Will Online Gambling Survive in New Jersey?

After high expectations, online casino regulation in New Jersey has failed to resuscitate Atlantic City casinos as hoped.

Overly Optimistic Projections

New Jersey Governor Chris Christie publicly predicted revenue increase projections of as much as a billion dollars per year. A more informed financial source, Alex Bumazhny of Fitch Ratings, tempered those expectations to a still highly optimistic $200 to $300 million.

In light of how the reality has played out, however Bumazhny slashed those expectations by 50% to between $120 million and $130 million.

Surprising Falloff?

Of the current surprises, he says: "What you're seeing with the weakness is really a surprise to most people, including the operators themselves.” The state started promisingly enough, at a revenue rate of about $11 million a month from January of this year, but growth subsided rapidly and declines were posted in April, May and June.

The Explanations

The problems according to Bumazhny is not clear, but he has some theories: "It could be seasonal, that people are retracting from online gaming because they have more options during the warmer weather including going to the actual casinos themselves."

Federal regulation may also be discouraging provider investment in credit card use or marketing efforts.

Individual Giants OK

Nonetheless, some larger individual operators are still meeting their target revenues, primarily because of larger market shares than expected, according to Golden Nugget's Alicia Brown, who claims her casino expected "the market size to be 30 percent to 40 percent bigger by now.”

Less Competition

This makes sense, as the New Jersey market did not grow commensurate with expectations, but smaller market means less competition to the largest operators such as the Golden Nugget, whose revenues still grew over the last two months, despite the overall revenue drop in New Jersey.

Customer Resistance

Overall, in customer surveys questions have arisen as to the adaptation of gambling to an online model, "You're looking at a picture and watching a wheel go around. That's all you're doing. There're no sounds like when you're in a casino," Frank Farrell of Pennsylvania explains of playing online poker when he visits his friends in New Jersey, "There're no people screaming, 'Hey.' That's part of the allure of the casino."

A further poll shows that expansion of gambling in general outside of Atlantic City is not a popular idea in New Jersey.

Summertime Blues

However, there remains steadfast faith by economic experts that the three month decline will reverse itself when the traditionally soft summer season ends and people are forced back indoors to entertain themselves.