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business newsSex, Drugs, and the Rocky Economy: Gambling
The industry's chips are down.
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Not so this time around. In the current recession, people simply have less money to bet. In the 12 states where casinos are legal, total earnings came in at $4.5 billion in fiscal year 2009, which ended June 30. That represents a 7.4% drop compared to 2008, according to data published in the New York Times.
Lotteries haven't been immune to the downturn: Profits for 38 states reporting data came in at $14.5 billion this year, a 2.6% drop compared to last year.
See also The Real Impact of the Explosion in Gambling.
The three states where gambling has been legal the longest each suffered drops in tax revenues. In the fiscal year 2009, Illinois reported a $166 million drop in tax revenues from 2008; Nevada saw a $122 million drop; and New Jersey $62 million.
Going by these numbers, some experts believe the gambling industry may be near its saturation point, bumping up against the Economics 101 rule of diminishing returns. To put it simply, a limited number of gamblers are splitting their dollars across more options, including casinos, “racinos” (racetracks with slot machines or other games, which exist in 12 states), Indian casinos (found in 29 states) and lotteries (legal in 42 states and the District of Columbia).
“The data shows that states take a real chance in depending on gambling because this revenue is not likely to keep pace with growing budgetary needs,” Lucy Dadayan, a senior analyst at the Nelson A. Rockefeller Institute of Government at the State University at Albany, told the Times.
In Ohio, where the governor has already approved video slot machines at racetracks, a referendum next month will determine the fate of four Las Vegas-style casinos. In Illinois, bars and taverns will soon be allowed to add video poker and video blackjack machines. Last year, Colorado voters supported an increase in betting limits from $5 to $100 at casinos, and Missouri voters approved the end of limits on how much a gambler could lose. In each case, state officials packaged the measures as public-works plans or budget stopgaps.
The states might first consider the lessons learned in Las Vegas, says Dan Shapiro, director of marketing for Lucky’s Race and Sports Book, which operates 12 locations in Nevada. Shapiro says that Las Vegas -- America’s gambling Mecca and a microcosm for the entire industry -- appears to be reaching its saturation point: Locals are betting less, tourists are spending less, and new construction is unlikely for at least a decade. (Recent figures for August mark the twentieth straight month of year-over-year declines for Nevada casinos.) However, there are a few bright spots on the horizon. Although bets at the blackjack table are down, says Shapiro, “People are still betting on sports, especially during football season.”
Take it as a sign of our new-found austerity. Football games last three hours, roulette spins one minute. And these days, people want to get more bang for their betting dollar.
Hoofy and Boo have covered some of the baddest vice stocks before. See their report below.
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