Will the big game save gaming in Atlantic City?
Atlantic City's embattled casino industry, which has lost thousands of jobs this year as money-losing operator shut their doors, shouldn't expect much of a boost from sports betting, experts say.
The reasons are many. For one, the decline of New Jersey's gaming industry has been years in the making and was hastened when lawmakers in neighboring Pennsylvania, a key Atlantic City market, allowed casino gaming. Atlantic City casino revenue reached a peak of $5.2 billion, and tumbled to $2.86 billion last year nearly two dozen casinos were built within driving distance of the Jersey shore gambling mecca.
Second, as an economic activity, sports betting isn't a game-changer. According to data from the American Gaming Association, a trade group, about $3.4 billion was wagered on sports at casinos in Nevada in 2012, though the total amount generated by the state's casinos race books was much smaller. The AGA pegs the gross gaming revenue from sports bets at $170 million, a tiny percentage of the $10.9 billion consumers plunked down in the state's casinos in 2012.
A further damper on sports betting profits at Atlantic City casinos is the fact that it's legal in Delaware and a handful of other states.
"I don't think it's going to be the lifeline for the casinos," said Alex Bumazhny, who follows the casino industry for Fitch Ratings, adding that the credit rating agency "doesn't think it will make a big difference" in Atlantic City.
Under a measure New Jersey Gov. Chris Christie signed into law last week, Atlantic City racetracks and casinos can start accepting sports bets. But that law comes amid a major slump in gambling in the state. Over the past few months, operators of the Revel Casino Hotel, which at one time was touted as linchpin of an Atlantic City revival, Trump Plaza and Showboat, closed their doors. The Trump Taj Mahal has threatened to shut down next month unless it receives concessions from state officials.
Earlier this month, Brookfield Asset Management, owner of Las Vegas' Hard Rock Hotel & Casino, acquired Revel for $110 million, a fraction of the $2.4 billion to build. Casino industry experts have argued that it will be difficult for Brookfield to operate Revel as a casino because it never made a profit. Florida developer Glen Straub, who submitted the losing bid, is challenging the sale.
"The reality is that it's a big deal for Monmouth Park and that's it," said Alan Woinski, the president of Gaming USA, a consulting firm based in Paramus, New Jersey, in an interview, referring to a struggling race track in Oceanport, New Jersey, that under the state's new law will be able accept sports bets. "This whole thing is a snow job."
Another obstacle is that New Jersey residents are divided over the benefits of sports betting. Though 44 percent of people surveyed by Rutgers-Eagleton poll thought that sports betting was a positive for Atlantic City, another 48 percent were less sure of its value, while another 31 percent thought it would make no difference.
Still, sports betting is starting up in New Jersey despite ferocious competition from a number powerful interests. Professional sports leagues in the U.S. and the NCAA have long opposed sports gambling because of fears it would lead to game-fixing. Despite such concerns, Christie initially moved to permit sports betting in 2011 after voters approved a constitutional amendment to legalize it.
The NFL subsequently sued to block the law, claiming that it violated an 1992 federal law that restricted sports betting to four states. A federal court ruled in the league's favor, and the U.S. Supreme Court refused to hear the state's appeal, leaving the ban in place.
But State Senator Raymond Lesniak, an outspoken proponent for sports betting, pushed through a bill this that year that abolished the state's existing prohibitions against sports betting. The state then eliminated all of its laws outlawing sports betting at tracks and casinos.
"Nobody expected such a bizarre move," said I. Nelson Rose, a professor at Whittier Law School who has written a textbook on gaming law, adding he wasn't sure if New Jersey's move will survive a court challenge. "This isn't going to save Atlantic City. There probably isn't anything that can save Atlantic City."