Las Vegas Sands (NYSE:LVS) and Wynn Resorts (NASDAQ:WYNN) have built incredible empires of gambling resorts around the world. These properties wow visitors with amazing spectacles of entertainment, dining, shopping, and of course all the live gambling you could ask for.
Then the Internet made it easy for those who just want the gambling aspect to sit at home and play online. This could be a threat to Las Vegas Sands and Wynn Resort, even while companies like Boyd Gaming Corp. (NYSE:BYD) are signing on to this trend and altering their offerings accordingly.
Adelson versus online gaming
Las Vegas Sands CEO Sheldon Adelson has been a longtime opponent of online gambling, and has been spending large sums on lobbying to prevent its legalization. Online gaming is not a business opportunity that Adelson is interested in for Las Vegas Sands. He thinks that its legalization and growth threatens an industry empire that he and fellow physical casino resort builders have worked very hard to create.
Until recently, Steve Wynn of Wynn Resorts had been on the sidelines of the debate, though he recently threw his support to Adelson. However, this came only after he put things in place to ensure that if online gaming does take off in the US, his company will still be able to jump on board.
Las Vegas Sands sues mainland China online gaming companies
The threat that Las Vegas Sands has feared, a surge of less-than-official online gaming sites with shady dealings and poor consumer safety measures, has come to pass in China. Las Vegas Sands has discovered multiple sites which it claims are using its likeness to trick consumers into thinking they are playing at an official site of Las Vegas Sands, so the company is now taking legal action. Las Vegas Sands Corp vs. Unknown Registrants of www.368.com is under way.
In the complaint filed at the end of June, Las Vegas Sands explained that it feels that the domains of these Chinese online gambling companies are using Chinese characters which are very similar to Las Vegas Sands' Chinese name, as well as logos very similar to its Venetian design trademark.
The complaint claims that the companies are purposefully trying to lead online gamblers to think that the sites are affiliated with or run by Las Vegas Sands. The sites in question are accessible to US citizens as well, which means that these casinos abroad could lure in American Internet gamblers as well who think they are playing at Las Vegas Sands.
What this industry could be
Boyd Gaming Corp. has struggled to grow its earnings this year. For the first quarter the company reported revenue down nearly 4% and EBITDA down over 11.6% year-over-year. While the company has reported rising net revenue for the past three years straight, it cannot seem to stop the net losses.
The U.S. gaming economy itself is still struggling to regain its 2007 peak. Las Vegas Sands and Wynn Resorts also posted pretty lackluster results for their US operations during the same quarter. For the first quarter Las Vegas Sands posted a 7% year-over-year decline in revenue for its Las Vegas operations, and Wynn Resorts posted a 1.5% decrease in revenue for Las Vegas over the same time-frame. However, the companies both reported incredibly profitable quarters and record-setting revenue thanks to their Asian operations.
However, now Boyd Gaming Corp. is hoping to reverse this trend by betting on online gambling. The company's New Jersey casino and hotel, The Borgata, is now much more than just a physical casino. The company has been busy building its online presence and now offers live online gambling. Along with its partnership with PartyPoker, Boyd Gaming Corp. is by far the market leader in online gambling in the state.
So far online revenue hasn't done much for Boyd's bottom line because of costs associated with launching these operations. However, if the online gambling segment can continue to do well with lowered front-end costs, then it could become a cash generator for the company. New Jersey is a special case where the local government has been lenient on online gambling, as not all states allow such operations. However, the trend is that more and more states are legalizing and supporting them, and analysts believe California could be next.
Las Vegas Sands and its leader's opposition to online gaming may be futile considering that the threats are coming from around the world, evidenced by the issues with www.368.com and the ensuing lawsuits. Wynn seems to have taken a better stance by hoping that online gambling doesn't happen, but preparing to profit if it does come.
Meanwhile, Boyd Gaming Corp. is going all in and making a significant bet on this new trend. Whether you are for or against online gambling, when it comes to making an investment decision, it's important to know that it is there, it seems to be growing, and actions like this show that it could be a significant part of the industry's future.
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Bradley Seth McNew owns shares of Las Vegas Sands.. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.