Article in The News Journal, regarding possible legal bookmaking by Delaware racinos.
Sports betting data in dispute
Experts: Industry's estimate of new tax revenue is optimistic
By AARON NATHANS, The News Journal
Posted Sunday, April 15, 2007
It's been touted as the savior of Delaware's racinos, a quick infusion of tax dollars for a cash-strapped state. Legalized sports betting, say industry officials, can help the state fight back against the casinos opening across state lines.
But gambling experts are skeptical.
Several consultants and academics saw flaws in a report released last week that forecast an additional $70 million in annual tax revenue if Delaware allowed its racinos to offer sports betting.
The report was commissioned by the Video Lottery Advisory Council, made up of casino executives, and written by an Atlantic City-based consultant.
Of that $70 million, sports betting itself would bring in $9.3 million, according to the study. The other revenue is based on the theory that those who come for sports betting will stay and play the slot machines.
"That strikes me as being very aggressive," said Will Cummings, a Boston-based gambling consultant. Cummings said he didn't think sports betting would be a significant reason people would be attracted to a gambling venue.
People who enjoy one form of gambling are typically loyal to that game, be it slots, poker, horse races or sports betting, said Bill Eadington, director of the Institute for the Study of Gambling and Commercial Gaming at the University of Nevada at Reno. There isn't a lot of crossover, he said.
"They say they're going to spend a tremendous amount of money on slots while they're attracted by sports betting. There seems to be a logical flaw in that," Eadington said.
Eighty percent of a casino's business is typically generated by just 20 percent of its customers, so a few more casual visitors won't make much of a dent, Cummings said. Devoted sports bettors can stay with their bookies or gamble over the Internet, he said.
The report cites a survey its authors conducted of 1,510 men living in Delaware and major metropolitan areas within 150 miles of the state, including New York, Philadelphia, Baltimore and Washington.
The report concluded that 13 percent of those surveyed would come to Delaware's racinos if they offered sports betting.
According to the study, 56 percent of those who currently visit Delaware racinos were interested in participating in sports betting. And 41 percent of gamblers who don't visit Delaware racinos said they would go to place sports bets.
Even 26 percent of non-gamblers surveyed, people who do not visit any casinos at all, expressed an interest in visiting a Delaware racino to bet on sports.
"By virtue of them placing sports wagers, patrons will stay in the racino for longer periods of time, giving them ample opportunity to play the slots or electronic tables," the report stated.
Cummings said he's seen many surveys like the one commissioned by the casino council, and they are "overwhelmingly optimistic."
It's easier for someone from New York to say they'll come to Delaware if it offers sports betting than it is for them to actually do it, Cummings said.
"People anticipate they will do new activities at a rate much higher than at a rate borne out when you actually introduce the activity," he said. "They tend to be agreeable and answer the interviewer's questions in a positive instead of negative manner."
Sutor, chairman of the Video Lottery Advisory Council, rejected that argument.
"We expect some people will try to shoot holes in the report. But we're extremely confident in the methodology that was used and the experience of the people who created the report," Sutor said.
Sutor, who is Dover Downs Hotel and Casino's executive vice president, agreed with Eadington that people tend to be loyal to one form of gambling, but "there is crossover."
"If out-of-town people come to Delaware for sports betting, they're going to do more than just sports betting," Sutor said. "We're going after people who would come from out of state, who would come to our facility to enjoy the atmosphere of sporting events while placing wagers."
New Jersey resident Michael Green, of Winslow Township, said sports betting wouldn't be enough to entice him to Delaware. Green goes to Atlantic City three or four times a month to play table games.
"Slots is the biggest sucker bet there is. All I play is poker now," Green said. "The only people who make money off sports betting is the house."
Across the borders
Delaware, which had a monopoly on the region's casino scene since the mid-1990s, has seen increasing competition from Pennsylvania. Casinos opened last year in Chester, Philadelphia and Wilkes-Barre. Another casino will open in Harrisburg later this year, which Sutor said will be a short ride for Maryland residents.
