Other shoe about to drop in AC?

According to a WSJ report, MGM Mirage has decided to sell its interest in the Borgata and presumably close the door on any future developments in Atlantic City:

For years, New Jersey regulators have raised concerns about the suitability of casino company MGM Mirage's business partner in China. Now, MGM Mirage has an answer: cash out of Atlantic City.The company plans to divest its 50% stake in the Borgata casino resort, a person with knowledge of the negotiations said last week. Although it has been scouting for buyers it hasn't come to a deal, according to two people with knowledge of the talks.MGM Mirage hopes that its plan to sell its Atlantic City interests will convince New Jersey regulators to agree to curtail their regulatory oversight of the company. Any additional scrutiny has the potential to cause problems with MGM Mirage's business elsewhere.MGM Mirage disclosed last year that New Jersey's Division of Gaming Enforcement had issued a confidential report saying the company should disassociate from Pansy Ho, MGM Mirage's joint venture partner in Macau. It labeled her an “unsuitable” business partner.

via MGM Mirage Prepares to Sell Stake in Borgata – WSJ.com.

Here are some numbers. According to the latest-available financial report, Borgata was on track to show a net income of about $120 million in 2009. MGM Mirage gets half of that. In this economy, adding $60 million to your bottom line is nothing to sneeze at. There are expenses involved–particularly, as we see, regulatory-related expenses. And the threat of drawn-out litigation makes that $60 million a year look less and less attractive.

According to the 2008 MGM Mirage Annual Report, in that year the company spent $24 million on its MGM Grand Atlantic City development before pulling the plug due to the worsening economy. Now that we’ve all seen the city’s revenues fall back to 1997 numbers, it would be hard to argue that this was a bad decision. Unless something dramatic happens (that is, unless casino operators make something dramatic happen), Atlantic City is clearly a declining market.

What about Macau? According to MGM Mirage’s investor relations, the company earned $24 million in revenue from MGM Grand Macau in the third quarter of 2009. That pencils out to roughly $96 million for the year.

Which is greater? $60 million or $96 million? The decision seems obvious.

There is also the fact that Macau is the world’s fastest-growing casino market, and Atlantic City has, as I said before, gone back to 1997 and, with the imminent arrival of Pennsylvania table games, is poised to fall even further.

Even as an Atlantic City native, I’ve got to admit that MGM’s management has few options here. Clearly the most responsible decision for the company’s health is to stay in Macau.

To make a long story short, Atlantic City needs MGM Mirage far more than MGM Mirage needs Atlantic City at this point. Should this make a difference to the integrity of the licensing and enforcement process? Absolutely not. But there’s something to be said for over-zealousness. Past operators chased from Atlantic City by regulatory overkill–Hugh Hefner and Hilton Hotels are the most prominent–continued to do business in other states with not even a whisper of impropriety. Hilton was even invited back.

What does this all mean? New Jersey’s regulators aren’t doing the state any favors by throwing the book at MGM Mirage. The only beneficiaries might be the existing operators, who will have one less rival to face (if MGM decided to go ahead with their AC project), and even that’s debatable, since a project of the scale that MGM had proposed would have probably brought more people to town. This looks like a lose/lose situation.

8 thoughts on “Other shoe about to drop in AC?”

  1. American Gaming Guru

    Dr Dave….you said it absolutely right! I could not agree more. It should be interesting to see if the Christie Administration has anything to say about it as well.

  2. The regulatory big-wigs of Atlantic City seem too uptight for their own good in some cases (like with Mirage and other potential American casino operators.

    My favorite word (and philosphy) is “liberal”. Although this once beautiful word has been high-jacked over the last 2 decades and become more like a political noun…I still live by the rule that the world needs to become less strict and more liberal.

    “Give me liberal or give me death”.

    AC needs to “upgrade” its philosophy and its spirit to better fit the times.

    IMO

  3. To fully understand the meaning of government all a person has to do is hop into a cab. Once inside the cab you will soon sense the type of ‘individual’ government the cabbie has set for his taxi.

    It’s up to to cabbie to ban or allow smoking. Some of the more authoritative drivers (let’s call them Russians) actually post big ‘No Smoking’ signs on their dashboard or bellow “No. You put cigarette out NOW or I throw you out!”

    It’s up to the cabbie to ban or allow route and road choices. There are some drivers (let’s call them Dicktatorial Arabs or Rednecks) who allow no input at all from their passengers.

    It’s up to the cabbie to allow eating or drinking in the back seat. There are some drivers (let’s call them East Indians or Hindus) who forbid all forms of chewing or swallowing.

    Sometimes passengers find out they are a few dollars short and can’t pay their complete cab fare. It’s up to the cabbie to either ‘cut them a break’ and show some mercy….or else call the Taxi Authority to take the passenger to jail.

