Nevada and Delaware Interstate Poker Agreement not Enough

Nevada and Delaware signed on online poker compact last week.  This compact (read: agreement) means that residents of these states can play online poker against each other.  So, online poker operators in both of these states can accept players from either state.  The USA Today story on this agreement can be found here. 

This is a good thing, but it really isn't sufficient to make Nevada or Delaware online poker a big money maker.  Why?  Because the populations of these states are just too small.  Nevada has approximately 2.75 million people and Delaware has approximately 917,000 people.  This is barely 1% of the 316 million people in the USA.  For Nevada and Delaware to really get critical mass, they need to have deals with more states.  I don't see that happening.  If I was a governor of a larger state, I wouldn't necessarily compact with Delaware or Nevada because I won't get as much value from them as they get from me.

If you take the population of Nevada (rank 35 of 50) and add the populations of every state that is smaller, which includes Delaware (rank 45 of 50), you barely break 20 million.  Now 20 million isn't necessarily bad, but you have to have those 15 states working together and agreeing on the deal to get to an aggregate 20 million population.  To put that into perspective, that number is just slightly larger than the population of Florida (rank 4 of 50), which has a population of approximately 19.5 million.

Nevada and Delaware have to somehow get agreements with larger states to feed off of their larger populations before the larger states get wise.  I don't think that will happen.  I foresee something different. I predict that the four largest states will eventually work together and craft a compact just among themselves.  Those states are California (38.3 million), Texas (26.5 million), New York (19.6 million) and Florida (19.5 million).  Add that up and you have approximately 104 million, almost one-third of the entire US population.  THAT is a good number and you only need four states to work together.

Illinois and Pennsylvania are both a bit above 12 million in population, but that is a big drop from over 19 million.  If I were those four states, I would just work together and perhaps add Illinois and Pennsylvania, which would put the total size of the "Big 6" network at just under 130 million.  This is a large enough number that would be sufficient to have a good population of online poker players.  Then, that group could then cut deals with other countries.

With online poker, size DOES matter.  California, Texas, New York and Florida have it - Nevada and Delaware don't.

Nevada Gambling Hypocrisy On Parade

Here are a couple of recent stories that highlight the hypocrisy that arises when you deal with an industry that has a strong regulatory component.  These stories are in addition to my recent post regarding casino heavy hitters fighting each other over expanded gambling, which you can see here. 

The first story details the news that Nevada's senators (one Democrat, one Republican) are teaming up to introduce a bill to outlaw all online gambling in the US except for poker.  Why?  Because they are trying to stop the "wild West" of gambling.  You see, yes they are doing this to protect their Nevada casinos, but you shouldn't only think of their more noble motives of protecting YOU from evil gambling.  As you of course may realize, Nevada only offers good and pure gambling...so that's OK and should be protected.

This bill is going to be bi-partisan because, let's be clear, the Democrat, Harry Reid, isn't very popular among Republicans, which is probably an understatement.  He needs his fellow Nevada senator, a Republican, to help weasel this bill through.  Of course, the bill would also have to get through the House of Representatives, but one step at a time.

My view is that this bill shouldn't get through the Senate, but it indeed may.  When?  After the November elections during Congress' lame duck session.  This bill will be inserted into another bill that due to its content would be deemed a "must pass" bill.  Think of something like a bill to authorize the budget for the armed forces, or removing a tax impediment for disabled elderly people.  No one will stop those bills, so Harry Reid as Senate Majority Leader will add this bill to that one and force people to vote for this or they will be viewed as hating old people, the military, etc.  Watch for the news on this bill to go very quiet until after the election, then watch these lame duck bills come up in November and December.  The article on this bill can be found here.

Now, where's the hypocrisy?  Well the Nevada view that their gambling is good and everyone else's is bad is hypocritical, but let's add in the other story to buttress the hypocrisy.  This story discusses how Nevada regulators are allowing slot players to use prepaid access cards.  Now similar means are used for sportsbook and poker players, but doing this with slots isn't exactly the same.  It would take some time for a sportsbook player to place their wagers, similar with a player in a poker game.  Slot machines are fast.  You can get a new spin about every 6 seconds if you're fast enough.  Also, sports betting and poker have a skill component, where a slot machine does not.

