Steve Wynn made quite a few waves this month when news emerged that Wynn Interactive had filed for an online gambling license in New Jersey.
The nature of the application and the application itself both remain confidential. And neither representatives from Wynn nor officials from the New Jersey Division of Gaming Enforcement have been willing to offer any public comment on the matter.
But what we do know is that Wynn's application puts the company in an interesting position.
That's because online gambling regulations in New Jersey limit online operator licenses to entities that own land-based casinos in Atlantic City. And while he has an impressive presence spanning the globe, one place where Steve Wynn does not have a casino is Atlantic City.
So what exactly is Wynn's plan for profiting from online gambling in New Jersey?
Partnership could be hard to come by
Wynn would be something of an odd fit as a partner for one of Atlantic City's land-based casinos. Many directly compete with Wynn in other markets. And Wynn Interactive is not, to the best of our knowledge, a viable technology partner - although it's thoroughly possible that the company could acquire the expertise and a platform for online gambling on relatively short notice.
But perhaps more prohibitive is the fact that the vast majority of Atlantic City's casinos have already announced their primary partnerships for New Jersey's online gambling market. So, even if Wynn weren't an awkward fit on face, their viability as a partner would be limited by the fact that most eligible casinos are already spoken for.
Building in Atlantic City prohibitively expensive?
While Wynn could certainly marshall the financial resources required to build a casino in Atlantic City under normal circumstances, the company's ongoing plans in other markets could complicate an attempt to build from scratch in New Jersey.
You've got the development in Cotai, which will set Wynn back some $4b to complete, a number that could rise even higher by the time the doors eventually open. On top of that obligation is the potential development of a Massachusetts property. While not nearly as pricey as Cotai, it still will require a cash commitment of over $1b to build. Plus there's talk of Wynn's expansion into the Pennsylvania market.
In the face of those projects - especially in the context of declining profits at Wynn - it could be hard for shareholders to stomach the costs of building a new property in the financially reeling Atlantic City market.
Buying a stake in existing property could provide the answer
With a partnership unlikely and building arguably too great of a financial risk for the uncertain payoff of access to New Jersey's regulated online gambling market, the one remaining option for Wynn - buying a stake in an existing Atlantic City casino - may just be the one the company ultimately pursues.
Several Atlantic City casinos, including Revel, The Atlantic Club and the Showboat, are said to be up on the auction block. Of that list, Revel is the most natural fit for Wynn in terms of aesthetic and approach. Buying a stake in a property like Revel would give Wynn a foot in the door of the New Jersey market for online gambling but relieve it of the massive obligation that building or buying outright would bring.
But would Wynn be willing to alter their traditional strategy for entering new markets in such a radical way? To date, the Wynn expansion playbook has been very straightforward: Lead with the Wynn brand, undiluted and full-force. The Encore was a near-replica of the Wynn Las Vegas, and Wynn's Macau properties almostly exactly echoed their Las Vegas counterparts.
At least one analyst believes Wynn will have little choice but to return their focus to the domestic market. Perhaps the lure of bargain-basement prices, access to the NJ market for legal online gambling and the economic need to draw more growth from American properties will be enough to convince Wynn that a place on the Boardwalk is worth the trouble.
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