The threat of war is shaping the economy, depressing the stock
market, impacting investment and consumer confidence and pushing the states'
budget crisis to greater extremes. The Dow Jones Industrials ended February
at 7884, down 169 points from the beginning of the month. The threat of war
is also affecting fuel prices; gas prices have reached the $2 level, with some
predictions for $3 by summer. Fuel prices raise all travel costs, and, by virtue
of their impact on home heating and normal driving, reduce individual and family
disposable income, the source of all gaming revenue. That kind of news not
only depresses stock prices, it also depresses people. Consumer confidence
fell to a ten year low.
Wall Street's Angst War.
…Stocks have fallen in seven of the previous eight sessions due to fears of
terrorism and war. …The Dow and S&P 500 were headed for their fifth straight
losing week, while the Nasdaq was aiming to claim it first weekly gain in
five weeks. …Concerns about war have been the biggest drag on the market
so far this year, stripping the Dow of about 1,000 points since Jan. 14, when
the blue chips stood at 8,842.62, their high for 2003. Amy Baldwin, AP, Yahoo Business, 2-14-03
Casino Bonds in Slump on War Worries.
Bonds in the once-hot casino sector have suffered a reversal of fortune in
recent weeks as deepening fears of war and security threats sap investor demand.
…"Everything is down, it's not just gaming," said Jane Pedreira,
a fixed-income gaming analyst at Lehman Brothers. "It's really not a
good time to come to market at all." Dena Aubin, Reuters, Yahoo Business, 2-18-03
Gasoline Tops $2 In More States Soaring
Prices Begin To Spread Across USA. About 500 gas stations are charging
$2 or more for a gallon of regular gasoline, according to data from roughly
100,000 stations in markets of all sizes. The highest gas prices mainly are
in California and Hawaii… James R. Healey, USA Today, 2-18-03
Consumer Confidence Nears 10-Year Low.
Consumers have grown increasingly worried about the economy as the nation
inches closer to war with Iraq, driving down their confidence levels to
their lowest point in nearly a decade, a private research group said Tuesday.
Rebecca Gomez, Associated
Press, Yahoo Finance, 2-25-03
The "trickle-down" effect was the economic theory of the Regan
era. In 2003, it could find a new application. The fear of war and a depressed
economy have a trickle-down on everything and everyone, from Wall Street to
the average citizen. , The journey from Wall Street to Main Street trickles
through State Street. Budget shortfalls (state and local) continue to impact
gaming as states look for ways to close the budget gaps. The story isn't new
this month; however, it continues as each of the states debates the issues and
the proposed solutions.
States' Budget Gaps Jumped 50 Pct.
The deteriorating situation could prompt more cuts in a wide range of programs
such as elementary schools, health care for the poor and more. Additionally,
it will increase pressure on state lawmakers to raise taxes. …Several
states are already discussing raising so-called sin taxes, on cigarettes or
alcohol, while others are pushing gambling to raise revenue. Robert Tanner, Associated Press, Yahoo Business, 2-5-03
In the midst of continual news on a struggling stock market,
lower earnings, high unemployment and debates on new taxes, a couple of trends
are clearer this month than last. The first trend might be called the rise
of the city-state. Cites around the country are acting as states and trying
to find ways to bring casinos within their control and tax jurisdiction. The
authority and power to enable and control gaming lies with the state; therefore,
cities must look to the state legislature for enabling legislation. The cities
are, however, taking the leading role in a new and stronger fashion as they
seek more control over gaming. The role they want looks very much like the
role the state has traditionally played.
There are four cities in California, Oakland, Richmond, West
Sacramento and Vallejo, negotiating with Indian tribes for a casino. Besides
California there are proposals, discussions or just plain dreams in Austin,
Bellevue (Nebraska), Butte (Montana) Chicago, French Lick (Indiana), Philadelphia,
and many more up and down the East Coast. Some cities are looking for an Indian
tribe, some just want enabling legislation to allow casino development and others
want to own and operate the casinos themselves.
Downtown Casino Proposed.