Here's a quote from the article:

"Here’s how it would work: A player who wants to use an access card in a slot machine would first have to register at a casino with identification that verifies a player’s address and date of birth. Registration would also tie a player to a casino’s loyalty card. Players could then load the cards at their banks by transferring funds from a checking or savings account.  Harry Hagerty, president and chief financial officer of Sightline, said his company’s agreement with banks puts limitations on the amount of money that a player could load to an access card — a maximum of $2,000 a day, $4,500 a week and $10,000 a month, and the most a player could put on a card at any time is $25,000.  Regulators also said a player wouldn’t be able to use the card for at least 15 minutes after transferring the funds."

Wow, very responsible of Nevada to make sure the maximum on a card is $25,000 and they have a whole FIFTEEN MINUTE cooling off period. (sarcasm alert)

Here's the Nevada hypocrisy.  One the one hand, they want to make it easier for people to spend their money on slot machines, ahem, THEIR slot machines, which they must think is a good thing.  On the other hand, they are seeking to pass a federal law to outlaw online slot machines, because those are generally not Nevada slot machines, which of course must be assumed to be bad.

So, in essence, NO NO NO don't put your money in those non-Nevada slot machines because they are bad and evil because they are electronic and online and you could go through your money very fast.  Put your money in our slot machines because we're pure and decent and we limit the money you have on your prepaid card to $25,000 dollars!  Right, I stand corrected thinking about this...no hypocrisy here!  (sarcasm alert)

Nevada Making Preemptive Move to Solidify Sports Betting Competitive Advantage

Nevada Senate Bill 346 is moving through the initial legislative processes.  What this bill will allow is for the expansion of sports betting in that groups of people could form an entity and bet as a group.  Currently, only individuals can make sports bets in Nevada.

According to the AP story, the bill sponsor, Senator Greg Brower, a Republican, explained that the bill would add entities could be formed and authorized to make sports bets. The groups could act as a type of hedge fund and wager big dollars on football, basketball, baseball and other sports. In turn, they could seek out investors to put up money and allow an expert to make the bet.

This expansion of sports betting would further distance Nevada from other gaming states and could bring some of the estimated $380 billion per year wagered illegally on sports into the open, where it can be regulated and taxed, which in addition to assisting the Nevada gaming industry, is of keen interest to State of Nevada.  If this bill does pass, gaming industry estimates sports betting handle would triple to $10 billion per year within 5 years.

The bill hasn't yet moved past the committee, so this is still in its infancy, but stay tuned.

Nevada Lawmaker Seeks To Allow Betting on Presidential Elections

A Nevada senator introduced legislation to allow casinos to accept bets on US political elections.  Wagering on elections would be new in the US, but is common in other countries such as the UK.  The Las Vegas Sun article covering the story reports that the Irish online gambling company, Paddy Power, took $1.6 million in wagers over last year's presidential election.

The legislation would potentially allow wagering on more than just the presidential election.  Quoting from the article, "the law would allow betting on Senate, congressional and presidential campaigns. Segerblom said he would be open to allow bets on state elections as well, and said the law could also allow bets on the Academy Awards and other cultural events."

This is great news for YouGaming's patented pari-mutuel fantasy concept.  The concept, covered by three US Patents, covers pari-mutuel fantasy wagering on any human event or contest in both a skill game and a wagering game implementation.  To try out the feasibility of these kind of games, YouGaming's skill game website, ProContest.com, crafted a US Presidential fantasy game and an Academy Awards fantasy game on the site and tested game logic.

The wagering games being proposed in Nevada can easily be implemented in both a fixed odds as well as a pari-mutuel format.  The pari-mutuel format will allow the casinos to offer games freely without the worry of loss due to the setting of an improper payout odds or betting line.  In pari-mutuel wagering, the house just takes its percentage off the top, with the rest being paid to the winning bettors.  In these new game areas, pari-mutel will be a safer approach for the casinos and very likely more profitable, due to the higher takeout percentage.

