State Sen. Raymond Lesniak (D-Union) says he's not shocked by Fitch Ratings' announcement Tuesday that is has lowered its year-end projection for the state's online gaming revenues to the $120 million to $130 million range.
In a report explaining its decision, Fitch cited overall weakness in the Atlantic City market and a “poor” showing thus far in 2014 for online gaming revenues, which total just $63 million year-to-date.
“None of this is surprising, for a couple of reasons,” Lesniak said.
Lesniak says there are several contributing factors in play, such as the continued hesitance on the parts of credit card companies to authorize online transactions, the absence of online gaming giant PokerStars in the market and “amateurish” marketing by companies that are already operating.
In December, Fitch had initially projected revenues in the range of $200 million to $300 million by year’s end, a figure the agency says was “among the more bearish in the industry” at the time.
Gov. Chris Christie was then among the more bullish, as he initially predicted last year that the state would see $1 billion in online gaming revenues by the end of the 2014 fiscal year. But after numbers began trickling in, the Christie administration later dropped out of the online gaming prediction business.
Lesniak said that while the numbers have fallen below his expectations, Christie’s projections “raised expectations way too high.”
“He just made those numbers up,” Lesniak said.
Christie’s office did not immediately respond to an emailed request for comment.
Lesniak said he expects PokerStars to make another serious run at entering the New Jersey market. The company saw its license application suspended in December amid questions about its tainted legal past in the United States, but a proposed $4.9 billion purchase of the company by Amaya Gaming has the state listening again.
Fitch’s estimate cut comes weeks after news that two casinos, Showboat and Trump Plaza, are expected to cease operations in the coming months and another, Revel, has filed for bankruptcy and will be auctioned off early next month. The anticipated closures would follow the lead of the Atlantic Club, which closed its doors in January.
And it appears as if online gaming may have been delaying the inevitable, Fitch says.
“Several of these closures were likely delayed by the prospects of online gaming,” the agency said in its report. “The market retained capacity for the last two (to) four years in anticipation of online gaming’s success, especially since online gaming licenses were attached to casino licenses. However, with online gaming revenues plateauing early in the ramp-up cycle, online prospects are now depressed and unprofitable land-based operations are discovering that closing is their best option.”
Fitch notes that decreasing of supply of casinos may be “healthy” for the Atlantic City gaming market, but warns that “additional risk remains if New Jersey passes legislation over the next few years permitting land-based gaming in the state outside of Atlantic City.”
Christie and Senate President Steve Sweeney (D-West Deptford) have both recently said that they would be willing to open conversations about expanding gaming operations in the state, potentially in the Meadowlands or Jersey City.
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