Casinos Pose Threat To Zynga Inc (ZNGA)’s Online Gaming

Zynga Inc (NASDAQ:ZNGA) is facing hurdles in its bid to offer real money gambling as states like New Jersey legalize internet betting but enact conditions that mainly favor existing casinos. The shares of Zynga Inc (NASDAQ:ZNGA), which offers the most popular free to play poker game, hiked 45 percent this year, primarily due to investors’ hopefulness of the of the company’s success in its foray into real money online betting, like it has in social gaming.

Casinos Pose Threat To Zynga Inc (ZNGA)'s Online Gaming

The casinos which are favored by the existing laws are Casinos like Caesars Entertainment Corp (NASDAQ:CZR) and MGM Resorts International (NYSE:MGM) – the big players in the gambling world. It implies that others may need to partner with them.

“I can’t tell you what games will be allowed or what the tax rates are going to be,” said Skip Bronson, chairman of U.S. Digital Gaming, a Beverly Hills, California-based firm looking to enter the market. “But I can guarantee in all the states, it’s the existing stakeholders that will have their way.”

As per the forecast of Manchester, UK based researcher H2 Gaming Capital, the US market for online gambling will reach $7.4 billion yearly by 2017. The states in which online gambling have been legalised are Jersey, Nevada and Delaware. In Delaware, the state lottery will run three horse tracks and is seeking bids from technology partners.

The largest operator of US casinos, Caesars, licenses technology from Gibraltar based 888 Holdings Public Limited Company (LON:888), according to Seth Palansky, a spokeperson for the Las Vegas based company’s interactive business. The casino major with its hub in Nevada, Atlantic City and other US markets said it can probably sell shares in the division in order to fuel growth.

MGM Resorts, with the biggest presence in the Las Vegas Strip, and Boyd Gaming Corp. (BYD), its partner in the Borgata casino in Atlantic City, have arrangements with Bwin Party, an Internet gambling firm from Gibraltar.

If Zynga Inc (NASDAQ:ZNGA) succeeds in starting its online real money gambling in UK, and the venture’s legal status in the USA spreads, in the near future Facebook might strongly consider buying-out Zynga. Zynga Inc (NASDAQ:ZNGA) is still a major contributor to Facebook revenues. The situation is similar to eBay and PayPal’s connection a few years back. There could be a greater possibility of Zynga being acquired by Facebook, which would reduce cost and increase revenue for Facebook Inc (NASDAQ:FB). But with these regulations favoring casino’s such a deal looks a bit dim.

[via: Bloomberg]