Seminole Tribe of Florida (with an Assist from Disney) Protects Florida Gambling Monopoly
The Walt Disney Company spent $20 million in support of a ballot initiative that would give Florida voters the right to prevent the expansion of casino gambling within the state, a measure designed to protect their tourism interests and the state’s brand as a “family friendly” destination. Amendment 3 of the Florida Constitution passed on Tuesday evening, with more than 70% of the state’s voters backing the law that will require new casino projects to gain the support (60% must vote in favor) of the state-wide voting public prior to breaking ground; few (if any) projects are likely to meet the 60% benchmark. MGM Resorts International (seeks licensure in state), the Miami Dolphins and the Tampa Bay Buccaneers (both NFL teams are hoping to profit on sports betting) were among those that publicly opposed the measure; each of the 3 entities spent $500K on the proposed amendment’s “no” campaign.
Howie Long-Short: Disney (DIS) was invested in the amendment passing for its own selfish reasons, but there’s no bigger beneficiary to the “Voter Control of Gambling” amendment passing than the Seminole Tribe of Florida (spent $16 million on “yes” campaign). The Tribe dominates the Florida gaming landscape, operating in the state under a Federal gaming exemption afforded to Native Americans with little competition; the amendment’s passage ensures the moat remains around their business.
The long and costly battle for gaming company expansion into the state just became infinitely more difficult, but don’t expect casino operators to give up on Florida. Dan Alkins (Chairman of the committee opposing the ballot initiative) said should the measure pass “there’s going to be litigation just continuing on forever.” The state’s size/population, reputation as a tourism destination and abundance of retirees makes it a highly desirable locale for casinos to take up residence.
It’s worth pointing out the irony in the Miami Dolphins opposition of the amendment, while playing their home games at Hard Rock Stadium; a chain owned by the Seminole Tribe and the one that will pay the franchise $250 million over the next 18 years for naming rights.
Speaking of MGM Resorts International (MGM), the company is reportedly exploring a potential merger with Caesar’s Entertainment (CZR) to form a gaming behemoth (think: +/- 50% of all hotel rooms in Las Vegas and Atlantic City). While there’s no offer on the table (and it’s possible regulators could determine a merger would create “undue economic concentration), it’s known that “without a CEO, Caesar’s is in play” and that it’s CZR’s activist investors (own +/- 25%) driving the tie-up talk; a merger would allow the combined companies to eliminate redundant “overhead and marketing” expenditures. Wynn Resorts (WYNN) and the Genting Group (OTC: GEBHY) have also been names as companies that could have interest in a CZR (-25% YTD) take-over. With licenses in 13 states (49 casinos), the company is well positioned to benefit from wide-spread sports betting legalization.
Fan Marino: Howie mentioned Las Vegas and Atlantic City, so it seems like an opportune time to note that Eilers & Krejcik is projecting New Jersey sportsbooks will generate more sports betting revenue than those in the gambling mecca, as soon as 2021 ($442 million vs. $410 million). The boutique research firm (with a focus on the gaming industry) supported their thesis by pointing out NJ gamblers can make “sports betting transactions” on credit card (as opposed to being forced to make a deposit in a casino), that the state’s sportsbooks have created a highly competitive online/mobile market (think: pricing/promotions) and that state’s licensees have had “very high rates of black market recapture.”
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