    There’s a lot of governing and government at play once you enter a cab. The driver has the ‘temporary power’ to basically deal with you as he pleases (as far as allowing you to roll your window up or down, ad infinitum).

    There are some cabbies (let’s call them former Hippies) who quickly let it be known that the ‘customer is king’ and that the strict and overly-authoritative form of ‘cab-government’ doesn’t apply in his cab. He behaves in a “liberal” way…allowing smoking, drinking, eating, kissing, cussing, horseplay, customer road choices, and even bra removal…plus dozens of other ‘governmental allowances’.

    And if the customer can’t pay his full cab fare…he doesn’t worry too much about it and let’s you slide…cuz, he knows you just made an innocent mistake in not budgeting your cab-fare money wisely enough. He doesn’t care if you drink in the backseat (although he might caution you to make sure you don’t let the bottle or glass smack into your lips on the speed bumps).

    Whenever you enter a taxi – you will find out how strict or liberal the ‘driver’s government’ is going to be. You’ll usually appreciate a “liberal” driver over the more authoritative types.

    To me…a good example of “liberal” versus “non-liberal” forms of government can be seen in something as simple as a TV sitcom. Archie Bunker wasn’t a liberal. ‘Growing Pains’ Dr. Jason Seaver WAS a liberal.

    If you were a kid…what parent would you choose to have? There’s a lot to be said for ‘liberal parenting’…as well as ‘liberal cab-governing’.

    Sometimes “liberal government” isn’t such a bad thing after all. Think about THAT the next time you enter a cab or a voting booth.

    IMO

  4. Uh, wow.

    I think it’s fair to say that the NJ authority has consistent standards even if the strictness of those standards causes them to lose in guilt by association.

    It’s a sword they’re willing to fall on from time to time.

  5. “Uh, wow”.
    You talkin’ to me?
    ==========
    I really don’t care about Atlantic City one way or the other. In fact, I haven’t got a clue about what goes on there and I’m 99.3% sure I’ll never step foot in the place.

    This article drew a direct line to the subject of the “over-zealouness” of AC government regulators. Which naturally reminded me of ‘authoritative’ versus ‘liberal’ rule (and Las Vegas versus AC).

    Since the once grand word of ‘liberal’ is hardly used as adjective anymore I felt like making it the subject of my daily input.

    I thought the ‘taxi parable’ might remind someone that liberal thinking still has a fitting place in our society.

    This article and its mention of “regulatory overkill” made it seem (to me at least) like overzealous government is choking the life out of free enterprise in Atlantic City. Hence my use of the phrase “give me liberal or give me death” (a simple Patrick Henry word twist).

    This article made me think that a more liberal regulatory approach might save AC from dying. According to you though, their standards are consistent…and maybe that’s all that matters.

    I would imagine that the word “consistent” is a member of the “conservative” word family. It certainly seems like a spin-off.

    Quite frankly…as a Westerner, a former Californian and now a Las Vegan…perhaps I’m more partial to the concept of liberalism than other people. You really can’t expect to find much conservative thinking in two states built on the backs of a Gold and Silver Rush.
    —-
    Definition

    Conservative:
    disposed to preserve existing conditions, institutions, etc., or to restore traditional ones, and TO LIMIT CHANGE.

    CAUTIOUSLY MODERATE or purposefully low: a conservative estimate.

    traditional in style or manner; AVOIDING NOVELTY OR SHOWINESS
    ——–
    Those definition DO seem to apply to Atlantic City more than Las Vegas. So you are right.

    Las Vegas was built on ultra-“liberal” and lax attitudes. You would have to agree that LVs’ 1905-1935s roots prove that. I’d imagine the liberality of early Las Vegas would have startled many Atlantic City citizens of that decade.

    So…I’m sure there is a lot of difference in the two cities’ approaches to governing things like casinos. Compared to Las Vegas…Atlantic City is actually a ‘newbie’ in the casino industry, while its city government is likely steeped in older ‘conservative tradition’. Maybe that’s its problem.

    Quite honestly, I don’t have one single bit of interest in Atlantic City Government. If it feels like falling on its own sword why should I grieve.

    I do have a huge interest in “liberty” though. So, I decided to use this forum to defend (+/or correct, +/or remind anyone) that the concept of ‘liberal’ thinking in government is what caused a group of patriots to start a revolution a few centuries ago. And that the word “liberal” (up till the early-90s) was mainly used as an adjective….and not reduced to a political noun by blow-hards like Rush Limbaugh.

    Rush trashed America’s best word and diminished its meaning. So, I’m choosing this forum to defend the word “liberal” and the entire system of dictionaries actually.