Read more: http://www.lasvegassun.com/news/2013/mar/25/betting-presidential-elections-nevada-state-senato/#ixzz2P28l0Ckc

Las Vegas' November 2012 Has Few Bright Spots

The numbers are in for November 2012, and Las Vegas doesn't have much to be joyous about.  The first story is from the Las Vegas Review Journal, cited by CDC Gaming reports.  Nevada year over year gaming revenues dropped 11% for November, to just over $782 million for the month.  In Las Vegas, the percentage drops were worse, with the Strip down 12.8% and Downtown down 17.2%.  The November reversal countered two previous months of year over year increases.  Could it be a quick reaction to the election results?  Perhaps, but I don't think that's a key driver.  It likely shows that the economy is still weak and we indeed could be headed for another recession dip.

The second story is from the Las Vegas Review Journal that shows some good news for Las Vegas.  Visitor attendance for November 2012 was 3.1 million, up from 3 million from November 2011.  That is good news.  Some of the increase was due to a couple of conventions making reappearances and existing conventions having slightly larger attendance.

This is interesting in that in the same month, there were approximately 100,000 more visitors to Las Vegas, but Las Vegas gaming revenue was down almost 13% on the Strip and over 17% downtown.  People showed up, but were not gambling as much.  The story does talk about hotel average daily room rate (ADR) being up 0.6% to $104 for the month and occupancy rates at 79.7%, up from 78.3% in the prior November.  Again, not too bad, but the story provides enough information to dig deeper and learn more.

The story provides comparisons to the highs enjoyed by Las Vegas in 2007 before the economy soured.  During the boom, occupancy was higher at 90.4% and ADR was $146.53.  Those numbers are much better than the current 79.7% / $104.  But this isn't all the bad news in the numbers.  The story provided the number of rooms in 2012 and 2007, which allow estimation of a different metric, revenue per available room or RevPAR.  RevPAR is a better measure than ADR since revenues are measured against the total number of rooms available, as opposed to ADR, which measures revenues against the number of rooms sold.  If you had a 100 room hotel and just sold one at a rate of $1,000, the ADR would be $1,000 but RevPAR would be $10.

So the estimated RevPAR for November 2012 was $82.89 and for 2007 was $132.46, based on the occupancy rates, ADR and number of rooms in the Las Vegas market at the various times.  So, estimated RevPAR is still down about 37% from the peak.  If you look at ADR, Las Vegas is down about 30%.  But look at room revenue and you'll see just how much money that isn't coming in.  If occupancy and ADR had stayed at the 2007 levels, Las Vegas would have brought in about $155 million more in room revenue, just for the month.  That would have more than made up for the lower gaming revenues.  Las Vegas has hopeful signs, but they've still got a long way to go to where they were before the economic downturn.

Nevada Casino Revenue Drops

Bloomberg Businessweek reports an AP story about the 10% year over year drop in Nevada casino win for May.  The state's casinos earned $885 million in May 2012 vs. $984 million in May 2011 - a good size difference.  The Gaming Control Board couched this bad news by stating that this month would have had a tough comparison due to the very good May of 2011.  Still, a 10% drop is tough to explain away that easily.

The "explanation" given by the spokesman actually makes a better argument as an indictment.  The spokesman called this May's numbers a "statistical anomaly," given that there was a strong events calendar, particularly in Las Vegas.  This May, downtown Vegas casino revenue dropped 2 percent, but strip revenue dropped a whopping 18 percent.  How is that an anomaly where you admittedly had a good calendar to draw visitors, but your gaming win drops 18 percent?  I suppose an anomaly, but not in a good way and should raise more red flags rather than less.

Not all regions dropped, however.  Laughlin had a 20 percent gain and Boulder had a 9 percent gain.  So, that puts to rest the "bad month for comparison purposes argument."  The true disasters in my opinion were up north in Reno and Lake Tahoe.  Reno only dropped 6 percent year over year, but Lake Tahoe dropped a unbelievable 27 percent.  Reno and Lake Tahoe have suffered due to the expanded tribal gaming operations in California for a while now, and it is not going to improve unless those regions do something drastic.  You can read posts on California tribal gaming here and here and my post with regard to what Reno and Lake Tahoe should do here.  A post regarding actions with regard to Las Vegas can be found here.

