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Caesars: Online gambling might hurt casinos in Nevada, NJ

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Christopher DeVargas

An exterior view of Caesars Palace on Thursday, June 6, 2013.

Updated Thursday, Dec. 5, 2013 | 10:21 a.m.

ATLANTIC CITY, N.J. — The world's largest casino company is cautioning investors that Internet gambling might hurt, rather than help, its brick-and-mortar casinos.

Caesars Entertainment, which owns four of Atlantic City's 12 casinos, wrote in a filing with securities regulators late Wednesday that online gambling could reduce patron visits to its casinos in New Jersey and Nevada, and harm the company's bottom line.

In a report to the U.S. Securities and Exchange Commission, Caesars wrote that Internet gambling will compete with the company's business in Nevada, where online poker is offered, and New Jersey, where all casino games are now available online.

"Caesars will, and other online providers do, offer online gaming options that compete with our live poker offerings in Nevada and New Jersey," the company wrote. "Expansion of online gaming in Nevada, the commencement and expansion of online gaming in New Jersey and the introduction of online gaming in other jurisdictions may further compete with our operations. Online gaming may reduce customer visitation and spend in our traditional casinos in Nevada and New Jersey, which could have an adverse impact on our business and result of operations."

It also wrote that its four New Jersey casinos — Harrah's Resort Atlantic City, Caesars Atlantic City, Bally's Atlantic City and the Showboat Casino Hotel — could be further affected because all the games they offer at their physical locations can now be played online. Patrons must be within New Jersey's borders in order to gamble on its websites.

A company spokesman downplayed the warning, telling The Associated Press it had to be included for legal reasons, regardless of how likely or unlikely the company believes a potential risk to be. The filing also listed many other potential risks to its business, including another economic downturn, war, or a terrorist attack.

"There are legal reasons for including cautionary language for potential issues that, while we consider them less, rather than more, likely, could impact our operations," Caesars spokesman Gary Thompson said. "While it's a legal requirement to include language such as this among potential risk factors, our experience has been that opening new channels to reach potential new customers and offer them the benefits, among others, of our Total Rewards program, has not caused visitation declines."

He said the declines the Atlantic City casinos have experienced in recent years were due to increased competition in the shore town's feeder markets, and the continuing recovery from the recession of several years ago.

Even before Internet gambling started in New Jersey last month, some feared it might hurt land-based casinos by eliminating the need to visit Atlantic City. The casinos are offering online players comps such as free hotel rooms, meals or show tickets that are redeemable at the casinos.

Steve Norton, a casino consultant and former vice president of Resorts Casino Hotel when it opened as the first U.S. casino outside Nevada in 1978, said he hopes the online perks will succeed in bringing more people to Atlantic City.

"But I have my doubts," he said. "Online gaming should improve the bottom line profits of Atlantic City casinos, but may also reduce the need to visit a live casino."

He also predicted Internet gambling in New Jersey would harm eastern Pennsylvania casinos more than those in Atlantic City in terms of reducing the amount of visitors to physical casinos.

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