Internet gambling could add $100M to A.C. bottom line

A casino game now available online in New Jersey.
A casino game now available online in New Jersey. (The benefits of such games to individual A.C. licensees is difficult to predict.)
Posted: November 29, 2013

A Moody's bond analyst estimated this week that New Jersey gamblers' online losses could result in as much as $100 million in total operating profit for the seven Atlantic City casinos that have Internet gaming permits.

Online gambling won't save Atlantic City, but it "is a much-needed boost for a market that has suffered protracted declines in gaming revenues amid increased competition from neighboring states and weak consumer gaming demand," said Peggy Holloway, a Moody's Investors Service vice president and senior credit officer.

It's hard to say how much individual licensees in Atlantic City will benefit from online poker, slots, and blackjack, because the additional profits will be split with partners who operate the virtual casino, provide the games, and ensure that the gamblers are physically in the state, among other services.

Financial details on those relationships are not public. The New Jersey Division of Gaming Enforcement said it considers them proprietary.

Caesars Entertainment Operating Co., which owns four Atlantic City casinos, and Borgata have 60 percent of Atlantic City's brick-and-mortar gambling market and are expected to be the biggest beneficiaries of online gambling.

Moody's estimated that Caesars could gain between $14 million and $40 million in annual earnings before interest and taxes from online gambling. That equals between 2 percent and 4.5 percent of such earnings for the 12 months ended Sept. 30, Moody's said.

Fitch Ratings, another credit-rating agency, pointed to a potential downside of Internet gaming for Atlantic City. "In some ways, it will be detrimental because it has kept brick and mortar supply in the market when the level of demand dictates that some supply should be removed," Fitch said.

New Jersey's online gaming law allows 12 permits, one for each of the Atlantic City casinos. Only seven of the online permits are being used. It is likely that some casinos have been kept open in the hope that online gaming could make them attractive to a buyer.

Atlantic City casino gaming revenue has plummeted to an estimated $2.8 billion this year from more than $5 billion in 2006. The number of casinos, meanwhile, has remained 12, as Revel replaced the Sands, which was demolished in 2007.

The Moody's report also cited a threat to SugarHouse Casino, Parx Casino, and Harrah's Chester, given the possibility that New Jersey customers could stay home to gamble. The biggest threat is to SugarHouse, which is taking on extra debt for expansion, Moody's said.

The Parx parking lot usually has a huge contingent of cars from New Jersey, some of whom might stay home to play online.

215-854-4651 @InqBrubaker

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