A team of local business leaders and power players wants to build a casino
in downtown Austin, the Austin American-Statesman reported. The dream
would cost $440 million, and raising the sum is the least of the uncertainties,
the newspaper said. …They say it would provide a river of profit -- $200
million per year -- that could be taxed to help struggling schools, city services
and the state government. Las Vegas Sun, 2-17-03
A casino town? Mayor Jerry
Ryan's recent announcement that Bellevue will get in line if casino gambling
becomes legal in the state of Nebraska told us what one man thinks. His
will not be the only voice. …At this stage it is important that anyone thinking
of bringing casinos to Nebraska know that Bellevue will grant a fair hearing.
Bellevue Leader, 2-11-03
Gaming Haven Proposed For Butte.
A bill will be introduced at the Legislature soon to authorize creation of
a "music and entertainment district" to allow wide-open gambling
at some proposed new major casinos in the national historic district near
uptown Butte. …as is done in Branson, Mo., along with a dozen hotels for
the anticipated influx of tourists. Charles S. Johnson, Billings Gazette,
2-21-03
Daley Says Casinos Can Plug Budget
Hole. Mayor Daley said Thursday he remains intrigued about a government-owned
Chicago casino….take back all of the state's gambling licenses to create
a "pot of gold"… Fran Spielman, Chicago Sun Times, 2-7-03
Towns' Quest For Casino Advances In
House. A House committee gave residents of French Lick and West Baden
Springs their first win this year in their fight to get a casino for the economically
depressed area. …a bill to give the state's 11th riverboat casino license
to the Orange County towns. House Bill 1902 also would require county voters
to approve a referendum before the casino arrives. Kristina
Buchthal, Indianapolis Star, 2-13-03
Katz's Casino Proposal. If
Green Bay can own a football team, why can't Philadelphia own a casino? Republican
mayoral candidate Sam Katz isn't proposing a municipal gaming house (picture
the Parking Authority running blackjack tables), but he is talking about
a nonprofit corporation that would capture the bounty of casino profits for
the public good. Dave Davies, Philadelphia Daily News,
2-13-03
The trend of cities becoming the dominant force in the expansion
of gaming is clear. Cities, large and small, are looking for ways to bring gambling
revenues into their treasuries. Among these cities are Philadelphia and Chicago
who think they want to own a casino or two. In what may be the next phase on
this expansion and development carousel, a developer wants to buy a city, Las
Vegas. Barrick Gaming Corporation is trying to buy Vegas, not the Strip, only
the downtown, just a small variation on a theme, but enough to please both Paganini
and Ella Fitzgerald.
Barrick Exec Confident In Downtown
Prospects. Fremont Street pedestrians walk
by Jackie Gaughan's Western, which is part of the collection of downtown casinos
and motels Barrick Gaming Corp. is in the process of purchasing. …Barrick
Gaming has already spent $1.3 million for its $82 million deal to buy the
Plaza, Western, Gold Spike and the Las Vegas Club, Barrick Chief Gaming Officer
Phil Flaherty said. …"This is the best time to do a deal," he said.
"The best time to do a deal is during a downturn. The smart money knows
this is the best time to buy. Once we finish blowing up Iraq, there will be
a settling down." Michael Gaughan noted that the 35 acres Barrick
is buying represents a good chunk of downtown real estate for the price, and
suggested that Barrick Gaming's buying may not be over. "This is
as much a real estate deal as a hotel deal," he said. "They're looking
at all the land (downtown). They want all the land." Jeff Simpson, Gaming Wire, Las Vegas Review-Journal, 2-7-03
Not every city sees gaming as the solution to all of its problems.
In fact, in an ironic twist of fate, it is cities that have gaming the longest
that believe that. Take, for example, the case of Reno, Nevada, the original
home of casino gaming, the place where Harrah's first saw the light of day.
Reno took a back seat to Las Vegas forty years ago; as Las Vegas grew and its
casinos became more innovate. Reno was much more conservative its growth and
its casinos. Still it was the "second city" of gaming until Atlantic City arrived
on the scene. As gaming spread Reno's ranking dropped, but it was still one
of the "premiere" gaming resort destinations in the country. Until… until
Indian gaming came to California. Since then Reno has been on a constant downhill
slide. Casinos and the casino industry in Reno are in trouble, and there are
very few exceptions
Washoe County Cuts Value Of Casinos.
