The article below highlights the potential growth of online gaming for Boyd Gaming, especially since the Borgata leads NJ online revenue. But boosters of online gaming revenue fail to notice that online revenues represent a tiny fraction of Boyd’s overall revenue, and unless Boyd divorces itself from other assets and revenue (such as real estate and food & beverage), online revenue won’t make a dent in Boyd’s overall results unless there is a dramatic regulatory change. Even a federal law allowing online poker would not be a win for Boyd since global leaders in online poker would move into the market more aggressively such as Pokerstars, PartyPoker, and 888. If the national online poker market opened up by federal legislation, I expect current alliances to break down as the leading online poker sites would have little to gain from the US land based operators. Currently, PartyPoker needs the physical Borgata location in order to operate online, but if a physical presence isn’t required, then the online gaming companies will shed their partnerships.
Boyd Gaming would be better positioned if it splits the company into a hotel/gaming operator, and a real estate investment trust similar to Penn National and GLPI. This would make Boyd’s balance sheet more flexible, enable Boyd to diversify risk, and enable shareholders to better value each constituent part of the company. If this separation were completed, Boyd might be in a better position to form an alliance or merge/takeover an online gaming company, or expand into the online market more strategically. It would also allow shareholders of the gaming operator to feel the growth of online gaming without being weighed down by the real estate.