Rebuttal to Adelson Forbes Opinion

June 21, 2013
Rebuttal to Adelson Forbes Opinion

Sheldon Adelson, CEO and majority shareholder of Las Vegas Sands, published an Op/Ed in Forbes on Wednesday opposing all forms of online gambling.  Mr. Adelson made many points that the anti-gambling lobby continues to make.  The difference is that the author of the opinion in question is CEO of the most valuable casino company in the world.

After starting out with a background, Adelson makes his first point:

With the expansion of internet gaming now taking place at the state level, I strongly urge Congress to either rewrite the Federal Wire Act, or pass new legislation making internet gaming illegal nationwide.

In my opinion, this creates Tenth Amendment issues in two ways.  Congress could either ban all online gambling, even legislation that has already been signed into law by states, or Congress could go the route that the Professional and Amateur Sports Protection Act took where it exempted states that had already passed gambling the federal government set to restrict.  New Jersey has the opinion that this type of exemption is not constitutional.  Regardless, many governors and lotteries spoke out when the Reid/Kyl bill sought to take away their right to offer casino games.  This would be unlikely to change if a future bill attempted this same action, even if Congress banning online gambling in whole or in part is a constitutional act.

Adelson then cites an unknown online gambling study:

Recent research from a number of European countries shows that the proliferation of internet gaming has, as a start, resulted in a 20 percent decrease in visitation to the land-based casinos in those countries.

I have been unable to find any such study on the Internet and Adelson does not disclose a link or source for it.  The closest article I could find was hardly scientific.  It also mentions that sports betting and lottery games are thriving.  Many European gaming establishments are not destination casinos, they are corner betting shops or taverns, which make Europe hard to compare to the U.S.

A U.S. study showed that casino visitation was down 5% in the 2000’s, where most forms of online gambling were illegal, but remained easily accessible to anyone interested in making a wager over the Internet.

Regardless of what any research on casino traffic says, any study released in the past five years would need to take into account the worldwide banking crisis and the recession caused by it.

Adelson then offers casino revenue statistics:

The research also shows that over the past ten years internet gambling revenue in Europe has gone up on average 26 to 28 percent.  Meanwhile, land-based casino revenue has been flat or even contracted during that same period of time, even though it was expected to increase at five to ten percent per year.

This point seems to contradict the one Adelson is trying to make.  During a worldwide recession brick and mortar gaming went sideways, while online gambling revenue exploded, so in fact, online gambling had no effect on brick and mortar revenue, unless one expected it to rise during the implosion of the world’s economy.

What does that information foretell for us here in the United States? To begin with, a loss of 200,000 direct gaming industry jobs and additional 200,000 lost indirect and induced jobs.

This may be true but misses a few points.  Online casinos do not need dealers, cocktail waitresses, porters, housekeepers, front desk clerks, bartenders, security guards or surveillance.  They do need software developers, site security, server space, customer service, payment processing, content providers, SEO experts, computer equipment and a number of tech jobs that are associated with any serious internet business.  Besides, as Adelson points out, European brick and mortar casinos were able to maintain their revenue levels even during a recession.  Why would 400,000 jobs be lost when there is little or no loss in revenue?  Adelson is likely using his 20% loss of visitation figure from his unnamed study to create this number.

Adelson then continues by stating that there is no way to “fully determine that each wager has been placed in a rational and consensual manner” and “the possibility of people betting under the influence of drugs”.  In my opinion, this can also apply to casinos where gamblers are offered an open bar for as long as they are playing.

Companies and Industries Resisting Technology Almost Always Lose

There are numerous examples of companies and industries that decided to fight technology instead of embracing it.  The most prominent example is the music industry.  The RIAA fought Napster and similar companies in the 1990’s in an attempt to prevent digital music from becoming a reality.  The industry lost that fight and now iTunes takes a piece of the action, instead of the recording industry cutting out the middleman and selling directly to consumers.

Blockbuster resisted streaming and kiosk models to deliver movies to consumers.  Netflix and Redbox eventually forced the company into bankruptcy.  Numerous bookstores failed as Amazon dominated the industry and eventually rolled out the Kindle e-reader.  Borders could not keep up and filed for bankruptcy.  Barnes and Noble appears to be near the end of its life.  Consumer electronic stores like Best Buy feel similar heat from the Internet taking away their ability to compete.

Even if states and the federal government resist the temptation to legalize online gambling it will still prosper offshore.  As long as there is money to be made in online gambling there will be unregulated companies willing to accept those bets.  Jobs that Adelson seems so concerned about are already being lost to other countries, as well as the tax revenue that would be generated from regulating the activity.

Adelson then took his anti online gambling tour to Bloomberg.  In addition to his previous opinion, he stated online gambling is:

…a toxicity, it’s a cancer waiting to happen

This is an interesting choice of words coming from the CEO of a company that allows smoking in their U.S. casinos.  One could argue that smoky casinos are one of the biggest reasons a segment of gamblers do not frequent casinos.  Online gambling would give those players a service they may not otherwise use due to second hand smoke.

Adelson’s position also ignores the fact that the younger generation of adults is constantly connected to the Internet through tablets and phones and this connectivity will only grow.  His company’s poker room management understands this though.  The Sands Poker Room at the Venetian provides power outlets for players at each poker table as well as wifi.

While Adelson would have no problem accepting $5,000 blackjack bets for hours in a live casino, he does not want a poker player to enjoy a $5 sit and go at an online poker room, even though it appears that both business models can coexist.  The absurdity of banning an activity over the Internet that is legal live will become more and more evident as the years pass.

I want to point out that I respect Mr. Adelson’s right to his opinion and his right to express it.  He is a brilliant business man that ranks as the 15th richest man in the world with an estimated net worth of $26.5 billion. He obviously has done a lot right in the business world.  I just do not feel that his resistance to technology is one of those things.

– John Mehaffey – Twitter


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