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Gambling Industry a Risky Bet in 2009

January 03, 2009 08:00 AM
by Isabel Cowles
The struggling gambling industry, once considered recession-proof, faces an uncertain future heading into the new year.

Gambling: A “black hole for practical reasons”

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In 2009, the future of gambling is uncertain—and some people are happy about it. 

Like many industries, gambling experienced a freeze on growth in 2008: New casinos were put on hold while casinos nationwide laid off workers. In addition, the Wall Street Journal reports that outlays at casinos are down and stock prices of gambling businesses are struggling.

Furthermore, many Americans have come to recognize gambling as a “black hole for practical reasons,” according to the Journal. "We're seeing an increasing backlash as the public becomes reinformed about the negative consequences of gambling," John Kindt, gambling critic and business professor at the University of Illinois, told the publication.

No place has been hit as hard as Las Vegas. In December, MSNBC cited the Nevada Gaming Control Board’s report that revenue at the state’s casinos fell by 22 percent in October, compared with the same period in 2007—the tenth straight monthly decline.

But casinos across the country have also felt the effects of the recession. Casinos in Atlantic City, New Jersey; Kansas and Washington state all reported steep losses in November.

Some casino owners are pushing for more customers: Vegas casino operators have begun lobbying the Nevada Gaming Control Board to make gambling legal at age 18 to increase their consumer base.

Despite the desperation of casino operators, many Americans are happy with the effects of the downturn on the industry. Anti-casino groups like Casino-Free Philadelphia point out that growth of casinos means a drain on small businesses that cannot compete, as well as increased traffic and crime in cities where gambling facilities are built.

Dan Hunter, a lawyer and board member of the group, told the Wall Street Journal that the anti-casino movement has had a unifying effect on the community. "We have strong conservatives and Republicans, and we have people like me who are strong leftist Democrats," Hunter said.

Background: Gambling today

Casinos across the country have been reporting losses for several months, according to a November report by Trump Entertainment Resorts. Consumers are avoiding risk as they’ve seen their retirement savings dwindle through investments that have been deflated by the current economy.

Interestingly, 2008 has marked a shift in the tendency for “sin sector” economies to thrive through economic downturns. Historically, sin sector stocks including alcohol, gambling and tobacco have been a safe bet in bearish financial markets. This year, however, shares of tobacco conglomerate Altria dropped 11 percent from the start of the year to July 25.

Nevertheless, the downturn has encouraged some new pockets for potential growth within the gambling industry. Horseracing tracks, such as Yonkers Raceway in New York, have upped their offerings to include slot machines and gambling stations. After losing about $5 million a year, the newly built Yonkers “racino” helped the racetrack become profitable again.

"You go to the sales and even the baby horses are bringing in much more than they used to only because of the money they take out of the slots," Frank Calica, handicapper and horse trainer, told NPR in April.

Another factor that may encourage growth in the gambling sector is eased restrictions by lawmakers. In New York, for example, Gov. Paterson recently announced a plan to loosen gambling restrictions in order to help cut the state’s largest budget deficit in history.

According to The New York Times, easing gambling restrictions would allow retailers to sell lottery tickets, expand hours at casinos across the state and facilitate the installation of more racinos, including adding video slot machines at a racetrack in Long Island.

Related Topic: Is online gambling a losing game?

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