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Boyd Gaming CEO Kevin Smith expects his company’s foray into regulated online gambling to produce positive results before 2014 draws to a close.
Smith told listeners on a recent earnings call that online gambling “will be cash flow neutral or profitable” for Boyd “by the end of the year.”
View the complete transcript of the call here.
Boyd is active in the New Jersey market for regulated Internet gambling via its co-ownership of the Borgata. The Borgata offers both online poker and online casino games in cooperation with platform partner bwin.party.
The Borgata and its partner sites have established a healthy lead over competing operators in terms of revenue generated from online gambling (view a spreadsheet containing all NJ iGaming revenue to date here). And Borgata and network partner Party Poker NJ sit comfortably at the top of NJ’s online poker traffic charts.
But that lead has come at a cost – specifically, a $3.2mm operating loss in the first quarter of 2014.
Smith attributed the lion’s share of the loss to one-time costs associated with the launch of Borgata’s online poker and casino brands.
“Like any startup business,” Smith said, “we invested heavily in marketing and advertising. Of the $3.2 million operating loss reported by our online business during the quarter, about $2 million was due to onetime nonrecurring expenses.”
Smith further clarified that the majority of those nonrecurring expenses were made up of “startup costs and launch advertising.”
When asked by Thomas Allen of Morgan Stanley if reducing marketing expenditures would jeopardize the Borgata’s online dominance in New Jersey, Smith dismissed the concern.
“I think a lot of our market share that we’ve gained is not due to the $2 million or so that we spent in marketing and startup advertising. It really has to do with the power of the Borgata brand,” Smith responded.
“So we’ll continue to market and advertise in a prudent fashion,” Smith continued, “where we think we need to, when we think we need to and provide the right incentives to our customers to keep them on our site. But we don’t think kind of pulling back to a more normal run rate is going to impact our market share or our ability to continue to run a good business there.”