle between pro and anti online gambling advocates – the place where all of the arguments will be hashed out.

- Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus for OPR is the developing legal and legislative picture for regulated US online poker and gambling.
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