The lag between reality and public perception By March 30, 2013 at 9:35 pm According to Hilaire Belloc, there is a lag between reality and public perception of reality. Writing in 1929 about French Cardinal Richelieu and his impact on Europe, Belloc describes the lag in terms of the Spanish Empire. In 1620 the Spanish Empire was on the wane and the French Empire was beginning to rise. But at the time, everyone including the French and Spanish still thought of Spain as the dominate power in the world. We are in a comparable situation now, in the public perception Nevada and New Jersey and the casino industry are the dominate powers in commercial gambling – gaming. But, they are not. Twenty-five years ago, Nevada and New Jersey not only dominated the gaming industry, they were the industry; between the two states they generated approximately $10 billion in gaming revenues. In 2012 Nevada had $10.8 billion in gaming revenues and New Jersey has $3.05. However, Pennsylvania had $3.16 billion in casino revenue, replacing New Jersey in second place. But that is not the whole story; Pennsylvania also had $3.4 billion in lottery revenue and $776.9 million from racing – over $7 billion in total. And nationally, the picture is the same; combining Indian and traditional casinos, the total gaming revenue in the country was $65 billion; lottery revenue approached $20 billion from 43 states lotteries; racing handle was another $10 billion. So while the public perception of gambling is a slot machine or black table in a casino, the reality is quite different. When you think about gambling in America, the first thing that probably comes to mind is Las Vegas. But Las Vegas currently represents just 10 percent of U.S. gaming industry revenue. This is according to a new report from Bank of America Merrill Lynch. Regional commercial gaming accounts for another 47 percent of the industry. The remaining 43 percent: Native American gaming. The Native American gaming story is particularly extraordinary in that it has grown into a $27 billion business from almost nothing in just 20 years… Any which way you slice it, the U.S. casino industry has seen dramatic growth over the last 20 years. Over that time, commercial gaming revenues have grown at a +10% CAGR, from only $10 billion in 1992 to a peak of $37 billion in 2007. Business Insider, 3-11-13 The business of the gambling has grown to be much larger than the casino industry and it has spread far beyond the deserts of Nevada and the shores of New Jersey. Two states that best illustrate the immense changes in gaming are California and Florida. First the smaller of the two, Florida. It was in the new a lot in March. In the past, Florida may not have come to mind immediately when one thought about commercial gambling, but in 2013 Florida is most certainly a gaming state. It is part of the national trend in gaming of expansion and diversification. Fixated as industry observers have been on its traditional jurisdictions, we have missed the rise of an entirely new kind of gaming jurisdiction – states with lotteries, horse racing, casinos and possibly slot machines in bars and restaurants, keno games, poker and bingo. For example, Pennsylvania may be second on the casino revenue list, but counting all forms of gambling, Florida is probably second – actually third, but we will get to that later. Gaming revenues in Florida were approximately $8 billion in 2012; nine Indian casinos generated $2.1 billion in revenues, 17 racinos produced $425 million from slots and $883 million from betting on horses, dogs and jai alai, poker receipts were $125 million and the lottery added another $4.5 billion. Total gambling revenues generated by Florida’s Indian tribes grew by 5 percent, to about $2.16 billion…The Seminoles agreed to pay the state $1 billion over five years for exclusive rights to blackjack and other table games, but that compact expires in 2015. Meister attributed Florida’s growth to structural improvements and the introduction of blackjack and other table games at Seminole Casino Coconut Creek and Seminole Classic Casino in Hollywood, as well as a new gambling room specifically for Asians at the Seminole Hard Rock Hotel and Casino in Tampa. Nick Sortal, Sun-Sentinel Florida Lottery officials told The Associated Press on Thursday that the state would join 42 others later this year in selling tickets to the Mega Millions game. Tickets will go on sale on May 15. The state already sells tickets to Powerball, another multistate game. It also has its own game called Florida Lotto…Last summer the Florida Lottery wrapped up the most financially successful year in its history. The state-created lottery boosted its sales to $4.45 billion, an increase of more than $440 million over the previous fiscal year. Gary Fineout, Associated Press There is another source of gaming revenue that has not yet been reported in Florida – Internet cafes, but it