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FUTURES OF GAMING: HOW CASINOS AND GAMBLING MIGHT EVOLVE IN THE NEAR FUTURE

2019; Mary Ann Liebert, Inc.; Volume: 23; Issue: 5 Linguagem: Inglês

10.1089/glr2.2019.2353

2572-5327

David G. Schwartz,

Gambling Behavior and Treatments

Gaming Law ReviewVol. 23, No. 5 ArticlesFree AccessFUTURES OF GAMING: HOW CASINOS AND GAMBLING MIGHT EVOLVE IN THE NEAR FUTUREDavid G. SchwartzDavid G. SchwartzDavid G. Schwartz is the associate vice provost for faculty affairs at the University of Nevada, Las Vegas, in Las Vegas, Nevada.Search for more papers by this authorPublished Online:22 May 2019https://doi.org/10.1089/glr2.2019.2353AboutSectionsPDF/EPUB Permissions & CitationsPermissionsDownload CitationsTrack CitationsAdd to favorites Back To Publication ShareShare onFacebookTwitterLinked InRedditEmail The human drive to gamble is apparently innate, as the history of gambling proves. Gambling has been around a long time and has seen many changes, but many of those in the gaming industry believe the generational shifts the business now faces are unprecedented, with potentially dire consequences for the industry. Many fear that millennials will not gamble unless casinos make extraordinary efforts to accommodate them. While visitors to Las Vegas appear to be spending significantly less time gambling, both commercial and tribal gaming revenues are at record highs. In addition, sports betting, particularly on mobile devices, it set to grow significantly while the esports industry is growing at a dramatic pace.Shifts in the way that people choose to gamble are not new. Gambling has always evolved with technology and the paths open to gaming in the future are consistent with the historical evolution of gambling. Even the relatively brief history of the modern casino shows that this is the case.For example, baccarat, which is the highest revenue-producing table game in some jurisdictions, was not widely played even 40 years ago while faro, which dominated gambling halls in the nineteenth century, is a relic. Slot machines have an even shorter lifespan, and many of the games that are popular today have features that would have been unthinkable 20 years ago.This is not to say that casinos have nothing to worry about. The changes that the casino gaming industry are beginning to see may bring much larger disruptions to the business than anyone currently realizes. Again, history provides something of a guide. The casino resort, the basic building block of the modern casino gaming industry, only became a major locus of American gambling in the last 75 years. The casino resort's rapid rise was predicated on a series of cultural, political, and legal factors that coalesced in the second half of the twentieth century to produce a favorable climate for the birth and growth of the institution, and as those factors shift, it is only logical to expect a divergence between gambling and the casino resort.Gambling is Old and so is the Business of GamblingPhysical evidence of gambling has been found in the oldest archaeological digs in Europe, Mediterranean, and Near East, suggesting that the activity is, at the least, as old as organized societies.1 The earliest games for which records exist used extremely simple technology. A game like “odds and evens” had players bet on whether a selected group of markers would number odd or even (a surviving descendant is the game of fantan). It is clear from even a cursory review of gambling history that the materials and tools used to gamble have evolved with technology. The first items used as dice were astralagi, or the ankle bones of goats and sheep. With four asymmetrical sides, rolling them produced a semi-random result. While not precise, this was good enough to satisfy the gamblers of the time, who had little understanding of the concepts of randomness or probability.These early games had in common that they were social: players bet against each other, with no central bank or house. Play was at the discretion of each player, with stakes and any deviation from accepted rules mutually agreed upon. As such, there was not much of a business around gambling. However, some gambling professionals emerged. These professionals consistently won by cheating—the only way to secure an edge in social games. Professional gambling had a sense of dishonor attached to it. This stigma goes back to at least the time of the compilation of the Talmud, a compendium of Jewish law from the fourth to sixth centuries. The assemblers of the law maintained that habitual dice players could not be witnesses or magistrates because they “did not occupy themselves with the welfare of the world.”2 The intimation, that professional gamblers were inherently untrustworthy, was not at all undeserved, owing to the nature of the games themselves, and the fact that the only way to be guaranteed a profit was to cheat.There were, however, businesses that profited from gambling. While social games of dice could take place anywhere, players