The conventional wisdom says Sheldon Adelson is opposing online casinos to protect himself from competition. The conventional wisdom is wrong.
Las Vegas casino mogul Sheldon Adelson is held up as the embodiment of greed. A man who will do anything to make a buck, pay any price to make sure his long-term interests are protected. The same man who has amassed a $40 billion fortune running gambling establishments in Vegas and Macau is now spending hundreds of millions lobbying federal lawmakers to ban online casinos in America.
The conventional wisdom is that Adelson is doing this to shield his land-based casinos from competition from the emerging online industry. He has stated that internet gambling poses an existential threat to the industry as well know it, that it will “cannibalize $25 million to $50 million of land-based revenues at the state’s (New Jersey’s) land based casinos” by siphoning customers.
He also claims to be alarmed by social problems he associates with the activity, calling it an issue of “moral standards.” This seems ironic and unbelievably hypocritical, seeing as he made his entire fortune off of other people’s gambling losses.
Despite being a dollar-driven man in every sense of the word, I don’t believe that Adelson is doing this for his own economic gain. Here’s why:
Adelson is stinking rich and extremely old
• It is unlikely that Sheldon Adelson’s quest to ban online gambling is motivated by personal economic interest
• Online casinos do not cannibalize land-based establishments, and Las Vegas Sands could increase revenue by launching its own online casino
• Adelson is more likely motivated by personal sentiment
Sheldon Adelson has a lot of one thing and a little bit of another. The first is money, the second is time left on this earth. His net worth comes in at a shade over $41 billion, putting him #8 on the Forbes list of richest people in the world. He is also is 80 years old.
There is no law saying that extremely rich people can’t desire even more money, or that people don’t seek money which they won’t live to spend. But its likely that Adelson is more interested in the legacy which will follow him after death, and not the amount of money he can squeeze out of his last few years. He has no long-term interests to protect.
Online casinos don’t cannibalize land-based
The cannibalization theory makes sense on the surface level, but there is little evidence that it actually applies to major casino hubs like Vegas and Atlantic City. Studies including one by Boyd Gaming have shown that the majority of online casino customers are people who have not previously gambled in land-based casinos, and that some people develop an interest playing online before taking their money to a traditional establishment.
Dover Downs CEO described the complimentary relationship between the two forms of gambling perfectly, stating that existing customers are not taking their business online:
You’re talking about a new market, a new demographic. Some of them may try just for fun, but they’ve been used to coming here and they love the personal touch, the customer service. They’re still going to go for the spa treatments.
Adelson’s financial future lies in Asia
Adelson has made gambling news by making billions on his ventures in Macau and Singapore and has been looking to expand into Europe for quite some time. Even if his Vegas casinos lost some revenue to online sites (which we believe they won’t) he has a steady stream of cash coming in from overseas.
Adelson has pledged to willingness to “spend whatever it takes” to get an online gambling ban through the legislature, but he’d be better off investing that money in Asia’s emerging casino market. Legal online gambling or not, the future of the casino industry lies in Asia, not the United States.
Adelson can use online gambling to his advantage
This is the most important reason of all. Adelson could use legal, regulated online gambling to funnel more money into his already ample pockets. American gambling laws allow states to create legal markets, and New Jersey and Delaware launched their first sites last year.
Boyd Gaming decided to bandwagon on the burgeoning internet trend in opening the Borgata online, with the Golden Nugget also launching a site. As cannibalization is a myth, these companies have pumped up revenues by expanding their offering to this “different demographic.”
Using the online platform to compliment land-based operations helps the bottom line by tapping into a new source of revenue. If Adelson was really desperate for more dollars, he would follow suit.
I cannot see into the mind of the fascinating man who is Sheldon Adelson. But what I can see is arguing that his anti-online campaign is motivated by money is illogical. It seems more likely that Adelson is a traditionalist who finds internet gambling distasteful, or maybe he sincerely believes that in the very long term it will hurt the land-based industry. But speaking in terms of his own bank account, the trend poses no personal threat.