Casino executives told county officials they see only a slight recovery from
the horrible year of 2002 because of the expansion of Indian gaming
in California. "It's tougher than anyone who is not close to it can believe,"
said Earl Howsley, Eldorado finance director. . Susan Voyles, Reno Gazette-Journal, 2-21-03
For fiscal year 2002, pre-tax net income for the county's
38 casinos totaled $9.35 million, down from $73.3 million from the year
before, according to the latest Nevada Gaming Abstract from the State
Gaming Control Board. The $9.35 million in net income is derived from revenues
of $1.8 billion — for a pre-tax return of only 0.5 percent — for the year
ended in June 2002. Susan Voyles, Reno Gazette-Journal, 2-20-03
Atlantis Casino Has Record '02 Earnings.
Location and strong patronage from local residents helped propel the parent
company of the Atlantis Casino Resort in south Reno to record earnings last
year. Monarch Casino & Resort Inc. said Thursday that its net
income for 2002 rose 87 percent to $8.6 million, or 90 cents per diluted
share compared with 49 cents in 2001. Bill O'Driscoll, Reno Gazette-Journal, 2-21-03
Reno's story has a point and, if you wish, a moral. Gaming
is not a bulletproof solution to the current economic or budget crises. Gaming
like all industries is subject to pressure from government regulation, available
capital, supply of customers and most importantly competition. No state, city
or, indeed, Indian tribe can control the growth of competition even though it
would seem there are still plenty of customers "out there" for everyone.
More People Gambling, Study Finds.
Gambling in the nation continues to rise, with 82 percent of adult Americans
saying they had gambled in the last year, a study has found. The report,
by the Research Institute on Addictions at the State University of New York
at Buffalo, is in the winter issue of The Journal of Gambling Studies. …The
researchers cited studies showing that 61 percent of Americans gambled
in 1975 and that 63 percent did in 1998. The New York Times, Indianapolis Star, 2-3-03
One of the factors that impact casinos, as it does all industries,
is regulation. Regulation is one of the costs of gaming. Casinos have to be
licensed in what is a lengthy and expensive process in most jurisdictions.
And casinos have to have additional staff and equipment to meet regulatory requirements.
All add to cost of doing business and reduce profit margins. But there is another
and more expensive type of regulation, regulation that limits the time, bets
and behavior of consumers; smoking is an example of this kind of regulation.
Relatively new to gaming, non-smoking regulation is starting to be a significant
factor. And to date it has proven to be very expensive for operations in jurisdictions
with non-smoking requirements.
Bill Would End Smoking In Bars And
Casinos. The Assembly Environment and Solid
Waste Committee unanimously passed the Clean Indoor Air Act, which would
ban smoking in common areas of casinos, restaurants, bars, banks, hotels
and other indoor public places. It now heads to the Assembly Health Committee.
Joe Weinert and Pete McAller, The Press of Atlantic City,
2-10-03
Casino Receipts Add Fuel To Smoke Ban
Fire. Gambling receipts have continued to sag in Helena and soar outside
the city limits, according to new Department of Justice statistics. …According
to the Justice Department numbers, East Helena establishments saw a 39 percent
increase — or $263,000 — in video gambling income compared to a similar three-month
period last year. …Tax collections within the city limits fell 12 percent
compared to one year ago, which means bars and casinos earned $460,000 less.
Jason Mohr, Helena Independent
Record, 2-28-03
Sharp Fall In Gaming Revenues To Hurt
Clubs. Victorian AFL clubs will see as much as $2 million stripped
from their revenues this year by a downturn in gaming attributed to the ban
on smoking in gambling venues. …Essendon has confirmed that revenue from
its gaming venues is "undoubtedly down, something between 10 and 20
per cent" and Western Bulldogs chief executive Campbell Rose said
the impact of the ban was clearly being felt at the three venues his club
operates. Stephen Rielly, The Age, 2-12-03
….the impact of the smoking bans is the most serious and immediate.
The bans were responsible for the 2.2 per cent fall in gaming revenue and
2.4 per cent decline in trading profits from Tabcorp's gaming division in
the December half. The numbers, however, understate the severity of the impact.
At the start of the half the division was booming, with revenue up 11.4 per
cent in July and 17.1 per cent in August. Stephen Bartholomeusz, The Age, 2-20-03
Even though gaming expansion remains likely in a dozen or so
states, one can begin to imagine a Reno-like time in the future. A time when
expansion has stopped and each state and jurisdiction is fighting to the death
with the neighboring jurisdictions. Still, there is a lot of money to be made
until then. And best positioned to profit in this latest expansion era are
the manufacturers. IGT, the most likely beneficiary of any new gaming, is trying
to broaden its revenue stream past game sales. No one understands what happens
when an expansion bubble bursts that IGT. It was after all, the expansion bubble
of the early 1990s and its bursting that lead IGT, the others followed suit,
to reduce the emphasis on game sales and place more emphasis on "recurring"
revenue.
