Is New Jersey Online Gambling The Lifeline For Atlantic City And Its Future?

Posted on July 7, 2020 - Last Updated on July 6, 2020

Editor’s Note: This is the first of a multipart series on Atlantic City gambling and its future.

Time to step into the time machine. The day is May 26, 1978, and gamblers are lined up on the Boardwalk, waiting to step inside Resorts Atlantic City.

This day marked the launch of New Jersey’s legal casino industry.

But do you think any of those gamblers standing in line talked about playing blackjack or slots on an iPhone?

OK, it’s a silly question considering mobile devices weren’t even a pipe dream at the time.

But back in the late 1970s and early ’80s, the New Jersey gambling industry was all about Atlantic City casinos.

Fast-forward to today, and the NJ online casino business is impossible to ignore. In 2019 alone, NJ online casino revenue came in at $482.7 million. And that was good enough for a 61.6% year-over-year increase.

Here we are in 2020, and the industry is showing no signs of slowing down. Through May, internet gaming revenue stands at $337.7 million.

Sure, some will say it’s a result of Atlantic City casinos being closed from March 16 through July 1 due to a global pandemic. Gamblers saw online gambling as a safe alternative until their favorite casino reopened.

Well, let’s not forget about the fact that January produced the first-ever month of revenue north of $50 million … $55 million, to be exact. And February was the second ($51.9 million).

It’s highly unlikely this revenue stream is going to vanish anytime soon. The bottom line is online gambling is a major component of AC’s financial future.

Here is a closer look at how the NJ online casino industry got to where it is today.

Online vs. retail casinos? It’s not a competition

The internet gaming industry has come a long way from its 2013 launch. Back then, there was a total of just 13 online casino and poker platforms.

And the initial revenue from that first month of business came in at a measly $7.4 million.

Six-plus years later, the market now consists of 40+ gambling sites hosted by two dozen brands. Some are now outperforming brick-and-mortar operations.

Ed Andrewes, CEO of Resorts Digital (Resorts’ online division), thought it would happen, but not quite so soon.

February was one of the recent examples that includes a full month of online and casino floor results.

Resorts reported $14.5 million in land-based revenue. Out of the nine casinos, the number was the second-lowest, just ahead of the $12 million earned by Bally’s.

Resorts Digital, however, earned $16.5 million for the same month. And out of that number, online casinos and poker sites accounted for a tad under $12.5 million.

So how did it happen?

“A key factor of the success of the digital business has been the focus and support from the land-based management team, and we very much view the Resorts businesses as a single whole,” said Andrewes.

“In the digital team, we have been focused on the activity that we know works and generates both revenue and profit. On top of that, we have also benefited through two great partners in the form of The Stars Group (FoxBet) and DraftKings, who are both highly experienced and effective operators in the digital space.”

In other words, online casinos and AC casinos are a team and not in competition with each other.

A closer look at Resorts’ success

AC casinos do not get all of the online revenue. It is divided between the online operators, partners and casinos. And of course, there are taxes to pay.

But even so, it’s easy to compare and contrast the two sides, especially in how one revenue stream boosts the other.

For example, Resorts neighbors the bigger and much newer Hard Rock Atlantic City.

Looking strictly at land-based casino revenue from the two properties, one could easily question how Resorts is managing to stay in business.

For 2019, Hard Rock, with its international brand recognition, generated a casino win of $324 million, good enough for second in the market behind the MGM-owned Borgata ($709.5 million).

Resorts generated $176.3 million in the same category, which was the second-lowest total in the market behind Bally’s ($176 million).

But when the revenue from Resorts Digital is added to the retail revenue, the playing field levels out. Resorts’ online gambling revenue for 2019 came in at $100.1 million, a 121% year-over-year increase. An additional $79.6 million was generated from mobile sports betting.

Resorts Digital is benefiting from its partnership with DraftKings Casino (and sportsbook).

The online portfolio also includes:

For comparison purposes, Hard Rock’s internet gaming win came in at $22.5 million for the same period.

Andrewes said the numbers show that the online industry has become crucial to Atlantic City’s future.

“With the opening of the Hard Rock and Ocean casinos [in 2018], the bricks-and-mortar sector has once again become highly competitive, and it is crucial to the welfare of Atlantic City that these casino properties not only survive but flourish,” said Andrewes.