often congregated in taverns, where they could shoot dice as well as enjoy food, drink, and other diversions.3 In the West, gambling in taverns can be traced back to the early Roman Empire, where play in the backrooms of inns, food stalls, and taverns was tolerated.4 Similarly, gambling houses—which provided space and equipment for gambling in return for a share of the proceeds—were found in ancient China and India.5These businesses, even when completely dedicated to gambling rather than offering a space for it in return for the purchase of food, drink, or entertainment, did not permit players to bet directly against them. This would be tantamount to a gym or athletic club fielding paid teams against paying members, rather than providing basketball courts that members use to play against each other. And as long as gambling games remained social in nature, there was no reason to change the basic structure of gambling businesses. One might make money tolerating or even facilitating play, but there was no sustainable method for profiting from the games themselves—barring, of course, cheating by individual players.The discovery of mercantile gambling changed the nature of gambling and made possible the creation of gambling businesses that allowed customers to wager directly against them. Mercantile games, which could be played using dice, cards, wheels, or even lottery tickets, had in common one basic idea: a discrepancy between the true odds of the game and the payout offered to customers. The game of double-zero roulette is illustrative. A player betting on red is paid even money when winning, which would lead to a dead-even game but for the presence of the zero and double zero, which means that, out of the 38 possible outcomes of a spin, only 18 result in a win. The result is a game with a “house edge” or “percentage” of 5.26 percent. The phenomenon is even clearer when looking at single-number bets, where the two-unit gap between the “true” odds (37 to 1) and the payoff (35 to 1) is the house edge (it is the same as the percentage for the even-money bets).6The emergence of mercantile gambling made possible the rise of gambling businesses that directly profited from customers that bet against them. These businesses could be based on different games, but had one thing in common: in return for government support, they gave a portion of their revenues to the state. Lotteries were the first serious gambling business to develop in Europe, with the first one of which there is a surviving record appearing in L'Ecluse, Flanders, in 1444. This initial draw was organized specifically to raise money to repair the city's walls.7 Private merchants often took the lead in debuting this new form of gambling; in Venice, for example, secondhand clothes dealer Geronimo Bambarara offered a lottery game in 1522. After other businesses turned the Rialto into a virtual gambling zone, the Venetian government stepped in and began offering its own sanctioned games.8Despite a dip in popularity in the nineteenth and early twentieth centuries, lotteries have remained popular sources of government revenue for centuries. Lotteries were often organized by private operators who contracted with the government thus creating a partnership between the business and the government. A similar model of partnership between business and government was evident in the thriving gambling culture of Venice, which was built upon gambling resorts, in which the government would profit from mercantile games by taking a cut of the proceeds.The Rise of the Gaming ResortThe Western tradition places the origin of the legal, state-sanctioned casino in early seventeenth-century Venice. While gambling was long popular in Venice, particularly during Carnival season, it was not until 1638 that the Grand Council legalized it. A single impoverished noble family, the Barnabotti, were given the franchise to offer state-sanctioned gambling at the San Moise Palace. The Barnabotti had been living on the dole, as they were aristocratic and therefore forbidden from seeking the work of lesser classes, even as their own wealth dissipated. The Grand Council's decision effectively passed the burden of supporting the Barnabotti from the general coffers of the state to the wallets of the gambling public.When viewed in context, the Ridotto owed its birth to a confluence of circumstances. The poverty of the Barnabotti gave this politically powerful family an incentive to explore new ways to earn a living. The onus of supporting the Barnabotti placed a fiscal obligation on the Venetian government. The declining fortunes of Venice made money harder to raise, inspiring a certain entrepreneurial spirit within the Grand Council. Finally, the pervasive social acceptance of gambling, particularly during the six-month carnival season, undercut the legal fiction that it was a suppressed activity. In addition, the presence of a large number of travelers and tourists, many of whom were lured by the thrills of the carnival, presented