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Can online gambling sites weather the recession even though their land based casino counterparts are hurting.
It was once thought that the most recession proof business in the world was gambling. Much like general entertainment (movies, live performances, ect…) in the past these have proven not to decline with wide spread financial crisis. The idea behind it was that in tough times folks needed to be cheered up, so they always found the money to have fun.
It is obvious by the gambling reports from the Atlantic City casinos that this is no longer the case. February numbers pointed to a missive 19.2% decline in revenue compared to the same time in 2008, aggregated from the 11 casinos operating in the city, something the New Jersey Casino Control Commission calls the worst monthly decline in the 30+ years gambling has been legal in New Jersey.
And the future of casino gambling in Atlantic City is far from brighter, after the massive gambling revenue decline was paired with the constant stream of bad news coming out of the local casinos.
For starter, three of the AC casinos, those operated by Trump Entertainment, have already filed for bankruptcy protection in February after failing to meet obligations thanks to the deteriorating gambling traffic to the city, following one of the deepest recession ever to hit the United States. Everyone knows that things are bad, but when the casinos start finding themselves bankrupt, the situation is obviously dire.
In addition to the three casinos filing for bankruptcy, other gambling companies are scraping further casino development in Atlantic City. Pinnacle Entertainment has postponed a casino beach front resort with price tag of $1.5 billion indefinitely, while MGM Mirage, which is seriously struggling in Las Vegas, as well, is also canceling all further developing and expansions.
Last quarter of 2008 was good for many online casino operators and other online casino peripheral companies but it will be interesting to see if they weather the storm and come out unscathed in the first quarter of 2009 which has just been completed. My guess is that the strongest and best run will likely at least hold their own for most of this year and we might even see a spike in the fourth quarter. I don't believe that any group of online casinos is exempt from the pain of the financial crisis but I think some will rise to the occasion and do well.