Casino Companies Are In For an Overhaul


In just a few years' time, the casino business that we've become familiar with may be changed completely. New technology and an expanded acceptance of mobile technology by regulators will begin turning the traditional casino upside down.

Slot machines may be replaced by iPads, table games will be electronic, you will be able to play from your room, and online gaming will be everywhere.

This isn't a negative for gaming companies. In fact, it creates a huge opportunity and it may open up gaming to a new breed of consumer.

The revolution is here
Bally Technologies (NYS: BYI) and International Game Technology (NYS: IGT) were granted the first online game licenses in Nevada earlier this year, and casino operators Boyd Gaming (NYS: BYD) , Stations Casinos, and the Golden Nugget were the first casinos recommended for approval for intrastate online poker . Online poker was big business in the U.S. until the Feds shut down Poker Stars and Full Tilt Poker, and this is another step on the way to a comeback.

The Global Gaming Expo last week also showed a new generation of games for casinos. No longer will casinos have to buy a $20,000 slow machine when an iPad can hold more games and costs only $500. The possibilities for games begin to open up pretty quickly with devices like this.

Opening up to a whole new customer
Some casino games have always been intimidating to play. Once you move beyond your first penny slot machine as a new gambler it's intimidating to sit down at a blackjack table or play poker against real people. Mobile gaming and new devices can alleviate some of these jitters. Online gaming and mobile gaming is an opportunity to expand the customer base for gaming companies at a time when gaming has stagnated in many locations.

Forcing the Fed's hand
This may eventually push Congress to lay out a framework for regulating and controlling online poker and other online games of chance. Nevada is the first to go forward with online gaming, but others will soon follow. Even those who want online poker legalized admit that federal regulation makes more sense than 50 different sets of rules.

Most casino operators would jump at the chance to offer gaming on a federal level. MGM Resorts (NYS: MGM) and Caesars Entertainment (NAS: CZR) would be two of the biggest players in all likelihood. The companies own some of the world's most well-known gaming brands including Caesars' World Series of Poker.

But not everyone is bullish on online games. Las Vegas Sands (NYS: LVS) chairman Sheldon Adelson has spoken out against online poker and hasn't made any indication he intends to participate in the potential boom in the gaming business. We'll see if he changes his tune if MGM and Caesars start raking in profits from online games.

The next gaming boom
The companies that have benefited from gaming's boom in Asia may not be the companies that benefit from an online or mobile boom in the U.S. Caesars and MGM have been dogged by debt in recent years, but they would be huge beneficiaries of online games. Las Vegas Sands may be left in the dust online unless Adelson changes his tune.

But the big winners may be IGT and Bally's. These companies will provide the technology needed for online gaming and will open up a new revenue stream. The gaming revolution isn't a done deal yet, but it's time to start preparing for it because policymakers aren't stopping it.

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