In US, you might not want to invest in physical gambling venues unless they are able to innovate

In a study published a few days ago, Arun K. Srinivasan and Thomas E. Lambert analyzed the stagnating casino revenues and tax receipts for the eleven states using a panel data from 1991 – 2010. Their analyses indicate that tax receipts for state governments followed an S-shaped growth pattern with higher growth rate during the decade of 1990’s followed by a much slower growth rate in the last decade. The “border effect” on Illinois with the number of casinos operating in the neighboring states of Iowa, Missouri and Indiana was evident with decreases in tax receipts for Illinois from its existing establishments within the state for certain years. However, in the aggregate and over a longer period of time, any border effects did not seem to matter, similar to the findings of Lambert, Srinivasan, Dufrene and Min (2010).

With revenues apparently stagnating, even during a recovery stage in the current business cycle (as of mid-2013), and with more states legalizing or thinking about legalizing gambling, the casino industry in the US faces the challenge of how it can once again “re-invent” or reposition itself to prevent a decline in future revenues or market share. Another option may be for the casinos to ask for assistance from the states in which they operate—the state of Indiana recently gave tax breaks to its casinos in order to help them deal with new competition from casinos in Ohio (Cook 2013). The results of Arun and Thomas indicate that the casino industry in the US may be in the maturity stage of the product life cycle. With online gaming currently being debated in the US, one has to wonder whether physical gambling venues offer as much promise in the future as they did in the past. Unless casino firms are able to offer more and better entertainment or other features to draw in consumers, the traditional casino organizational arrangement could be faced with declines in sales into the foreseeable future, which would mean less tax revenues to the states, unless states are able to somehow tap into any revenues from possible legalized sports gambling and/or online gambling, which could also mean opening up investment from foreign gambling operations which already have an online presence (Parry 2011) . Many states want possible tax revenues from online gaming, even though it may require state regulation and strict monitoring. In 2011 the New Jersey legislature passed a bill to legalize online gaming within the state but Governor Chris Christie vetoed it. However, that November, New Jersey voters approved a referendum legalizing gambling, and although any attempt to implement the law was thought to receive a challenge by the federal government (Shafer 2011), those fears have now passed, and New Jersey and Delaware are expected to offer online gaming within their borders before the end of 2013 (Parry 2013 . The news for New Jersey is especially welcomed given the closing of four major casinos in Atlantic City in 2014 with one costing $2.4 billion in existence for only two years (Chappell 2014). A major concern with online gambling is how to minimize illegal gambling and interstate gambling (within state online gaming is legal), which may necessitate the need for cyber café-like gaming parlors. Of course, any boost in tax revenues from online gambling could be offset by the loss of jobs in actual casinos located in the states – online gambling can be offered from anywhere and is not as labor intensive as regular casino gambling. This would possibly blunt the economic development efforts of casinos, unless casino employees could somehow be re-assigned to new duties in online betting parlors if online gaming is not permitted from one’s home.

Leave a Reply

Your email address will not be published. Required fields are marked *