The day the earth stood still

Bang!  For a moment today, the earth stood still, frozen like a bad connection on Skype.  In that frozen picture you could, if only for a second, see the future – a new sort of Brave New World.   It is no longer talk; on Tuesday, August 6th, the BBC reported that Facebook has its first actually gambling application.  The application, Bingo Friendzy – cute, isn’t it a parody of the essential concept of Facebook, friends connected to each other – is only going to be available in the United Kingdom.  However, Facebookers in the UK can make a real wager now and collect real money.  Just a few years ago in the United Kingdom, one had to register to gain entrance into a casino and then wait for a considerable amount of time before you could actually enter a casino and gamble.  Now the English have to wait until their computers boot up.

I have been told that I focus too much on the impact of competition on existing casinos.  I do because we are in the midst of some dramatic changes to the gaming industry, most of which are driven by new competitive forces.  Competition is not new, not the casino industry or any other industry.  But there are times when the nature of competition changes – as it did for American car manufacturers in the 1980s.  Cars had been imported into the United States for years, but suddenly the foreign cars were selling more than American cars.  It was no longer a luxury car or two from Europe, but a mass of Asian car makers and a virtual flood of models – the totality of dozens of car makers and hundreds of models overwhelmed the American car makers. It was a shift from one competitive to model to another model – a totally different one.

In the casino industry, the shift was from internal competition – Nevada casinos competing against Nevada casinos and Atlantic City casinos competing against Atlantic City casinos – to external competition.  Nevada and New Jersey casinos now compete against casinos in dozens of other states; and the casinos in those other states too compete,not only internally within their own state, but with casinos in other states.  It is a major shift, the rules, the permitted locations and tax rates are different from state to state.  The rules, the locations and the tax rates have a major impact on the nature of the competition.  Both New Jersey and Nevada have low and favorable tax rates, but the are not very close to any large population centers and that is significant.  Atlantic City is not in the midst of a desert like Las Vegas, but it might as well be – because it is not close the key urban markets, like New York City.  A casino in New York City might pay a much higher tax rate, but it has a larger customer base.  In July, Aqueduct in Queens had a million customers – a million people visited the casino in one month; and the slot machines generated $59 million in revenues.

That is one reason I am attracted by the details of the competitive environment, because it is making some dramatic changes in the industry.  As New York City eats Atlantic City’s lunch, casino in Ohio are starting to eat Pennsylvania and Indiana casinos’ lunch and Massachusetts prepares to eat the lunch of casinos in Rhode Island, Delaware and Connecticut; they will have to stand in line for Connecticut’s lunch, because like Atlantic City, the long established casinos in Connecticut are being hit with lots and lots of competition; both are reeling from the blows.

But, in my opinion the changes caused by that inter-jurisdictional competition with be nothing compared to the impact of full-fledged Internet gambling.  The Internet is the ultimate “good location” – you know like the old cliche about real estate – the secret to success in real estate comes from three factors – location, location and location.  The same thing can be said about any retail business and that includes casinos; the casinos with the best location make the most money.  The perfect location is in the home of the consumer – wake up, turn on a computer and make a wager – that certainly beats a three hour drive to Atlantic City or Reno doesn’t it?  And if New York City is a great place to have a casino because of its 8 million citizens – then how great is Facebook with its – the last number I saw  – billion citizens?  It is only in Britain today – but look for Bingo Friends on a computer screen, iPhone or iPad near you soon.  The earth stood still and the invaders walked down the ramp into the landscape of Great Britain.

 Facebook’s First Real-Cash Gambling App Launched; A real-money gambling app has been launched on Facebook – the social network’s first.  Developed by London-based online gambling operator Gamesys, the Bingo Friendzy app allows users aged 18 and over to play games for cash prizes. Facebook said only its UK members would be able to view the app. The website’s largest gaming partner, Zynga, said it also planned to introduce real-money gambling versions of its games next year. BBC, 8-7-12


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August 2012
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