    Take no offence neighbor. “Liberal” is a good word and concept.
    ========================================

    LIBERAL:

    –adjective

    FAVORABLE TO PROGRESS or reform.

    IN ACCORD WITH CONCEPTS OF MAXIMUM INDIVIDUAL FREEDOM esp. as guaranteed by law and secured by governmental protection of civil liberties.

    FAVORING OR PERMITTING FREEDOM OF ACTION , esp. with respect to matters of personal BELIEF OR EXPRESSION.

    of or PERTAINING TO REPRESENTATIONAL FORMS OF GOVERNMENT rather than aristocracies and monarchies.

    free from prejudice or bigotry; TOLERANT: a liberal attitude

    OPEN-MINDED, esp. free of or NOT BOUND BY traditional or CONVENTIONAL IDEAS, values, etc.

    CHARACTERIZED BY GENEROSITY OR WILLINGNESS to give in large amounts: a liberal donor.

    given freely or abundantly; generous: a liberal donation.

    NOT STRICT or rigorous; free; not literal: A LIBERAL INTERPRETATION OF A RULE.

    of, pertaining to, or based on the liberal arts.

    of, pertaining to, or BEFITTING A FREEMAN.

    =========
    “Uh wow” is right.

    Liberal thinking certainly seems to apply to Las Vegas History and its current open-way of life, progress and expression.

    If you think Atlantic City has no need to instill a little liberalism in their policy making (in regards to casino operation) you are probably right. It’s likely to late for them to catch that ‘Liberal Western Spirit”

    I think the more “liberal style” of Las Vegas versus the “consistent, conservative standards” of Atlantic City is a good cause for me to celebrate the fact that I live in a western-city that has way more fun than AC currently (or ever) seems capable of.

    To throw a good party the host has to be a little bit liberal. Otherwise he’d have to spend the entire night authoritatively making sure all his guests are placing coasters under their drinks and trying to ‘conserve the integrity’ of his cherished coffee table.

    I doubt if any of us would want to party with THAT party-pooping, non-liberal mentality.

    Consistently Conservative Atlantic City versus Open-Minded, Liberal Las Vegas.

    I choose the latter.

  6. I applaud the NJ regulators for sticking to their regulations. How could they possibly allow Pansy Ho to be MGM Mirage’s partner if their goal is to completely isolate NJ operators from organized crime. Anyone who fools themselves (or their regulatory agencies) into thinking that Pansy got her money to invest in MGM Macau from anyone other than dear old Daddy is delusional. That alone should make her ineligible to be approved as a partner. But other reports of rampant drug usage and other corruption associated with Pansy in the dirty town of Macau are also in the supposedly “secret” report the CCC is considering.

    And shame on Nevada, Mississippi and any other gaming jurisdiction who signed of not only on her participation by her brother Lawrence, another silver spooner who wouldn’t have the money to place a bet in Macau if it wasn’t for crooked Daddy.

    But that leads us the the even more hypocritical discussion of the VIP market in Macau, which even today is rife with organized crime who could not get licensed in any jurisdiction, much less Macau.

    Will this decision hurt New Jersey? Yes, undoubtedly, but kudos to the regulators for putting principles before dollars.

  7. Strangely enough, this subject of Atlantic City government led me to think a lot about the liberal and free nature of Las Vegas and why visitors like our city so much.

    In Las Vegas tourists instantly feel like ‘anything goes’ and that they came to a place where the normal rules of society are set aside…and that they can take a vacation from the typical constraints of their everyday lives.

    As the Party Capital of the World, Las Vegas has always known that the normal rules of society have to seem like they’ve been set aside.

    The very nature of a “party” is that the everyday rules of life are relaxed. At a party a person is allowed to ‘break free’ for awhile and wear a lampshade on his head, flirt with his neighbor’s wife and act like a buffoon without too much repercussion.

    —————-
    Dictionary Definition
    PARTY:

    an advantageous or pleasurable situation or combination of circumstances of some duration and often of questionable character; period of content, LICENSE, EXEMPTION
    —————

    Author John Steinbeck thoroughly dissected the free-wheeling ‘nature of a party’ in the last chapters of his 1935 book ‘Tortilla Flat’. It’s good reading for anyone in the ‘party business’ (or casino industry).

    Las Vegas has over 77 years of experience in throwing proper parties. We are true experts in knowing all facets of ‘party life’.

    This is where I think Las Vegas does such a great job. We allow freedom to exist while simultaneously maintaining public order. We make sure that the ‘freedom to party’ doesn’t lead to chaos and mayhem. We have, perhaps, the best police and security system in the world. They understand their need to use liberal enforcement of ‘the rules’…and also understand when to ‘come down hard’ on outrageous violations.

