Online Poker Report

Don’t Blame Online Gambling for the Struggles of New Jersey’s Casinos

Atlantic City at night
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With the announcement of the impending closure of the Showboat Casino in August, and with the Revel Casino filing for bankruptcy (again), it’s a time of tumult in Atlantic City.

The once thriving Boardwalk has turned into the butt of many a joke among gamblers who see better options up and down the East Coast.

New Jersey lawmakers and the casino interests in the state have gone in search of answers, willing to discuss everything from expanding gaming across the state to legalizing sportsbetting.

One answer already implemented – online gambling – may have sped up contraction, but not for the reasons you might be thinking, or that some might try to sell you.

The launch of online gambling hasn’t hurt the casinos in any way. In fact it has boosted their performance, opening up new revenue streams and marketing possibilities.

Yet Atlantic City has contracted nonetheless.

Preemptive debunking

It’s almost a foregone conclusion that certain anti-online gambling groups will do precisely what iGaming analyst Marco Valerio fears: misrepresent Atlantic City’s contraction as a direct effect of launching regulated online gambling.

The narrative pretty much writes itself, as “Three Atlantic City Casinos Close in First Year of Online Gambling” is a catchy headline.

But it’s a false narrative when we look at the bigger picture in Atlantic City, and for that matter, across the country.

The real narrative that we should be espousing is the oversaturation of the brick & mortar casino industry, both in-state and interstate, and how Atlantic City and New Jersey will need to streamline and reinvent itself to survive and thrive in what is suddenly a very competitive market.

Every month Atlantic City didn’t contract was another month where the entire New Jersey gaming industry was hurt lost ground, as the failing casinos continued to poach potential visitors from the profitable ones.

Atlantic City needs contraction.

Online gambling has nothing to do with the current closures in Atlantic City, these were building up for years and we are likely to see several more closures before all is said and done.

Online gambling has perhaps sped up this process by bringing new revenue streams to the casinos that are “driving the car” in the AC market while the hangers-on were flung from the roof like they are in so many action movies. Online gambling was the quick jerk of the wheel needed to lose this unwanted baggage.

A changing market, poor business decisions (such as erecting an inadequately laid-out $2.4 billion resort casino in an area with no market for a $2.4 billion casino), and increasing competition just across the border in Maryland and Pennsylvania are fully to blame for Atlantic City’s woes.

If online gambling were to blame, than Atlantic City would have been hardest hit when offshore companies had free rein to operate in the United States (up until 2007) which just happened to coincide with one of Atlantic City’s most profitable periods.

The role of online gambling in AC’s contraction

Online gaming’s real role in that contraction has been to weed out some of the dead wood, as the bankrupt Atlantic Club was closed down in January, and the Showboat Casino is heading towards a similar fate in August.

Notably, neither of these two properties, or the bankrupt but still operational Revel Casino, has had any participation in online gambling in New Jersey.

Essentially online gambling acted as an indicator as to which casinos have a future on the Atlantic City Boardwalk and in the Marina District and which casinos were already breathing their last breaths.

With one notable exception (Resorts Casino), if a casino didn’t participate in New Jersey’s online gambling launch they were not long for this world anyway, whether online gambling was legalized or not.

Resorts will be the real test

For the most part, the casinos that have launched online gambling sites in New Jersey were in decent shape to begin with. But this isn’t the case with Resorts.

The big name casinos in Atlantic City are the Borgata, Caesars, the Tropicana, and the Trump Taj Mahal, and maybe even throw the Golden Nugget in there as a recognizable brand.

Resorts is a second-tier casino by revenue, accounting for about a fifth of the revenue a casino like The Borgata generates.

However, Resorts will likely rise to the top of the online gaming industry in New Jersey as soon as they launch thanks to their high-profile partnership with PokerStars.

It will be the PokerStars/Resorts partnership that provides us with our first indication if an online brand can save/resuscitate/enhance a brick & mortar casino, or if it’s merely a tertiary revenue stream.

So the question that could soon be answered is: Can PokerStars not only save Resorts from a potential date with the scrap heap down the road, but actually turn Resorts into a strong brand in New Jersey?

Image credit: gary718 / Shutterstock.com.

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Steve Ruddock
- 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.