appears from some stories that Internet cafes may represent $500 million in gaming revenue. Whatever the actual number, Internet cafes in Florida have become major news and further illustrate just how much more gaming exists outside of the traditional casino environment. Florida’s lieutenant governor resigned and nearly 60 other people were charged in a scandal involving a purported veterans charity that authorities said Wednesday was a front for a $300 million gambling operation. The organization, Allied Veterans of the World, runs nearly 50 Internet parlors with computerized slot machine-style games, which are normally legal in Florida if most of the proceeds go to charity. Mike Schneider, Associated Press, 3-14-13 A Local 6 investigation has uncovered more than $1.3 million in Internet casino money flowing from the accused racketeers and money launderers to Florida politicians. The amount is much greater than what is being reported by other news organizations because Local 6 included dozens of shell and affiliate companies named in criminal court documents as being funded by the alleged $300 million illegal gambling conspiracy. Tony Pipitone, WKMG, 3-14-13 As one might suspect, not all of those gaming venues get along with each. They are all battling for the same dollars and some of them are not as fit for the fight as others. One of the losers is jai alai; Boyd recently sold its interest in a fronton. Boyd bought into it thinking it might be a backdoor into a casino license. But, casino legislation is stalled in committee – literally – the legislature is taking a conservative approach to the subject – they are studying it – a process that will take at least a year. One of the road blocks to new casino legislation is Indian gaming; the tribal-state compacts give the tribes an exclusive. That automatically puts the tribes on opposite sides with every venue trying to expand its options. Boyd Gaming Corp. has sold a south Florida jai alai facility where the company once had designs on building a casino complex. The company announced today it would sell the Dania Jai-Alai facility in Dania Beach, Fla., to Dania Entertainment Center, LLC, for $65.5 million in cash…Florida has been a focal point for casino expansion in the past few years. However, opposition by the Seminole Indian Tribe, the Disney Corp. and conservative religious interests has scuttled casino plans for south Florida, including the Miami area. Las Vegas Review-Journal When slot machines began spinning at South Florida pari-mutuels back in 2006, some expected gobs of cash to roll in. And while the casinos are turning over healthy amounts to the state ($143 million in slot taxes last fiscal year), all agree that the industry hasn’t been as robust as expected…Business is down this year, partially because of end of the 2 percent Bush payroll tax cuts, which gave people more disposable income. Some racinos are down double-digit percentages compared to last year…Florida’s hyper-competitive market often has casinos chasing after each other’s patrons. This is especially true in poker, where players caravan from one card room to another, based on who has the biggest high-hand jackpot promotion …Jai-alai frontons have to pay players, and track owners must maintain their horses or dogs. Magic City Casino VP Izzy Havenick said his dog racing operations in Miami and Naples operated at a $6.5 million loss last year…The Seminole Indians: As they have often stated, the pari-mutuel leaders complain that their 35 percent slot tax hamstrings their ability to reinvest in their product; the Seminoles pay an estimated 12 percent on their revenues. Fort Lauderdale Sun-Sentinel Florida is a big story, but California is an even bigger story and one without much of the controversy and hype. Until 1984, when the lottery was authorized, the only gaming in California was poker. However, quietly over the course of the last 30 years, California has become the national’s gambling capital. California has 54 Indian casinos with over 60,000 slot machine; Indian casinos in the state generated $6.9 billion in 2011. In addition to the casinos California has 35 poker rooms, 8 major race tracks and a lottery that generates $3.4 billion in revenues. The total revenue from all of those sources is in the range of $10 billion, almost exactly the same as Nevada gaming revenues; or to put it other terms, California now generates as much gaming revenue as Nevada and New Jersey did when they had the only casinos in the country. So who is on first, second or third? Even if Nevada is still on first, it is not likely to be able to hold its place for long, California and Florida are coming on strong. Just as in 1620 when Spain was going down and France coming up and yet public perception still had Spain on top; Nevada and casino gaming are still on top in the public perception – but not in the reality. Other states and other games are taking over.