“iGaming has continued to provide much-needed revenue to the casinos. Since 2014, iGaming revenue has grown at a compound annual growth rate of 25%.

In Resorts’ case, the online revenue gives it not only recognition in the gambling market but also the spotlight when it comes to successful partnerships.

Golden Nugget: A case for online camaraderie

While the numbers from Resorts Digital are impressive, Golden Nugget has been and continues to be the industry trendsetter.

Despite being the smallest property in town, the operator is crushing it when it comes to online casino revenue. And by crushing it, we mean Golden Nugget is the market leader and has been for going on five years.

There are few who do not know that Golden Nugget’s self-branded online casino is the top dog, with 700-plus games. Its partners are well-known entities as well, including the online arm of Philadelphia’s SugarHouse (now Rivers) casino.

For 2019, total internet gaming revenue exceeded $177 million. That’s good enough for a 68.9% year-over-year increase.

When that number is combined with the land-based results for the year ($199 million), Golden Nugget leaps to No. 2 in total gaming revenue in 2019:

AC Casino2019 Retail Revenue2019 Online RevenueTotal Revenue
Bally's$176,010,260--$176,010,260
Borgata$709,560,969$77,761,137$787,322,106
Caesars$270,988,246$55,333,022$326,321,268
Golden Nugget$199,020,547$177,019,811$376,040,358
Hard Rock$324,000,867$22,533,132$346,533,999
Harrah's$312,035,515--$312,035,515
Ocean Casino$215,693,011$5,120,380$220,813,391
Resorts$176,371,879$100,130,206$276,502,085
Tropicana$302,859,158$44,797,620$347,656,778

Note: Caesars Interactive NJ hosts all online casinos for the three Caesars properties. Resorts Digital is the online arm of Resorts Casino. The table above does not include online or retail sports betting.

And with gamblers stuck at home for three-plus months, it’s highly likely Golden Nugget will once again outperform several of Atlantic City’s bigger properties in 2020. The license holder is setting new all-time highs, with the latest being May’s $29 million.

To put this number in perspective, Golden Nugget’s casino floor winnings for May 2019 came in at $17.1 million.

Year to date, Golden Nugget’s online gaming revenue sits at $120.9 million, which is an 86.6% increase from the same period last year.

GN has been and will continue to be at the forefront of the industry. Back in 2016, it was the first in the United States to launch a live dealer studio.

And earlier this year, Golden Nugget online casino debuted a self-branded exclusive video slot game.

It’s one of four brands operating under the license. The others are:

An NJ online casino lifeline

Of course, at the start of 2020, online operators probably did not envision monthly revenue closing in on $90 million halfway through the year.

Then again, who would’ve predicted Atlantic City casinos would be closed in excess of 100 days? Last week, Gov. Phil Murphy announced July 2 as the reopening date for casinos.

At the same time, the seven license holders can look at this historic time period as a time for building a strong online presence. The reality is casinos are going to be restricted to a 25% capacity. And there is no capacity limit online, so many players will continue with online gambling.

In the short term, at least.

The chart shows a year-to-date revenue comparison between land-based and online casinos:

License HolderYTD Internet Gaming Revenue YTD Land-Based Revenue
Bally's $-$28,272,587
Borgata $63,272,206$131,546,241
Caesars/Caesars Interactive $33,525,868$47,329,746
Golden Nugget $120,985,559$38,133,775
Hard Rock $18,505,091$55,700,294
Harrah's $-$59,692,535
Ocean$3,793,190$45,891,666
Resorts/Resorts Digital $71,673,003$32,521,014
Tropicana $26,041,112$56,558,470
Total $337,796,029$495,646,328

New Jersey is a beacon for online operators

Whether talking past, present or future, operators want a slice of the NJ online casino pie.

When New Jersey created its business model, it opened the door for European-based companies to set up operations here. The Garden State became a launching point to the US gaming industry.

Kindred Group is one of the companies that saw the potential and inked a land-based partnership deal with Hard Rock before the property even opened. The Unibet casino app launched last summer, and the integrated sportsbook arrived in time for betting on the NFL last year.

As far as timing goes, Manuel Stan, senior vice president US, Kindred Group, said that when PASPA was repealed, New Jersey was the only US state with a proven record in iGaming.