The report cites a "resurgent" Atlantic City, which gained momentum from the lavish Borgata Hotel Casino & Spa until the Pennsylvania casinos captured some of the city's business. West Virginia just legalized table games, and Maryland is also considering slots.
Forces such as these sparked the creation of the Lottery Advisory Council in 2003, and also the reconsideration of sports betting in Delaware, the only state east of the Mississippi River that can even consider the practice.
In 1992, a federal law made it illegal to bet on sports events except in states that already had legalized it. The exemption applied to Nevada, Montana, Oregon and Delaware.
This state had already permitted sports betting during a short-lived experiment in 1976. The state lottery director canceled the "Touchdown II" game the evening before the last regular-season games because a professional handicapper said publicly that the betting line listed locally was substantially different from the one in Las Vegas.
If large enough bets were made, and the games went according to Las Vegas predictions, it could have been financially devastating for the state. A record number of bets came in for that weekend's games.
Sutor said this time would be different, with private racinos conducting the betting.. Although they could lose money on any given Sunday, over the long run, the operators would be sure to make an average of 5 percent to 7 percent profit, Sutor said.
The Vegas example
Oregon had allowed lottery-style betting on professional football games, but outlawed the games earlier this year in a successful effort to entice the gambling-averse NCAA to bring basketball tournament games to the state in 2009.
In Nevada, king of all forms of betting, last year the state took in about $12 million in tax revenue off sports betting, according to Frank Streshley, senior analyst for the Nevada Gaming Control Board.
The Delaware survey suggested sports betting in Delaware would be similar to Las Vegas, except in that each wager would require betting on more than one sporting event, or more than one element of an event. No single head-to-head bets -- wagers on the outcome of just one event -- would be allowed. The betting would take place on-site at the Delaware racinos.
Eadington said people want to make head-to-head bets, and when they learn they can't do that, they'll be less likely to make a bet. Instead, they might casually make bets with friends or find some other way to wager, he said.
"Las Vegas does this about as well as you could: extensive sports book areas, gigantic TV screens, environments that are very attractive. And there's a limited amount of revenue generated, with much from the locals. Here, Delaware is going to have an inferior wagering product -- they'll have to work with the existing facilities," Eadington said.
Sports betting revenues experienced what is probably a one-time bump over the last year because of a new federal law that cracks down on Internet gambling operations. Those sites are generally illegal for the operators and money middlemen, but legal for the users, Eadington said.
Delaware versus the bookies
In competing for the sports betting dollar, Delaware would be competing with established illegal bookmakers, said George Ignatin, a retired economics professor at the University of Alabama at Birmingham. The bookmakers have an advantage because they don't require money down, just a phone call, Ignatin said. "It's very hard for the state to compete with that," Ignatin said.
Green, the New Jersey resident, put it another way.
"Good luck dealing with -- how do I put this politely? -- the syndicate. It's a billion-dollar business. You're not going to have people coming in there too often to place their bets. Not when Joe Shmoe just got his paycheck, and when he can call his bookie and say 'I want to put 400 on this game,' and he still has 600 in his pocket. He doesn't have to worry about paying until next week," Green said.
Supporters of returning sports betting to Delaware say the state isn't going after the hard-core sports bettors.
"No, I don't think the hard-core gambler who does betting with a bookie ... is going to drop everything and come running down to Dover Downs," said Rep. Vincent Lofink, R-Bear. "It's going to become a point of destination, where they can do a lot of things, sort of like a superstore."
Contact Aaron Nathans at 324-2786 or [email protected].
A report commissioned by the Video Lottery Advisory Council surveyed 1,510 men living in Delaware and major metropolitan areas within 150 miles of the state. It found:
13 % would come to Delaware's racinos if they offered sports betting
56 % of those who currently visit Delaware racinos were interested in participating in sports betting
41 % of gamblers who don't visit Delaware racinos said they would go there to place sports bets
26% of non-gamblers, who do not visit any casinos at all, were interested in visiting a Delaware racino to bet on sports
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