the possibility that Venice could benefit by siphoning money from this ready pool of disposable income.9For generations, the Ridotto worked well enough for all parties involved, and became a must-see stop for visitors to the City of Canals. The fact that such games could be played legally was such a lure that the Ridotto was enlarged. In fact, the lures of the gambling palace worked too well; by the 1770s, some Venetians were outraged that the fortunes of venerable noble families were being lost to the gaming tables. For that reason, the republic's Grand Council passed a resolution closing the Ridotto in 1774.10However, the idea that a gambling resort could be used to solve a jurisdiction's financial problems was too good to remain on the shelf. Throughout Europe, a series of gambling spas opened their doors. Located mostly in small, resource-poor jurisdictions without many other avenues of economic development, these resorts usually catered to residents of larger states that had prohibited gambling.Spa, a resort town that today is in Belgium, was one of the earliest of the small jurisdictions to embrace gambling. Its first gambling concession opened in 1765. The town enjoyed boom years until 1789, when the French Revolution and the wars that followed put a damper on lavish gambling.11 In the early nineteenth century, Spa declined as other, more easily accessible, and frankly more alluring resorts appeared. Lack of a modern transportation infrastructure handicapped Spa, but shifting fashions doomed it. As gaming historian Russell Barnhart concludes: In particular such German towns as Weisbaden, Ems, Kissingen, Bad Homburg, and Baden Baden had captivated society's fancy. The ambience of these new German watering places, the greater elegance of their landscapes, promenades, casinos, and more accessible springs, as well as their more charming hospitality, seduced away from Spa its former clientele and appealed to the new generation as mirroring their own youth, vigor, and romanticism. However attractive and refurbished was Spa in the 19th century, it seemed to represent too much the Age of the Rococo, and apparently no one wished to turn back the clock.12Those “German” resorts (Germany as a nation-state did not exist until the declaration of the German Empire in 1871) had more than fashion on their side. They took advantage of the 1837 prohibition of gambling in France, which not only denied Frenchmen and women legal places to gamble, but also freed up the human capital of hundreds of dealers, supervisors, and other gambling experts, who gave the resorts Barnhart cites a boost in both expertise and credibility with the French gambling public.13The rise of the Blanc brothers' operation in Bad Homburg is instructive. Following a conviction for bribery and corruption in Bordeaux, they were eager to put some distance between themselves and their native France. After opening a small casino in Luxembourg in 1838, the brothers got to know Lewis William, the landgrave of Hesse-Homburg, who was stationed as military governor there. They learned that, since 1824, three gambling concessions had been granted in Homburg, but all had failed, likely due to lack of capitalization which was not a problem for the Blancs who, despite their conviction, managed to keep most of their ill-gotten Bordeaux gains. After William died, the Blancs successfully negotiated with his brother (and new landgrave) Philip August to commence gambling operations in Bad Homburg.14After a temporary location proved successful on its 1841 launch, the Blancs threw themselves into building an elegant casino known as the Kursaal, which opened in 1843.15 Before their arrival, Homburg had struggled to attract dozens of guests in a year (the 1834 total, for example, was 155). In the Kursaal's first year of operation, Homburg attracted nearly 2,700 visitors, a number than would rise almost ten-fold over the ensuing three decades.16 The pleasant scenery, trusted dealers, and managerial savvy of the Blancs combined to make Bad Homburg a popular spot with gambling tourists, much to the delight of the landgrave. This same scene was played out across the Rheinland, as small, resource-poor Germanophone jurisdictions profited from their political independence and the wealth of both gamblers and administrative expertise that had fled France.The good times for spa resorts would come to an end in 1872, when a newly unified Germany that now included those small, liberally inclined jurisdictions, outlawed gambling. Luckily, another small, resource-poor jurisdiction that had resisted incorporation into France, Monaco, was ready to exploit Prussian prohibition. As at Bad Homburg, Monaco's rulers had a few miscues with concessionaires before partnering with Francois Blanc in 1863 (Louis Blanc had passed away in 1855). Under Blanc's leadership, Monaco became home to Monte Carlo, the peerless gaming resort of Europe.17 Contemporary travel writer W.J.A. Stamer eulogized Blanc (who died in 1877) in an 1894 survey of the