Casinos not always a financial panacea

Oct 6, 2009 5:02 PM
Burnt Offerings by Stan Bergstein |

New York’s Village Voice, trying to catch up with developments in journalism that threaten the existence of newspapers, ran a cover story last week citing a Forbes magazine interview with Mort Zuckerman, owner of the New York Daily News.

Zuckerman said newspapers could be saved, and his formula for doing it was for the federal government to allow sports betting on newspaper websites.

Zuckerman told Forbes, "Plenty of British newspapers do this; for them it’s a crucial part of their net revenue stream. I know a major newspaper in London that makes $15 million a year from sports betting alone."

That led, of course, to a discussion of the effort of Barney Frank, the Massachusetts congressman, he has spent much of the last two years campaigning hard for repeal of the present federal law, rammed through by Republicans under Bill Frist’s leadership three years ago, that prevents banks from sending cash over the web and keeps online betting illegal.

Frank says if he can get the law passed, which is doubtful, it would eliminate the barrier to internet gambling, at least at the federal level. He acknowledges it still could be banned by state law, so Mort Zuckerman’s idea is far removed from reality.

Whether or not newspapers will die without it is problematical, but they may shrink further in already declining numbers and change in content and presentation.

The same is true of casinos, and the idea that they are absolute and certain moneymakers is being tested both here and in Canada, where the racinos at Ontario racetracks, run by the provincial lottery corporation, have lost millions. Whether this is the result of over-saturation or mismanagement is a question being debated in the province.

But in a big American city like Pittsburgh, where a shiny new standalone casino opened recently, storm flags also are flying.

The Pittsburgh Post-Gazette, in a long story last week under the headline "Snake eyes coming up in the first weeks for new casino," revealed dismal results after the first seven weeks of operation.

The high expectations of instant success not only failed to materialize, but the financial rating firm of Standard & Poor’s lowered the casino’s credit rating from B to B-, citing the casino’s "weak operating performance. Unless there’s quick improvement," the report said, "the casino may not be able to generate enough money to meet its debt obligations." Its 3,800 stall garage was reported nearly empty on a recent Tuesday in the Post-Gazette story

Currently there are nine casinos and racinos operating in Pennsylvania, and during the week of Sept. 21-27 the new Pittsburgh casino, called The Rivers, finished dead last in gross terminal revenue.

All this is of special interest in neighboring Ohio, where state voters will cast ballots in a referendum next month to approve or disapprove four big casinos in Cleveland, Cincinnati, Columbus and Toledo.

Horsemen in the state are up in arms. They held a meeting last Saturday night in the paddock at Northfield Park, a racetrack in a Cleveland suburb, urging their members statewide to join an urgent campaign to defeat the casino referendum. Their rationale is that if the casinos win next month, slots at tracks, put on hold for a vote in November of 2010, will lose. The horsemen derive no purse income from the standalone casinos, but would get a healthy slice of slots revenues at the tracks.

In New York, where the biggest casino of all is planned for Aqueduct racetrack, a decision is likely by the time you read this. Steve Wynn is in the hunt with plans for a monster Vegas-type facility. Penn National is in the chase, along with Delaware North and SL Green, which is suing Delaware North for reneging on a partnership agreement and then allegedly using proprietary secrets of the deal for its own bidding purposes.

This circus has been playing for eight years now, but the tent is about to come down and the clowning around is just about over. Casinos elsewhere may be having financial troubles, but it is not likely a casino in the heart of America’s number one city, and the only game in town, can fail to enrich the city, and the casino operator who wins this gambol.

Well, maybe. They have messed up New York City OTB to where it is the city’s only legal bookie and is broke. Anyone who can do that can screw up a one-car funeral.

Question? Comment? E-mail me at: Stan Bergstein