In this article I will analyze the Online Casinos against Land Based Las Vegas Casinos- two competing industries, with unique trends, regulations and profits.
It is clear that there is a battle going on between the online casinos to land based casinos. Let's take for example one of the biggest and strongest land based casinos - MGM ($7.7 B) and one of the successful online casino company-888 Holdings ($1 B). These companies are good examples since they are market leaders and reflect the gaming industry very well.
The online vs. land based war began a long time ago but we believe it escalated in 2006 with the coalition of anti-gambling conservatives, together with Las Vegas interests and law enforcement which forced the government to ban online gambling.
Analysts estimated, at that time, that the amazing success of online casinos was over. Traded online casinos went down and everybody thought they were finished but it turned out to be the biggest mistake ever. Since then, land based casinos have been losing their power to on line casinos.
Countries all over the world have realized that it is better to regulate online casinos rather than ban them because people will always find ways to gamble and to play the casino and banning them loses millions in taxes.
Take for example MGM
MGM together with Dubai world fund (a government investment fund, with assets under management over $100 billion, and revenues being $10.6 billion in 2006) are short of funding in their $3.5 billion (still pending) project "City Center" in Las Vegas due to the reluctance of the banks to give such a big loan to the project. German Deutchebank and Suisse Credit are among those banks.
The raising of finance for this $3.5 billion projects should have been completed by end of June 2008. The cost of the project is $100 million a month.
"At present, no company in America has been able to borrow such sums from the banks" said James Maren, President of MGM Mirage in an interview with Bloomberg TV.
Just look at the MGM's trading charts below. Earnings per share went down nearly 50% from last year and profits went down more than 70% for the last year due to a decrease in players and a decrease in earnings.
There are several reasons for this:
First, the economy is in bad shape, gas prices are constantly rising, inflation is rising and US debt is more than $9.4 trillion and rising $1 billion a month. The stock market is also not doing well.
Second, it has become very expensive for Americans to travel to Vegas. When you pay more than $4 a gallon, you don't drive and you don't fly, simply because you rather save this money then spend it on traveling.
Third, online casinos are on the rise- with highly enjoyable online slot machines, high payouts, nice bonuses and lots of free coupons and free bonus slots, players would rather stay at home, save the travel money, play online slots and win more. With fast internet connections, advanced graphics and sound effects coming from new online games (such as free slots) and huge numbers of casino portals, gamblers have everything they need to optimize their gaming experience.
888 HOLDINGS
888.com is one of the successful online casino operators on the web. It trades on the London Stock Exchange; market value is about $1 billion.
Their financial report says it all. It shows an increase in the number of new players and every quarter the revenue reaches new highs. Just look at the chart!
A picture is worth more then 1000 words...
In conclusion:
1. Online gambling sites may soon be welcomed again in the U.S. It is only a matter of time until on line casinos return to operate and accept US players. It was a huge mistake to ban them and now the US government realizes it. I believe that if Obama will be elected, we will see this ban lifted. Check out our list of USA Online Casinos that still operate.
2. Online casinos are winning the war against land based casinos, especially those in Las Vegas. Land based casinos cannot afford to give out the same payout rates as online casinos.
3. For gamblers - MGM could be seen as a decent long-term investment after falling 70% in the last year, but I would still place my bets on 888 to win this war.
What do you think?
Check back with our online casino blog soon for more of our thoughts and updates on the casino world!