gambling resort by noting all he had done to bring Monte Carlo into prominence: By the unsparing use of printers' ink, Monaco the little known had become Monaco the renowned, or the notorious. By the opening of the railway the road thither had been made easy, if not precisely safe, and last, not least, the suppression of the German gaming tables had, by the enforced retirement of their respective tenanciers, left M. Blanc without a rival in the field. Rich beyond his most sanguine expectations—archi-millionaire—an authority on all matters connected with finance; courted, admired, bepraised, his elder daughter married to a prince, M. Blanc exemplified the truth of the adage “Nothing succeeds like success.”18While Blanc's personal drive and genius played a large part in the success of Monte Carlo as a gaming resort, a confluence of factors, ranging from the social norms that governed gambling among wealthy (and not so wealthy) Europeans to the political considerations that undergird prohibition, combined to make the conditions right for Monte Carlo to flourish.By the same token, shifting political and social realities led to the decline of Monaco as a gaming resort. The French government's 1907 legalization of baccarat paved the way for the rise of numerous small clubs and casinos throughout the country.19 Throughout the continent and in the British Isles, Europeans found ways to gamble that were more adept to the rhythms of the new century, as the dress codes and guest lists of Blanc's Monte Carlo became more outdated. Monte Carlo adapted to new tastes, bringing in slot machines and even craps, but never regained its place as the world's preeminent gambling destination.20 That title would pass to a resort in another resource-poor jurisdiction that also took advantage of surrounding prohibition to build an allure that was difficult for gamblers to resist.The Dominance of the American Gaming ResortNevada was born in battle (the Civil War, to be precise) and was initially dominated by mining, banking, and railroad interests. Gambling, legalized in 1869 and criminalized in 1909, was more a pastime than an industry in its first incarnation. Usually taking place in bars and saloons, Nevada gaming (as the practice was statutorily known from its inception) was decidedly small scale. For that reason, its prohibition was not viewed as a cataclysm. The Las Vegas Age, for example, coolly reported that Governor Denver Dickinson had signed an “anti-gambling” bill, which ended the issuance of licenses and made playing any game for money a misdemeanor.21 This ban on gambling was far from absolute, and was rolled back almost immediately. By 1919, both cities and counties were licensing card rooms where social games like poker were played, and slot machines played for low stakes and pari-mutuel horse race betting were also permitted.22While this arrangement seemed to satisfy the general public and local governments, a coalition of gamblers, businessmen, and their political supporters continued, throughout the 1920s, to advocate for a broader legalization of gambling that would return Nevada to its pre-1909 “wide-open” status. In February 1931, Nevada adopted a “wide-open” gambling bill after an eight-month campaign by the gamblers, developers, and other business interests who believed they would profit from the increased opportunities offered by less restrictive gaming legislation.23Initially, Nevada gaming did not change much following legalization. Bank games that had been in backrooms became publicly visible, but for the most part, gambling did not become a major business. Reno continued to be the state's major city, and its gambling halls were the center of Nevada's gaming industry, such as it was. Indeed, divorce, rather than gambling was the major attraction for many Reno visitors in early 1931. The state's “quickie” divorce law allowed no-fault uncoupling after one party established Nevada residence, for six weeks. A variety of Reno attractions, from a golf course to a private school, blossomed because of the divorce trade, while gambling, which in 1931 had a smaller capital investment than it did in 1906, was still seen as an iffy proposition.24Gambling halls in Las Vegas were similarly small, although they did have a built-in visitor base that Reno lacked: workers on Hoover Dam, who had sizable paychecks but few diversions in Boulder City. Small-stakes roulette, slot machines, bingo, and keno were the most popular games, as these gambling halls, like locals' casinos today, catered primarily to small-stakes, high-repeat visitors.25 An October 1931 New York Times article reported that both Reno and Las Vegas had been “flops” as gambling destinations, though it held out the possibility that the pendulum might, one day, swing the other way.26The pendulum did, indeed, begin to swing in favor of Nevada gaming, but not immediately. The Mexican government's 1935 suppression of gambling, which closed a casino at Agua Caliente that appealed to Southern Californians, led the