California Sports Betting Bill Moves Forward

The California Senate Appropriations Committee passed SB 1390, a bill authorizing sports betting in California, out of committee to the Senate floor for vote.  This is a big step, following on the heels of New Jersey's passing of a sports betting law in January.  As explained by the bill's author, California needs to have a sports betting law on the books so when the anticipated legal battle between New Jersey and the US Department of Justice is fought over the constitutionality of the Professional and Amateur Sports Protection Act (PASPA), California will also have an interest in the outcome.

What has been unexpected has been the bi-partisan support for this measure.  The bill had to pass through both the Governmental Organization and Appropriations Committees, with votes required to move them out (Appropriations actually needed votes to move in and to move out).  All three votes were unanimous, with no abstentions.  Both Republicans and Democrats are in support.  This bill has a real chance of getting through.  To track the bill's progress, you can use this link.

Nevada, currently the state with the de facto monopoly on sports betting, has got to be concerned.  If New Jersey implemented sports betting, yes, that would have some impact on Nevada.  If California implemented sports betting, what does Nevada have left as an attractant to California customers, still a major source of gaming revenue?  There was a previous post that posited an idea to help the northern Nevada casinos deal with increased gaming competition from California.  If sports betting comes to California, all of Nevada may need to consider this.

Nevada Super Bowl Betting Results Good

In addition to New York, Nevada also won the Super Bowl this year. Nevada sports books (with the majority of the action of course in Las Vegas) pulled in just shy of 94 million dollars in wagers ($93.8 million), "winning" $5 million. The hold percentage was 5.4%, which beat the theoretical hold percentage on typical 11/10 straight wager sports bets of 4.54%. Part of that could be due to slightly more money wagered on the losing side of the point spread, but most likely that is due to the books actually coming up short on the point spread portions of the wagers, but making that money back on losing parlay and proposition bets, which have better hold percentages for the sports books.

The Las Vegas Sun article also touts that this year's handle was the second-largest Super Bowl handle in the last decade. Before too many champagne corks pop, do realize that what is wagered legally in Nevada is but a small fraction of illegal sports betting in the United States. My estimate that for the Super Bowl, the illegal betting was about ten times the legal betting, or about ONE BILLION DOLLARS (now put your pinky to your lips like Dr. Evil).

As part of the National Gaming Impact Study Commission effort, the FBI estimated that one billion dollars was illegally wagered each week of the NFL regular season. That study was published in 1999 - this is 2012. Yahoo has a decent overview article regarding sports wagering and the position that legal sports betting should be expanded in the United States. I agree.

If interested, other previous posts on sports betting are available for view, with my recommended choices here, here and here, with the first post discussing the softening view of the NBA to potentially expanded sports betting.

Not A Surprise, Las Vegas Gambling Numbers Drop in 2010

The Las Vegas Convention and Visitors Authority published its 2010 visitor profile which indicated the continued downward trend in gambling, due to the economy. From the report, "eighty percent (80%) of 2010 visitors said they gambled while in Las Vegas, down significantly from 87% in 2006, 84% in 2007, 85% in 2008, and 83% in 2009."

The report is quite extensive, and I encourage you to download and peruse as it contains information on gambling, entertainment, demographics and traveler statistics. The report can be found at this link. Although the report is focused on Las Vegas, in my opinion, the information contained should have some utility for any venue with brick and mortar casinos.

California Tribal Gaming Now Even More Competitive with Northern Nevada Casinos

This blog has discussed the threat to Reno and Tahoe casinos from California-based tribal gaming properties. The key advantage of the tribal casinos is that the tribal properties are much closer to the California population centers than Reno and Lake Tahoe. The New York Times has an article that highlights the proximity advantage as well as the upgrading of the tribal facilities to become more full-amenity hotel casinos.

I've posted a similar sentiment to the Times article a few months back. That post can be found here. The most controversial post on this blog regarding the topic can be found here. Specifically what do Reno and Lake Tahoe do to combat full-amenity tribal hotel casinos that are located much closer to California cities? In the last referenced post, I discussed that Nevada casinos may need to exploit the two things they can offer that California casinos can't - sports betting and legal brothels. Sports betting probably won't generate the level of revenue to make up for lost slot revenue, but legal brothels may be enough of a differentiator to pull sufficient traffic to the Reno and Lake Tahoe properties to hold their own. Right now, Reno and Lake Tahoe are hurting to the tune of a 25% decrease in gaming revenue since 2007.

