Casino Gambling Future Forecast

Casino and Casino-style Gambling - US - November 2006

Future and Forecast

FUTURE TRENDS

Digital television promises interactivity

The following Figure shows retail sales of digital television at current prices, 2001-05.

FIGURE 41: Total U.S. manufacturer wholesale sales of DTV sets and displays, at current prices, 2001-05

Year Sales at current prices

$million Index % change

2001 2,648 100 -

2002 4,280 162 61.6

2003 6,521 246 52.4

2004 10,420 394 59.8

2005 (est.) 17,388 657 66.9

SOURCE: Mintel/CEA

If digital television is not yet a significant boon for the gambling industry, it will be soon enough. Digital television is a new broadcasting technology that is expected to transform the television experience. By banding information into digital bits, broadcasters will be able to stream more product into the home than was previously available with analog broadcast technology. Wholesale sales reached $17 billion in 2005, and a household penetration rate of 15%, according to the CEA.

The higher resolution of DTVs will result in better picture and sound quality, but what is of interest to the gaming industry is that the new space on the digital spectrum will allow for more interactive technologies. According to Congress, broadcasters will switch from analog broadcasts to all-digital broadcasts starting February 19, 2009. At that point, homes will become interactive audio and visual centers with opportunities for shopping, online banking, video games, video on demand and gambling. Next to mobile CE products and broadband technology, digital television is another frontier for the home gambling industry. One such model is the one designed by the cable network Spike TV. In 2006, the network announced the creation of Spike Casino, a program allowing viewers to gamble on games like roulette, craps and slot machines in real time and to interact with viewers in live chat rooms.

Young Hispanics are wireless and already gambling online

Hispanic population growth surged nearly 58% from 1990 to 2000вЂ"more than four times the growth rate of the U.S. population. In 2006, the 44 million Hispanics comprised 14.7% of the total population of 299 million in 2006. More significantly, the community is expected to keep growing at a strong and steady clip. By 2050, it is estimated that some 30% of the entire U.S. population will be Hispanic.

Hispanics represent the ethnic group in the U.S. that is most likely to gamble online and at home, and most likely to be very frequent visitors at physical casinos (six or more times per year) (see The Consumer section). According to the 2005 report Trends and Impact of Broadband in the Latino Community, issued by the Tomas Rivera Policy Institute at the University of Southern California, 14 million U.S. Hispanics are online and half of online U.S. Hispanics have broadband at home. The report says Hispanics are more likely to utilize all aspects of wireless technology, from downloading entertainment content to communicating via instant message (IM) chat, than any other broadband user. By 2009, Hispanics are expected to spend $41 billion on all telecommunication services combined.

Hispanic wireless users are younger than other ethnic group users. Some 56% of Hispanics online are aged 18-34 versus 34% for the general online population, according to the 2006 U.S. Hispanic Cyberstudy released by AOL/Roper. Hispanics spend more time onlineвЂ"9.2 hours a week compared to the general population at 8.5 hours. They represent the ethnic group that is most likely to give up their landline telephone service in favor of wireless phone service.

Currently there is a race to target the Hispanic consumer. In 2005, Verizon, Wireless, Cingular and Sprint-Nextel together spent nearly $140 million on advertising aimed at Hispanics, more than they spent on any other ethnic group, according to the New York Times. In sum, all the elements for rapid growth in gambling by Hispanics are already in placeвЂ"current desire, wireless capabilities, and the attention of major advertisers and communications companies.

Three U.S. gambling destinationsвЂ"the boardwalk, the desertвЂ"and the Gulf Coast?

Hurricane Katrina drastically affected the Mississippi coastal market, where 13 casinos were forced to close, and violent winds smashed high-rise condo developments that were designed to ignite the casino resort market there that had been relatively flat in 2003 and 2004. Condo redevelopment is seen as the area’s single chance at rebirth. Developers are acquiring land all along Interstate 10 with plans to transform the coastal region of Alabama and Mississippi into one of the country’s major destinations for casino gambling. Many casino companies have either reopened long shuttered facilities there, expanded their facilities or are in the stages of opening new resorts.

In the works are many aggressive projects involving both commercial casino operators like Trump Entertainment, The Torguson Gaming Group and Harrah’s Entertainment and Tribal operators such as the Mississippi Band of Choctaw Indians. A report released by a Biloxi gaming committee estimates that the casinos in that city will grow to 17 in number and will generate $1.6 billion in annual revenue. The Isle of Capri Casinos plans to build a $250-300 million gaming facility in west Harrison County, Miss. near the Gulf Coast.

Growth will be accelerated by the combined $50 billion in aid promised by Congress and private investors by 2010. In addition, the Gulf Opportunity Zone Act of 2005 is expected to create a housing and casino boom in the areas of Mississippi, Louisiana and Alabama directly affected by the storm. The state of Mississippi has also acted quickly, pledging not to raise state gaming taxes and to allow casino companies to move their properties as much as 1,500 feet inland. Before Katrina, casinos were built on barges as they had to be physically removed from the communities they served. Condo development is booming and large-scale resorts are being accelerated.