Las Vegas Chamber of Commerce to publish an open appeal to “gamblers and horsemen” to set up shop in Las Vegas, “the most liberal town in the West.”27 That influx of capital and expertise did not happen, but a crackdown on illegal gambling in Los Angeles that began in 1939 forced an exodus of Los Angeles-based gambling entrepreneurs, including the (recently) former LAPD vice captain Guy McAfee. McAfee would open the 91 Club on Los Angeles Highway/Route 91 and the Golden Nugget, and Benjamin Siegel and Moe Sedway invested in the El Cortez before taking over and opening fellow Angeleno Billy Wilkerson's stalled Flamingo.28The small-stakes gambling halls of downtown Reno and Las Vegas were well-suited to the 1930s, when the United States was still in the throes of the Great Depression and the viability of the gaming industry had yet to be demonstrated. With little certainty that Nevada's tolerance of gambling would continue or that gambling would be more than a curiosity for tourists, investment in gaming operations remained relatively small. The 1931 legislation had cleared the way for Nevadans to legally own businesses that offered a full range of games, but there was no demonstrated demand for anything more than a handful of slot machines and table games (along with keno parlors) found in the clubs mixed in with the downtown commercial districts of Nevada's major cities. But changing social, economic, and political conditions would, within 15 years of the Los Angeles crackdown on vice, facilitate the beginnings of a new kind of gambling in a new kind of structure: the casino resort.The Los Angeles influx initially brought capital and gaming know-how to Fremont Street, but another Californian set in motion a series of developments that would shift south, to the Los Angeles Highway, which would ultimately be rechristened the Las Vegas Strip. Thomas Hull, who already owned a pair of El Rancho motor court motels in California, was lured to Las Vegas in search of a “first class hotel” that would help the city capitalize on both its permissiveness and its proximity to the recently-completed Hoover Dam. Rather than build his hotel near the train station in Downtown Las Vegas though, Hull decided to construct a sprawling, bungalow-style resort with a casino and dinner theater just south of the city limits, at San Francisco Street and Highway 91.29Hull's El Rancho Vegas was an adaptation to changing public tastes. As a Californian, he knew the growing dominance of the automobile. He believed visitors would be more likely to drive to Las Vegas than ride the train and a sprawling resort on the road from Los Angeles would have the first shot at Angelenos. And just as importantly, the setting of gambling within the El Rancho Vegas would distinguish it from that inside the downtown gambling halls. On Fremont Street, gambling and drinking were the only real attraction. For those who had grown up with gambling as a fact of Nevada life, this wasn't a problem. But there was little allure for visitors who, while they might enjoy a game of chance, were not convinced this wasn't a seedy activity. Hull's El Rancho Vegas, by contrast, offered gambling as one of several rustic but urbane diversions. During warmer months, visitors could lounge by the pool all day before heading inside for a dinner show. In that context, dropping a few dollars at the tables seemed more acceptable.Despite a revolving door of owners over its first several years, the El Rancho Vegas was profitable enough to inspire others to build on Highway 91. The Last Frontier (1942) and Flamingo (1946) demonstrated that Hull's basic concept, a self-contained casino resort, could be a success.30 The Thunderbird (1948), Sahara (1950), Desert Inn (1950), and Sands (1952) elaborated on the resort paradigm, so that by 1955, when five new casino hotels opened, there was little new to be added to the model. By that time, thanks to the success of the casino resort, Las Vegas had not only displaced Reno as the nation's premiere “sin city,” but had become a national vacation destination.Casino resorts worked on the Strip for a variety of reasons, both internal and external. Within the operation itself, a large, self-contained facility made for a more profitable casino because it encouraged gamblers to play longer, thus generating more decisions, which in turn limited volatility and made it more likely for lucky winners to lose back their winnings. Food, beverage, and even entertainment could be run at a loss, thus offering higher quality at a lower price than would be possible at a non-gaming resort, providing an inducement for casual vacationers to stay—and perhaps bet a few dollars. Casinos in integrated resorts far outperformed their standalone counterparts. Even on Fremont Street, the old model—a bar with a few gambling options—was eventually pushed out by casino hotels that, while lacking the full range of Strip amenities, were far more sophisticated than anything that had been built in the 1930s. Attempts on the Strip