Boyd exec readies for rollout of Web gambling in New Jersey

To Boyd Gaming Corporation Executive Vice President Bob Boughner, the Borgata in Atlantic City is handling this week’s launch of Internet gaming in New Jersey much as it would oversee the opening of a new restaurant.

The expected revenue from New Jersey’s online wagering market, however, should far exceed any dinner tab.

Boughner said Boyd Gaming is not taking anything for granted in conjunction with the much anticipated Internet gaming rollout. The last thing the company wants to do is damage the Borgata’s market-leading brand.

“From our perspective, we have been and will continue to be very methodical, careful and thought out in this process,” said Boughner, who led the Borgata’s development and opening in 2003. “At the end of day, we want to expand the Atlantic City market, both the casino and the real money online experience.”

New Jersey becomes the third state, following Nevada and Delaware, to venture into Internet gaming, when websites go live Tuesday. The state’s Division of Gaming Enforcement is overseeing a five-day test period in which the websites offer limited wagering during limited hours to invited guests.

The testing allows New Jersey gaming regulators to ensure all the protocols work, including identity verification, geolocation systems and money transaction processing software.

Atlantic City’s 12 casinos operate the websites and have partnered with current online gaming operators or technology companies. The websites offer a variety of card games including blackjack, table games such as roulette, and several slot machines titles. Operators are launching separate online poker websites.

Wagering is restricted to computers and mobile devices that are physically within New Jersey’s boundaries. However, customers can travel from anywhere to play.

It’s unclear how many pay-to-play gaming sites will be available on Day One. But some point, Nevada will be well represented.

Caesars Entertainment Corp., which owns four Atlantic City casinos, will operate three online gaming products — Caesars casino, Harrah’s casino and wsop.com, which is based on the World Series of Poker.

Station Casinos’ majority owned Ultimate Gaming is operating ucasino.com and ultimatepoker.com on behalf of the Trump Taj Mahal. Slot machine manufacturer Bally Technologies is providing online software for the Golden Nugget Atlantic City.

Meanwhile, Boyd Gaming is in partnership with European online gaming giant Bwin.party and expects to unveil four websites — borgatacasino.com, borga- tapoker.com and two New Jersey-based partygaming.com websites, one of which is dedicated to poker.

Ultimate Gaming Chairman Tom Breitling said the launch will be much different from what the company experienced in Nevada, when ultimatepoker.com went live on April 30. Ultimate Poker didn’t have competition until wsop.com began accepting wagers in September.

“You’ll see about five or six companies at the start,” Breitling said of Atlantic City. “We’ve learned a lot in six months and we’re still learning every day. New Jersey is a different market, but the core issues are the same.”

NET BETS COULD REIGNITE NEW JERSEY

New Jersey, with a population of 9 million and a proximity to East Coast population centers, including New York City and Philadelphia, has a lucrative potential, analysts said.

H2 Gambling Capital, a Europe-based Internet gaming research company, predicted the state’s online casinos would generate $370 million in 2014. The entire market could be worth $526 million by 2018.

During a recent conference call hosted by Well Fargo Securities, H2 Director Simon Holliday said online gambling would not be a detriment to live gaming inside Atlantic City’s casinos. Offshore gaming websites, which ran freely in the U.S. before the 2006 passage of the Unlawful Internet Gambling Enforcement Act, “did not materially cannibalize casino gaming revenues.”

Analysts said the online activity could help Atlantic City casinos recapture a significant portion of the gaming revenue lost during a 41 percent decline the market has experienced since 2006.

Internet gaming is being run under a 10-year trial period. Gaming operators will pay a 15 percent tax on online gaming revenue, as opposed to the 8 percent tax casinos pay on revenue from traditional gaming.

New Jersey Gov. Chris Christie is bullish on Internet gaming. He is counting on tax funds from online wagering for filling out this year’s budget. In an address leading up to the 2014 fiscal year, which began on July 1, Christie said he expects a $200 million increase in gaming tax revenue, primarily from online gaming.

Well Fargo Securities gaming analyst Dennis Farrell Jr. said the figure suggests the governor believes casinos will bring in $1.2 billion from online gaming during the 12-month period, far above the most optimistic first-year projections of $650 million to $850 million.

“All New Jersey license holders will benefit, but properties with strong brands and gaming facilities will likely see the most upside,” Farrell told investors earlier this month. “We suggest investors focus more on the potential benefits of online gaming legislation rather than the month-to-month fluctuations at the individual casinos.”

Macquarie Securities gaming analyst Chad Beynon said from a pure player standpoint, New Jersey has distinct advantage over Nevada because of the large potential player pool. However, there hasn’t been much buzz so far traveling outside the Garden State into locations such as Manhattan, the New York City borough where potential players reside.

“New Jersey will be important to the big companies, such as Caesars and Boyd,” Beynon said. “The investment community has the most interest.”

Beynon said the biggest concern, even within the industry, is that New Jersey is moving too fast. Christie signed Internet gaming into law in February and regulations were written in late spring.

“The playbook is changing every day,” Beynon said.

To ensure the activity happens within the state’s borders, small no-play zones are being implemented, such as along the Hudson and Delaware rivers. So-called digital fencing has been moved to an unspecified distance inland to guard against anyone located in New York or Pennsylvania slipping through safeguards.

“Unfortunately for some people, there may not be sufficient verification that they are in New Jersey — even if they are — and they’ll be denied,” David Rebuck, director of the state Division of Gaming Enforcement, told The Associated Press. “It’s an unavoidable consequence.”

EASY DOES IT

Most casino operators are going with a slow rollout and aren’t spending much on marketing in the early stages.

Boughner is somewhat cryptic about Boyd Gaming’s plans.

“The Borgata is well-known in New Jersey and that market is our initial focus,” Boughner said.

Caesars Interactive Entertainment spokesman Seth Palansky said the company is relying on Caesars’ Total Rewards program to help launch the online products. He said the content would be different on the Caesars and Harrah’s websites.

“Our goal is to meet all of New Jersey’s timing requirements and have offerings that are unique,” Palansky said.

The World Series of Poker, which hosts events at the company’s Atlantic City properties, has “a large and loyal following,” Palansky said.

Breitling said there is significant interest in the casino games, which is different from poker-only Nevada. Poker, however, could account for one-quarter to one-third of New Jersey’s online gaming revenue. The other change is that gamblers will have a choice in websites.

“We’re taking the same approach in New Jersey that we did in Nevada,” Breitling said. “We need to build a one-on-one trust with customers in order to build customer and brand loyalty.”