The Garden State’s gambling industry had one of its best years ever in 2023.
At least, it did on paper.
According to recent financial data, online casinos in New Jersey and NJ sports betting both posted record returns last year, while the collective performance of Atlantic City casinos has elicited comparisons to a bygone time before widespread regional competition and internet gambling.
But 2023 may prove to be a watershed moment in the long and storied history of gambling — legal and otherwise — in New Jersey.
The evidence suggests 2023 will serve as the line of demarcation between pre- and peri-digital eras in Garden State gambling, signifying a nearly irreversible shift from an industry dependent on land-based casinos to an online-first market where internet operators overshadow their retail counterparts.
That is a lot of words to say this — online gambling is supplanting Atlantic City casinos as the dominant force in NJ’s legal gaming industry.
Most Atlantic City casinos not growing
While there is nothing wrong with the Atlantic City casino market, per se, it faces external (New York casinos, regional saturation) and internal (smoking ban, market saturation) headwinds that rival most prior market disruptions (Pennsylvania/Connecticut casinos, Great Recession).
And, unlike in years prior when online gaming and sports betting were introduced in an effort to boost AC’s fortunes, there are no more gambling expansion options left on the table.
In 2023, the data clearly shows that of NJ’s three primary ways to gamble (not including lottery), online casinos and sports betting are growing, while only one-third of the Atlantic City casino market can make a similar claim.
Of the nine casinos, only Borgata Atlantic City (+2.8%), Hard Rock Atlantic City (+58.2%) and Ocean Casino Resort (+92.4%) generated more in-person gambling revenue in 2023 than they did in 2019. Those three plus Bally’s Atlantic City were the only operators trending up in 2023 compared to 2022. And both Bally’s (+0.8%) and Borgata (+0.7%) were up less than 1% year-over-year.
Yet, collectively, Atlantic City casino win was higher in 2023 ($2.85 billion) than in either 2019 ($2.69 billion, +6%) or 2022 ($2.79 billion, +2.2%).
But it is not marginal growth in land-based gambling at AC casinos that contributed to NJ’s best-ever results last year.
Changes in gambling behavior leading to revenue shift
In the years following the worst of COVID-19, new trends and patterns emerged within the state’s gaming industry.
Post-pandemic changes in consumer behavior — the most notable of which is the continuous growth of digital gambling — are now considered commonplace.
And the responses from brick-and-mortar operators — namely, finding cost-efficient ways to deliver comparable pre-pandemic levels of service to guests — have become standard operating procedure.
As a result, the growth in the NJ gambling industry is almost entirely attributable to online betting.
2006 AC casino revenues dwarf 2023
The most recent reports published by the state Division of Gaming Enforcement highlight the stark reality of the industry and its direction.
Total gaming revenue — the sum of AC casino win, online casino revenue and sports betting revenue — coming out AC was over $5.2 billion in 2023. If you include sports betting revenue from the state’s licensed racetracks and their online partners, the total jumps to nearly $5.8 billion.
That is the number — $5.8 billion — that garnered headlines and attention.
On paper, it was the highest-grossing year in the history of legal gambling in NJ. The industry set a previous all-time annual high of $5.2 billion in 2006.
However, 2006’s results were entirely from AC casinos. There was no revenue from online casinos, sports betting or racetracks with sports gambling included.
2013 is not a good benchmark for AC success
Another point mentioned following the DGE’s release of December data was that 2023 was the best year for the Atlantic City casino industry since 2013.
But context is required to understand why 2013 is neither an apt comparison for the brick-and-mortar casinos nor a benchmark to strive for.
The $2.87 billion in total gaming revenue generated in 2013 came from 12 casinos in Atlantic City and a fledging online gambling industry that only launched in November of that year. Slot revenue reported by the dozen AC gambling parlors exceeded $2.06 billion and table games kicked in another $798 million. Internet gaming accounted for a measly $8.3 million in revenue in 2013.
Four casinos in Atlantic City — Atlantic Club, Showboat, Revel and Trump Plaza — would close their doors for good in 2014. A fifth — Trump Taj Mahal — would shut down two years later.
In other words, 2013 was not a good year for Atlantic City. It was the midpoint of a decadelong slide for AC that began in 2007 and only started to abate in 2016.
The 10,000-foot view is rosy, but a deeper dive reveals the cracks
In 2006, the year in which Atlantic City set its (real) all-time high for annual revenue, slot machines accounted for $3.8 billion and tables brought in $1.4 billion.
Casinos kept nearly all of that reported revenue, except for contractual agreements with certain slot manufacturers or licensing agreements with third parties. Based on past comments made by casino executives in newspapers, books and other media, the industry kept anywhere between 85% and 95% of land-based gambling revenue at that time.
Compare that to 2023, with nine casinos reporting $2.1 billion from slots and $736.2 million from tables. Similar revenue-sharing and licensing arrangements exist today for land-based revenue.
Online casino and sports betting revenues are not split as favorably for the land-based operators in AC. Although exact percentages are not publicly available, industry insiders have suggested that pre-pandemic contracts could be as lopsided as 90/10 in favor of online companies, while post-pandemic deals are still not anywhere near an even 50/50 split.
Online casinos in New Jersey generated $1.9 billion in 2023, an increase of more than 15% year-over-year. Meanwhile, NJ sports betting revenue attributed to AC casino licensees and their digital partners netted $471.7 million, a YoY increase of nearly 61%.
Will NJ be an online casino-first state while AC casinos take a back seat?
What does all this mean? It means that the claim that New Jersey and Atlantic City just enjoyed one of the gambling industry’s best years is both 100% factual on the surface and 100% disputable when actually examining the data.
It is clear that gamblers’ behaviors are shifting in NJ. It is also quite evident that, barring anything extreme, the demand for online gambling in the Garden State is not going to dissipate any time soon.
Now the question becomes what NJ and Atlantic City will do about it to ensure the long-term viability of the shore resort town that depends on casino tourism to survive.