IGT To Aggressively Pursue Lottery Contract. Graphically illustrating
of the impact of gaming proliferation on equipment manufacturers, Reno-based
International Game Technology has set its sights on servicing the new Tennessee
lottery. At stake is a contract that could be worth $200 million or more for
equipment and services. "IGT has made it clear they have an interest in
growing their online lottery business. …IGT plans to pursue the incremental
business aggressively… Rod Smith, Gaming Wire, Las Vegas Review-Journal, 2-5-03
As IGT sails along converting the industry to cashless and converting
itself into more than just a slot machine company, the competition has had a
rough month. Aristocrat is caught in an Enron-like mess and Sigma is struggling
to keep its licenses.
Aristocrat Tells All: It's Worse.
Gaming machine manufacturer Aristocrat yesterday fuelled concerns over
management credibility by confirming analysts' worst fears: the company's
earnings problems extended well beyond a one-off deal failure with a South
American customer. …Aristocrat shares traded for less than 15 minutes
yesterday before being placed in a trading halt ahead of the announcement
last night. Shares were down another 10c to $2.30 after touching $2.18. …
Once perceived as a "shining light" in the market, Aristocrat's
credibility was severely damaged, Mr Monaghan said. "The company has
dropped 60 per cent in the last 12 months. People expect that from dotcoms,
not from companies with the history and position of Aristocrat." Allison Jackson, Sidney Morning Herald, 2-10-03
Sigma Wins 90-Day License.
A Cole County judge has ordered the Missouri Gaming Commission to issue Las
Vegas-based slot machine maker Sigma Game Inc. a 90-day license. The judge
said the 90-day license will give the parties time for a full hearing and
due process. Las Vegas Sun, 2-13-03
In the 1960s, as the anti-Vietnam movement gained support, folksingers
often gave their voice to the debate. Bob Dylan sang sarcastically of "god
being on our side." In Bob's mind God did not take sides in war. The words
were not directed at any particular religious movement or specific support for
The War by any religion. It was a reference to the Pledge of Allegiance and
the non-secular, but deeply religious, foundations of our country. This year
God is taking sides in New Jersey, a state that has given us a great deal of
entertainment in the last month. A debate over increasing gaming taxes is raging
across the state; God has joined the battle. He lined up to support the casino
workers whose jobs, they feel, would be threatened by the governor's proposed
tax increase. In a very blue collar, heavily union state, churches are as
representative as unions.
Political Rivals Fight Governor's Proposal.
Imploring preachers to pray for Gov. James E. McGreevey, political foes came
together Wednesday to crusade against the new casino taxes in his proposed
state budget. Republican state Sen. Bill Gormley joined hands with warring
Democrats Mayor Lorenzo Langford and City Council President Craig Callaway
in front of the Second Baptist Church's altar. …A coalition of local black
ministers registered approval from seats near the speaker's podium, as elected
leaders called the proposed taxes an assault on an industry that produces
income for the state and an attack on a city that is on the verge of realizing
the payoff of casino gaming 25 years after its start. Bridget
Murphy, The Press of Atlantic City, 2-20-03
And now for a man who made a living explaining gaming to Wall
Street and the gaming industry itself, a new gamble.
Bear Stearns Analyst Resigns.
Jason Ader, Bear Stearns Cos. casino and hotels analyst, left the No. 6 U.S.
securities firm last week to explore other options, he said. Ader, ranked
No. 1 by Institutional Investor magazine from 1999 to 2001 and No. 2 in 2002,
will hand coverage of companies such as MGM MIRAGE and Hilton Hotels Corp.
to Mark Abramson. Abramson has covered lodging in Europe and Asia and been
with Bear Stearns for nine years, said Russell Sherman, a spokesman. Ader,
who turned 35 on Thursday, celebrated by asking his girlfriend to marry him.
He proposed in his Manhattan apartment before going to Lespinasse, the French
restaurant at the St. Regis Hotel. She said yes and he quit the next day.
Las Vegas Sun, 2-11-03
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