New Jersey Rides the Four Horsemen of Online Gaming: A Window of Opportunity to Lock In Your Brand

Recently in New Jersey, Governor Christie vetoed the legalization of online gaming, pointing to backroom gambling shops popping up all over the state, combined with undefined protection for problem gamblers.   It appears Governor Christie has not consulted with an online gaming expert because if he did, he would understand that the customer doesn’t want to drive to a casino or backroom to play, they want to sit on the couch in their pyjamas, drinking a glass of wine, enjoying a few hours of poker or casino in the comfort of their own home.   Backroom gambling is very prohibition era type language and it’s funny hearing it in 2011.   Governor Christie is not the only person who does not understand how the internet works.   The majority of the Casino Operators seem to be mentally restricted by the invisible border of the State of New Jersey.

Question:  Why have so few land based casinos created online gaming sites? For the life of me I can’t get an answer that makes any sense.   With the exception of a lot of UK betting shops and Harrah’s entertainment in Las Vegas, there are very few land based casinos operating on the internet.   Is it because the investment would be too large to get the online business off the ground? That can’t be the answer, as the cost of launching a fully functional casino complete with all of the casino games, as well as slots, poker room, sportsbook all in costs less than the price of a few fancy slot machines in a land based casino.   Is it the licensing and legality? This may be part of it because of the difficulty for Casino operators to think outside of land based model. Many may have not wrapped their heads around marketing to multi-languages in multi-currencies all over the world while hosting the website in a licensed location and doing all of this without breaking a single law in America.   I think the lack of understanding of how the virtual world does business may be at work here.

Lets run a hypothetical online casino start up by a smart and motivated Casino Gaming Executive.  Let’s call him… “Our Guy” because we are on his side, we like smart effective people.

“Our Guy” is the head of the Casino Operations at the Vunderbar Casino in Atlantic City and if “Our Guy” is worth his salt, he will understand that significant revenue share of the fastest growing segment of entertainment in the world today is worth investing his organization’s time and money.

Let’s look at the 4 horsemen concept with “Our Guy”:

1. First Strike Capability; while competitors are standing around waiting for the letter of the law for the State of NJ, “Our Guy “is going to develop his online gaming site, working with independent consultants to find and negotiate the best software available and integrate it into a solid online brand.   What are the competitors doing?    Looking at their shoes.
2. Indecision of Competitors: I’ve worked inside and outside of major corporations in entertainment and it is often a quagmire of politics, budget cuts, indecision, and traction-less meetings.  It is a very similar lack of momentum and indecision by Governor Christie that created an advantage for “Our Guy”.  It will be the single most effective decision “Our Guy” makes, moving aggressively, as long as he has chosen the right gaming consultants to work with.
3. Window of Opportunity to lock in your Brand: It is not against the law to operate an online Casino from America.   It is against the law if you are taking money from Americans to play at your online casino.   The reason most if not all of these online gaming companies are offshore in tax incentive jurisdictions is because it costs them less in taxes and  they can sink more back into the operations.  Whatever licensing structure “Our Guy” decides on for the online business, he can still make one hell of a dent in the international marketplace by working his already significant casino brand into the online world and cross market to his international customer base.   All of the major software companies will be falling all over themselves to be positioned with an American Casino even if the first year or two they are not doing business in America.  Let’s face it, the USA is the holy grail of online gaming, “Our Guy” knows this and is using his international start-up in a window of opportunity to fine tune the online product, work out bugs, market to play for free players, creating a database of potential future gamblers to market to, while cross pollinating the online customers with the Land Based Casino.   The timing on this window is tight; however the cross brand recognition is huge.