“As a global operator with a relatively equal revenue share between sports betting and iGaming (in 2018: 48% sports betting and 52% iGaming), Kindred Group’s focus is on markets/states with a multiproduct regulation — which is partly the reason why we entered the US via New Jersey and Pennsylvania,” said Stan.

“The continued iGaming growth in New Jersey since 2013 was a strong sign it is a good market. Furthermore, the leading operators have been rewarded for focusing on customer experience and innovation (e.g., Golden Nugget and live casino product), and we are confident these are areas where we can excel.”

Standing out in a crowded market

The Unibet brand is in the early stages of establishing its US customer base. So comparing its performance versus more established license holders such as Resorts Digital, Golden Nugget and Borgata is not exactly reasonable.

Land-based partner Hard Rock reported $5.4 million in May online game revenue, and that is an eye-opening 256.6% year-over-year increase. The number is a combination of the HR-branded app, Bet365, and Unibet. The DGE does not provide a breakdown by operator.

Stan says NJ is a fascinating market, and the company continues to learn every day.

“An operator has to offer a superior product and customer experience to stand out in a relatively crowded market, and this is what we are focusing to deliver.”

Hard Rock, like Kindred Group, has focused a lot on innovations. Back in February, the company unveiled the world’s first live slots studio. While customers can see the machines when they visit the property, they are only available via the app powered by Gaming Innovation Group.

It’s a unique blend of the old (land-based gambling) with the new.

When Play NJ caught up with Jim Allen, CEO of Hard Rock International, he said the company is “very encouraged” by the site and the overall numbers, as well as with the way the market is growing.

“I definitely think it’s part of Atlantic City’s future, but frankly, I think it’s part of gaming in general,” said Allen.

“The business model is changing. I don’t think you’re going to see the elimination of brick-and-mortar casinos, but certainly, the percentage of online activity, I believe, will continue to grow in an upward way.”

Online casino plus sports betting: the power of cross-selling

Of course, conversations about the NJ online casino market typically include NJ sports betting. There is a clear upward trajectory in the revenue numbers since the late-summer 2018 launch of the latter.

online gambling revenue

In July 2018, the Garden State only had limited retail sports betting. Online casino revenue came in at $25.9 million.

That number predates the cross-selling and integration of internet platforms.

Resorts Digital is one of the many operators that has benefited from cross-selling opportunities available via its different brands.

“The power of cross-sell from sports betting to casino has been tried and tested in Europe for a while, but I think in the New Jersey market, it has exceeded everyone’s expectation,” said Andrewes.

“Furthermore, all the services across the four brands under the Resorts Digital license provide customers with a one-stop shop for all their online gaming needs, whether it be casino, live dealer, sports betting or poker.”

NJ online gaming and Atlantic City’s future

So where does the NJ online casino industry go from here? Not just for the remainder of 2020, but four to five years down the line?

Current evidence shows that it’s highly unlikely to slow down anytime soon. And the market could even expand as new operators come online.

The wild card in the equation might boil down to the future of Bally’s online operations. Caesars sold the AC casino to Twin River Worldwide Holdings earlier this year. And Tropicana and Caesars plan to merge their respective online gambling entities once the Eldorado-Caesers deal gets final regulatory approval.

And the other unknown is the market itself. Will it experience a leveling-off period at some point?

David Schwartz, a gambling expert at the University of Nevada, Las Vegas, said it’s hard to say.

“It depends on how gamblers react to what the operators are offering,” he said. “If players get a compelling value and experience, there is every reason to believe that growth will continue.”

Stan offers the perspective that offline and online industries complement each other.

“The offline space will never be able to compete with the convenience of the online product, while the online product will, arguably, never offer the live thrill of the physical experience,” said Stan.

“As it can be seen in the data from US as well as the rest of the world, the addition of online gaming has a clear positive impact on the offline revenues. Yes, the online industry will play a bigger role in Atlantic City’s future, which will be highly beneficial for the future of the city.”

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Bill Gelman

Bill Gelman is a veteran sports writer based just outside of Philadelphia and not too far from the Jersey Shore. Bill spends time in Atlantic City writing about casino openings and expansions, special events and now NJ sports betting and online gambling.

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