to run a casino-less hotel (Tally-Ho) and hotel-less casino (Circus Circus) failed; Tally-Ho, with an added casino and quick change in theme, became the Aladdin, while Circus Circus only became profitable after the addition of a hotel (and a change in management).The appeal casino resorts held for customers was boosted by two primary factors. First, as casino resorts grew in Las Vegas, the United States was in the midst of an era of affluence. As more Americans had the time and leisure to travel, tourism to destinations like Las Vegas from the East Coast and Midwest, which would have been restricted to only the well-off a generation earlier, became common. Closer to home, Los Angeles was booming, and the rise of Southern California helped benefit Las Vegas, which established itself as a playground not just for Hollywood royalty, but for Angelenos of all stripes.Second, while Nevada was profiting from legal gambling, the rest of the nation was turning against the practice. From 1950 to 1951, the Senate's Special Committee to Investigate Organized Crime in Interstate Commerce (popularly known as the Kefauver Committee, after its publicity-seeking chair, Estes Kefauver) raised public awareness about the alleged links between illegal and legal gambling and organized crime. Whereas Americans had earlier considered illegal gambling to be a purely local issue, following the committee's televised hearings they were increasingly aware that criminal groups with national range profited from illegal (and, allegedly, legal) gambling.31 Following the publicity generated by the Kefauver Committee, many previously wide-open jurisdictions around the country which had tolerated technically illegal gambling operations, from urban slot routes to posh clandestine casinos, tightened their enforcement of existing laws and voted against permitting new forms of gambling. Even a potential Caribbean rival followed suit as, following the Cuban Revolution, the Fidel Castro-led communist government outlawed the nation's casinos, which had catered primarily to Americans.Las Vegas was built on a model, the casino resort, which was in turn predicated on creating a “captive audience” of gamblers. A large resort hotel with numerous amenities tied to a gambling casino made perfect sense in a tourist destination hundreds of miles from the nearest major city. The Mojave functioned as a sort of quarantine zone, containing the morally dubious gambling behind a protective desert screen. Thematically, the resorts themselves tended to distance their offerings from contemporary America. A Western theme predominated into the 1960s that put Las Vegas gambling into the context of America's frontier past (which was beloved thanks to the popularity of television and film Westerns) rather than urban corruption, the milieu from which most operators actually emerged. Even when resorts went beyond the American West for their themes, they settled on exotic locales, like the Caribbean, Middle East, and Caesar's Rome. Casino resorts in Las Vegas worked, and Las Vegas prospered, by being fundamentally different from the rest of the United States. As an adaptation to the political realities of gambling prohibition, the economic fact of rising wealth, and the social proclivities of Americans to gamble, Las Vegas could not have emerged as a gambling destination anytime other than the middle of the twentieth century.In other words, the rise of the Las Vegas casino resort as an institution was in response to a specific set of historical conditions, similar to those that produced Venice's Ridotto, the hot-spring-based gambling tourism of Spa, Bath, and numerous Rhine resorts, and Monte Carlo. Nevada, a resource-poor jurisdiction, had ample precedence for rolling the dice on gambling as an avenue of economic growth, and Las Vegas had many predecessors as a brilliant new destination.While this is all well and good, it raises a question for those who have paid attention to history. It is now nearly 80 years since Thomas Hull opened the El Rancho Vegas. The Ridotto had a run of more than a century, but it closed. Changing fashions and realignments conjured the Rhine spas and Monte Carlo into existence and consigned them to relative obscurity. Is the casino resort, that innovation of mid-century Las Vegas, destined for a similar fate? For answers, the maturation and adaptation of the casino resort in Las Vegas from the 1960s through the present and its spread throughout the United States provide some clues.Following a string of bankruptcies that attended the 1955 over-expansion of the market, casino operators refined their business model. Instead of appealing only to gamblers and vacationers (who filled hotels during the weekend but left them empty during the week), casinos started making concerted efforts to attract business travelers. This shift marked a milestone with the opening of the Las Vegas Convention Center in 1959, and may have reached its fruition with the 1999 opening of the Venetian, a resort that was d