The article describes that Reno properties are becoming more akin to the casinos that cater to the locals market, similar to how Stations Casinos operate their Las Vegas properties. The problem is that there may be too much casino capacity in Reno compared to the approximately 250,000 population base. In addition, the locations of the various Reno properties are not as well positioned as the suburban-located properties in the Las Vegas area.

Tropicana Adding Cantor Gaming's Mobile Product

The Las Vegas Sun reports that the Tropicana is the latest casino to add Cantor Gaming's mobile wagering system. Cantor's system is already installed at the Palazzo and M Resort. I believe that Cantor has an agreement with the Hard Rock, but the system may not be installed yet. Cantor isn't exactly taking Las Vegas by storm, but they are making progress and picking up casino installations.

The Sun story reports the deal to mobile gaming for the Tropicana's upcoming revamped race and sports book, as well as other public areas, such as pool areas, restaurants and bars. This installation is part of the Tropicana's $165M renovation. The Las Vegas Review Journal reports the deal is larger - that Cantor will actually RUN the renovated Tropicana sports book when it opens this fall.

If the Review Journal story is accurate, Cantor running the sports book is a bigger deal. Selling a wireless network coupled with their proprietary games is one thing; taking the responsibility and potential liability of operating a sports book is another. Cantor, if successful, will provide new competition to Leroy's and Lucky's, the two major sports book operators in Nevada. Cantor's mobile gaming system would be a differentiator.

Cantor is the only mobile gaming system approved by state regulators, so they are in the first-mover position in this application area. If Cantor indeeds leverages this and also enters the sports book market, they could easily become a real threat to Leroy's and Lucky's. With regard to the other nascent mobile gaming providers, they are definitely in the rear and losing ground fast.

Tropicana Undergoing Facelift

The Las Vegas Sun reported that the Tropicana will be undergoing a renovation that will cost upward of $165 million. Part of the thrust of the article is that the Tropicana will be losing some of its history, which is accurate. Of course, recent history for the property hasn't been that good, as it emerged from bankruptcy just last summer.

What the management team wants to do is retheme the Tropicana to a South Beach theme from the mix and match of decor installed over the 50 year history of the property. This is actually a very good thing. As the article states, often properties get "renovated" by blowing them up and rebuilding from scratch. The Tropicana will spend a fraction of the cost of a new build to refresh the property.

In addition, management is focusing the market position to a "best in class" position, which means that in their market tier, they are tops. That is also a good thing. The Tropicana isn't going to be able to compete with Wynn or the Bellagio, but they can compete with the mid-tier properties. Also, since the Tropicana is on the northern end of the Strip, their close competition, the Sahara, Circus Circus, Stratosphere (and the Las Vegas Hilton to the east), appear to be beatable properties. The makeover could put the Tropicana as the top property in this area.

I, for one, look forward to visiting after the renovation is complete.

Nevada Casinos Post Rare Loss

KNXT reported that for only the second time in history Nevada casinos lost money on an annual basis. The first year that happened was in 2003, while the economy was recovering from the dot-com bust and 9/11. In that year, the 260 largest Nevada casinos lost a total of $33.5 million.

This year?

This year, the 260 largest Nevada casinos lost $6.8 billion, 202 times as much money as they lost in 2003. Huge loss. $4 billion of that loss was by casinos on the Las Vegas Strip. President Obama telling people to stay away from Las Vegas wasn't helping things any. Now you know why the mayor of Las Vegas was so peeved.

The Record-Courier reported additional data concerning the Lake Tahoe and Stateline area, which lost $19.3 million. They define large casino as an operation that earn revenues of over $1 million, so the smaller operations aren't counted in this metric.

Who says that gambling is recession-proof? Not any more. Not that this was completely unforeseen. Nevada gaming revenue had been declining for a while, but to actually incur a loss of this magnitude has to shake up Nevada. You can read previous posts on this topic here and here.