The Casino Math of the 21st Century; When You Gain One, You Lose One

The expansion of legalized gambling in the United States has been dramatic.  Eighty years ago, when Nevada legalized casino gaming, it was the only state where it was legal to place a bet on the turn of a card, roll of the dice or a pull of a slot machine handle.  For most of that 80-year period, the expansion was slow and appeared to be a localized phenomenon.  Today, except for Hawaii and Utah, every state has some form of legal gambling.  However, in the last twenty years, a pattern has emerged; when gambling expands there is a comparable, not necessarily equal, but comparable contraction.   In the last couple of years, the contraction is starting to get as much attention as the expansion.

Recently, the annual East Coast Gaming Congress took place in Atlantic City.  As one might suspect, the trials and tribulations of the casinos in Atlantic City generated much debate.  Two issues headlined the discussion; the financial condition of the city and the actions being taken by Governor Christie and the New Jersey legislature to solve the problem.  The other issue is the referendum to be on the ballot in November to authorize two more casinos in the state in locations other than Atlantic City.  Five years ago, that was an unimaginable idea, today it seems to be a possibility.

Mark Giannantonio, the president of Resorts – the first casino to open in the state 38 years ago – warned anyone who would listen that more casinos would be a disaster for Atlantic City.  He predicted that five more casinos would close as a consequence.  He is certain that New York would immediately authorize an additional casino in New York City, further sealing the fate of the Boardwalk city.  In his doomsday forecast, Atlantic City would only have three casinos and they would struggle to survive.  Today, with only eight of the original twelve casinos still open, the casino industry in Atlantic City is very vulnerable.  It is no longer the 800-pound gorilla that gets what it wants.  Now it is more like the sick or injured caribou that is the target of the trailing pack of wolves.

Speaking at the East Coast Gaming Congress and iGaming Institute, Atlantic City casino officials said the new in-state competition could cause three to five of the surviving eight casinos to close. “Mark it down in your pads today: It’s going to happen,” Resorts Casino Hotel president Mark Giannantonio said. Wayne Parry, Associated Press, 5-26-16

While the casino executives were discussing the fate of casino gaming in New Jersey a quiet press release came from New Hampshire.  The horse race track in Rockingham Park will close on August 31st.  The land is being sold, the buildings torn down or auctioned off and the last vestige of gaming – simulcasting and some charitable gaming – will fade to black after 110 years.  The track is called New England’s first; racing began at Rockingham in 1906.  For most of its history, it was popular and successful, but its annual handle peaked in 1991 at $200 million; handle has declined by nearly 90 percent since 1991.  Track operators cite Indian gaming as the culprit.  It is a sign of the times and Rockingham Park is caught in the same expansion trap as Atlantic City.

Rockingham Park, New England’s first track that debuted with a Thoroughbred meet in 1906, has reached the finish line and will shutter its doors for good Aug. 31…In 1991, the year the first Native American casinos in Connecticut opened, Rockingham handled more than $200 million…By 2006, total pari-mutuel handle had dropped to $75,483,736. A decade later Thoroughbred handle had plummeted to $27,522, 208. Lynne Snierson, Blood-Horse News, 5-28-16

For years, the gaming industry has celebrated all expansion, proudly proclaiming the taxes it pays, the number of people it employs, the dollars spent on construction and products.  Each new casino was said to be improving the economy.  The time when one could make that argument is passing.  Today it is understood by most observers that every new casino comes at a cost to the other casinos in the region.

Of course, there is nothing new or unique in this.  Every industry, every business and every community have felt these forces over the years.  In that latter part of the 20th century it was the dominant narrative in retail.  Mega- stores forced the closing of smaller local businesses whenever they entered a new market.  Ironically in the 21st century narrative, those mega-retailers are feeling that same pressure from Amazon and the internet.  Whether the changes represent progress or disaster depends on your perspective.  It does not matter what you call it, it is a natural process and we are best served when we understand it and take it into account.  There simply is no such thing as a free-lunch casino; someone always has to pay for the feast.  It is the math of the century – to gain one you must lose one.



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