N.J. preps for Tuesday's online gambling debut

Nevada and Delaware may have beaten it to the launch of Internet gambling this year, but all eyes in the industry are on New Jersey as it opens the gates to online poker and other casino games.

So-called soft play - open to casino personnel and invited guests - started Thursday to test the websites. If all goes well, the sites will open to the public Tuesday.

With online gambling requiring, because of federal restrictions, the gambler's presence in the state that allows it, a large population is key.

New Jersey's 8.9 million people have online-gambling firms salivating. By comparison, Nevada has a population of 2.8 million, Delaware just 917,000.

"New Jersey is a massive opportunity because New Jersey has obviously taken a decision to enable regulated operators to offer casino games and poker, and for us it's the start of something very, very exciting," said Ben Carter, digital director for Betfair, a London firm running the online casino for Trump Plaza.

Online poker started in Nevada in April. Its two sites averaged about 200 players a day over the last week, according to PokerScout.com.

Delaware started this month with online poker, slots, and table games. Its poker site averaged 16 players a day.

Despite New Jersey's size, little is certain about what will come of the state's foray into online gambling. No one knows how big the public's appetite is for online poker, for example, because there's a huge black market.

Estimates of how much gamblers in New Jersey will lose annually to online casinos have ranged from $200 million to $1.8 billion - the amount online gamblers would have to lose on an annualized basis for the state to reach its tax-revenue target of $160 million in the fiscal year ending June 30.

To put it in context, Atlantic City's 12 bricks-and-mortar casinos won $3 billion from gamblers last year. The biggest take was Borgata's $613 million; the smallest, Trump Plaza's $103 million.

David Rousseau, a former state treasurer and now a budget and tax analyst for New Jersey Policy Perspective, a nonprofit research group in Trenton, has serious doubts that online-gambling revenue will meet the state's target.

"I hope Internet gaming works," Rousseau said. "Atlantic City needs some shot in the arm. The budgetary impact of this was one piece of it. The main part of doing this was to give another shot in the arm to Atlantic City."

But it's not clear how much online gaming will help the financially ailing Atlantic City casinos.

Fitch Ratings, a debt-ratings agency, called online gaming a general boost but pointed to uncertainty about how any profits would be shared among the casinos and the many subcontractors needed to make online gaming work.

As it is, gross operating profit margins for Atlantic City casinos in aggregate have fallen from more than 20 percent annually for decades to 11 percent last year. Even at the vaunted Borgata, gross operating margin - the percentage of revenue left after paying basic operating expenses - dipped below 20 percent for the first time last year, to 17 percent, data from the state Division of Gaming Enforcement show.

In an investor presentation last week, Tropicana Entertainment Inc., which owns Tropicana Atlantic City, said it expected online gaming to help stabilize revenue and operating income over time at the New Jersey property, not exactly a ringing endorsement of online gambling as the resort's savior.

Another unanswered question: How often will New Jerseyans stay home to play baccarat or blackjack online, rather than drive into Atlantic City?

"While we expect customers will shift some of their gaming spend to online-gaming sites from casino properties, online gaming will modestly increase the overall size of the New Jersey gaming market," Standard & Poor's, another credit-rating agency, said.

Despite questions about the economic and industry implications of online gambling, the change is thrilling for Dan Diorio, a 25-year-old Egg Harbor Township resident who wants to be a professional poker player.

Diorio said he played on the Harrahs Casino website for about two hours Thursday evening, soon after it opened for soft play.

"That went pretty good," he said Friday. "They had more players than I thought they were going to have on there. They had six or seven tables open. I only played for two hours because I had to get up early for work today."

Key to a good poker site is a large number of players - called "liquidity" - because that typically means players will be able to find a game they want to join.

The competition for poker "liquidity" in New Jersey is expected to be fierce, which is why his company is not focusing on it, said Betfair's Carter.

"It's something we have to offer as part of the overall package," he said, "because we know people want to play poker, but our focus is really on the casino games, on the slots, on the table games like roulette and blackjack."

12

Bricks-and-mortar casinos in A.C.

$3B

A.C.'s take from gamblers in 2012

$613M

Borgata's take of the 2012 total, the largest take

of all the casinos

$160M

New Jersey's tax revenue target for the fiscal year ending June 30

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