How internet gaming — recently reauthorized for 5 years — has been crucial for N.J.’s casino industry

Faced with the prospect of the go-ahead from New Jersey lawmakers on internet gambling lapsing, Atlantic City’s casino operators weren’t keen on bluffing: They needed this virtual form of gaming extended.

That’s because it’s a more important revenue stream to local gambling businesses than it ever has been, according to industry experts. Data points to internet gaming being more than a third of the share of total gaming revenue in New Jersey this year.

Jane Bokunewicz. (Stockton University)

Jane Bokunewicz, a professor and faculty director for the Lloyd D. Levenson Institute of Gaming, Hospitality & Tourism, part of the School of Business at Stockton University, said the state itself relies on it in a larger context: New Jersey has collected $117 million from internet gaming tax revenue this year, compared with $70.6 million from slots and tables.

So, that’s why there was a collective sigh of relief in the industry when the state Legislature passed a bill reauthorizing this type of gaming locally for another five years. Instead of having to sweat it again as 2028 nears, Bokunewicz said gaming operators would’ve liked to see a longer renewal period.

“They were hoping for 10 years, which is what was originally proposed,” she said. “I guess, for them, five years was an improvement on the (later proposed) two years. The issue with that is that they’ve made significant investments into internet gaming and they want to protect it, as well as encourage continued investment. When you have a short renewal time period, there’s uncertainty about those investments.”

The investments Atlantic City’s gaming operators have made so far in internet gaming have been paying dividends — even before the pandemic.

“While some of the growth in gaming revenue in 2018 and 2019 can be attributed to growth in brick-and-mortar gaming, likely boosted by the opening of the two properties, internet gaming was already becoming increasingly important as a revenue stream,” Bokunewicz said. “It generated almost $300 million in 2018 and $483 million in 2019.

“So, it was growing before, but it really took off during the pandemic. More people were introduced to it when the casinos were closed for three months.”

Fueled by growth across all segments — and not just millennial, Bokunewicz suggests — internet gaming accelerated during the pandemic business slowdowns. In fact, online gaming revenues were just shy of $1 billion in 2020, she adds. It leapt past that mark in the following two years.

Halfway through this year, internet gaming has already generated $930.8 million in revenue.

As Bokunewicz points out, although this revenue stream is appreciated by casino operators, they don’t stand to benefit from its growth in the same way that they would with in-person gaming.

For one thing, internet gaming is taxed at a higher rate, she said. And the revenues from it also have to be shared with the third-party online gaming providers that have to partner with licensed New Jersey gaming operators in order to provide services locally.

On top of that, those engaging in internet gaming from the comforts of their own home aren’t spending money in hotels, bars and restaurants that would be part of the overall casino experience.

But Bokunewicz doesn’t think casinos’ brick-and-mortar revenues are going to completely evaporate.

“I liken it to restaurants: You can eat at home, but people are still going out to restaurants,” she said. “It’s just another form of enjoying entertainment. But it’s not becoming a total replacement for in-person gambling.”