    When parties are held…there are various forms of ‘festive decoration’ to indicate that a ‘party mode’ is in session. It’s a historic fact (known in all cultures thru all history) that festive ornamentation allows people the right to party. (Balloons, colors, streamers, etc).

    In early 1940s Las Vegas…the festive ‘full-time’ ornamentation…and ‘signal to party’ was provided by giant and outrageous neon signs and unconventional advertising.

    For 70 years Las Vegas has openly told the entire world that we are a ‘party town’ (thru signs, crazy architecture, ads, relaxed gambling laws, subtle indications of sexual adventure, 24 hour availability of alcohol, etc.)

    And for all those seven decades, people everywhere have known that (like with ‘Burning’ Man’) the only real place to go into full ‘party mode’ is out in the desert, far away from the geographic constraints of everyday society.

    Las Vegas is the last, true Old West town. Oddly enough it came to life soon after the ‘Wild West’ cowboy towns had all but disappeared. The ‘gold stike’ at neighboring Goldfield was probably the last of the Wild West era. But, Las Vegas kept that Wild West spirit alive and learned how to actually market it.

    For 100 years Las Vegas has known its function. It’s a party town. It’s relaxed and liberal. It represents everything about ‘freedom’ and the American Way.

    Tourists from England love the in-your-face ‘fun spirit’ of Las Vegas. They know Vegas fully represents the best of Americans’ beliefs in freedom and their need to break free from the conservative nature of English rule (etc).
    ===
    So those are some of the things I realized after thinking about this Atlantic City post.

    I realized that Vegas is a very liberal place. It allows ‘freedom of expression’ and the freedom to live how one wants (for as long as a person can afford to).

    To me…modern-day Vegas is like an extension of 1960s San Francisco Spirit. It’s a place where people are allowed to express their sense of freedom.

    As for Atlantic City…I don’t know if it can ever express the American Spirit as well as Vegas does (simply by LVs virtue of its Old West roots, desert location, and nearness to Los Angeles).

    Atlantic City is another thing entirely…and I am sorry that I don’t yet understand what it’s all about.

    As for this whole Pansy Ho issue…I don’t know the facts. I’m the first to reject ‘foreign corruption’. I’ve seen first-hand (in the cab industry) how 21st Century immigrants bring their tainted and corrupt cultural beliefs into the American system.

    In the 1900s immigrants tried hard to blend into America and adopt its methods of behavior. In the 21st Century though…some of the immigrants aren’t so willing to blend. They bring their ‘old-school’ country’s corrupt values with them and pollute the True American Way.

    They don’t understand the whole ‘freedom & demomocracy’ thing yet. They don’t yet realize that our way of Freedom can’t exist if ‘corruption’ enters the picture.

    So. I’m all against corruption and corrupt people who contaminate our American Values. I dislike corrupt people as much (or probably more) than anyone else does.

    If the AC governmental board has some ‘secret information’ (or whatever) about possible corruption entering their system I suppose they know what they are doing. At least I hope so.

    But I don’t know enough about any of this AC stuff. All I know is that this post made me realize how much I love Las Vegas’ way of representing freedom and artistic liberty.

    In Las Vegas we don’t have to “fight for our right to party”. That battle’s already been won….and the whole world knows that when they need a big taste of fun and freedom…that Vegas is the place to come.

    I wish Atlantic City well. After all this talk I feel like going there, someday, to see what I’ve been missing.

    Today, at Wendy’s, I talked to an 87 year old guy who said he came “from Jersey” and could see Coney Island from his old home porch (with binoculars).

    Now, Coney Island is about as free and American as it gets.

    Believe me. I totally know I’ve missed a lot by never seeing much or knowing about East Coast life. The one thing Vegas doesn’t have..and can never get…is the salty air of a seaside town.

  8. “Well…Golly” says Gomer.

    I just realized that when I first read ‘Suburban Xanadu’I skimmed past pages 175 thru 200…because I wasn’t really interested in reading about Atlantic City, Indian Casinos, or Riverboat Gambling.

    It’s no wonder I did’t have a clue about gaming on a national level. But, when I first read the book I was mainly just interested in the Vegas aspects.

    This 2nd time around I actually took time to read the 25 pages I earlier skipped. Very enlightening (to say the least). And now comes the best part. Studying the ‘Notes’ section.
    ====
    I loved this one particular Westward-Ho ad that talked about Circus-Circus:

    “Astonishing! Amazing! Beyond Imagination! World’s largest gaming and entertainment center….Girls! Girls! Elephants…spectacular games of chance! Come one…Come All!”

    That there’s good PT Barnum writing, for sure.

Comments are closed.