For many years, online gambling found it hard to penetrate the U.S. market due to the stringent state legislations. The U.K., Canada and the rest of Europe have dominated the online gambling industry for years, but, based on developments in the recent past, this is about to change.
Now, over the last two years, a number of U.S. states have eased their legislative restrictions on online gambling as they continue to sense opportunity for revamping their state revenue through providing more investment opportunities. Gambling, and especially the online-based side of the game, has been one of the opportunities that states such as Nevada and New Jersey have sought to pursue.
This is just the beginning of what could be a massive change of heart in several other states with regard to online gambling, and based on recent reports, the business too seems to be gathering momentum.
New Jersey Online casino operations kicked off in November last year, and after one year of service, reports indicate that the New Jersey state ramped up $120 million worth of online casino revenues for the past 12 months, the New Jersey Division of Gaming enforcement has revealed.
Casino businesses looking to grow revenues
Over the last few quarters, casino businesses have struggled for an upside as they continue to face serious challenges from a financial standpoint. Majorities of the casinos have huge loads of debt on their balance sheets, and with declining margins, an uptick in revenue could go a long way towards easing the debt burden.
For instance, Caesars Entertainment (CZR, Financial) has a debt of more than $24 billion on its books, something that will continue to drain the company off cash flow from operations to the near future. This does not help the company’s stock price, which has plunged massively this year.
On the other hand, MGM Resorts (MGM, Financial) has a debt of nearly $13 billion, while Wynn Resorts’ (WYNN, Financial) debt stands at just over $7 billion. Both companies have decent cash flows, but given the level of debt they have on their books, they will still need to improve on top line in order to avoid possible scenarios of distressed cash flows.
Las Vegas Sands (LVS, Financial) seems to be the most attractive among these big weight casino companies, with very attractive profit margins, as well as, cash flows free cash flows approaching $3.8 billion. However, the debt level of $11 billion is likely to bleed the company a significant chunk of its cash flows.
Conclusion
The bottom line is that with the increasing challenge of improving financial position for casino companies, launching an online gambling platform could go a long way to easing the weight of the the current debt levels.
The recent revenue statistics indicate that the market has kicked off well. It is still far from the levels reported by U.K.-based online gambling companies like Betfair and William Hill, but from a positive side of view, the more U.S. states allow online gambling, the more it is likely to resonate with gamblers hence increasing revenues from the industry.
