New Jersey’s gaming industry is booming, but the gains are not being felt for online poker.
According to a gaming revenue report released last week by Garden State regulators, the online poker market contracted 3.2% year-over-year in March to $1.9 mm. That occured while the industry won a whopping 57.7% more from online slots and house-banked table games in a year-over-year comparison. The $37.2 mm in revenue from house-banked online casino games was an all-time high, shattering the previous record by about $5.5 mm.
The disparity between peer-to-peer online poker and the house-banked games has never been greater, as poker has been unable to capture the attention of the influx on new users attributable to the relatively new offering of online sports betting.
Overall casino industry revenue, which includes brick-and-mortar slot and table game win, as well as both online and retail sports wagering, was up a whopping 34.5% to $293.96 mm.
State figures indicate that the New Jersey is seeing some of its best days in years, but poker is alone on an island, stuck in the mud. It still speaks to a lack of liquidity for the games to thrive.
Also to consider is that online poker and sports wagering have overlapping demographics, but that hasn’t helped. All the public excitement is on sports betting these days, with promotions galore at New Jersey books. While poker platforms from the likes MGM and PokerStars have been integrated with the other online gambling offerings, it hasn’t been enough. Meanwhile, online casino growth has accelerated since online sports betting went live due to cross-platform integration.
All three of the state’s online poker operators are struggling with the vertical. Caesars Interactive Entertainment did see a small boost in 2018 thanks to kicking off liquidity sharing with its platform in Nevada (the only site in operation in the Silver State), as well as with the minuscule Delaware player pool. It wasn’t enough to propel the Garden State iPoker market to growth in 2018.
Online poker has struggled since 2014’s peak, which was the first full year of operation for the NJ online gambling industry. Online poker and the other iCasino games have gone in opposite directions since, aside from an uptick for poker in 2016 with the launch of PokerStars, the world’s largest online poker platform. PokerStars controls around 70% of the worldwide online poker market, but its NJ platform is ring-fenced. Once the buzz of the PokerStars launch wore off, the state’s online poker market continued its decline. It turned out that PokerStars effectively cannibalized the rake collected by Borgata and CIE prior to its launch.
Here’s a look at some of the figures.
Amount of rake collected:
- 2019 (through Q1): $5.59 mm
- 2018: $21.39 mm
- 2017: $24.25 mm
- 2016: $26.51 mm
- 2015: $23.81 mm
- 2014: $29.06 mm
- 2013: $3.21 mm (games launched in November)
Rake by current operator:
- 2019 (through Q1): $1.43 mm
- 2018: $5.66 mm
- 2017: $7.49 mm
- 2016: $9.19 mm
- 2015: $13.08 mm
- 2014: $15.31 mm
- 2013: $1.90 mm
Caesars Interactive Entertainment (WSOP/888)
- 2019 (through Q1): $2.31 mm
- 2018: $7.75 mm (Caesars began sharing players between NV, DE, and NJ in May)
- 2017: $6.98 mm
- 2016: $8.60 mm
- 2015: $10.73 mm
- 2014: $13.29 mm
- 2013: $1.20 mm
Resorts Digital (PokerStars)
- 2019 (through Q1): $1.84 mm
- 2018: $7.97 mm
- 2017: $9.78 mm
- 2016: $8.72 mm (PokerStars launched in March)
- 2015: N/A
- 2014: N/A
- 2013: N/A
No additional liquidity on the horizon
Online poker is a unique creature. From a user’s perspective, the game itself requires a high degree of patience. The optimal strategy is to play a small percentage of the hands you are dealt, assuming you don’t want to lose your money. Hence, the popularity of playing multiple tables at time. Multi-tabling only works when there’s an abundance of games to choose from, with a pool of players waiting to join and keep the tables full.
Even peak traffic at the NJ online poker rooms isn’t enough to populate all the poker variants and formats available. There’s no FOMO for consumers looking at NJ online poker offerings.
For tournaments, the larger the prize pool the more attractive they become. Most online poker players want to play in as large of a tournament as possible (in terms of the number of entrants), meaning that the ones on offer in New Jersey just don’t cut it, especially when in competition with other online gambling choices.
Is the landscape going to change anytime soon? More than likely not.
Pennsylvania this week announced that online casino and poker will launch in mid-July, and West Virginia recently became just the fifth state to legalize online poker. Michigan is also more than likely going to legalize it his year. There’s one huge problem, however. In January, the Trump Administration decided to reverse course of the legal interpretation of a 1961 law known as the Wire Act, effectively telling states not to allow interstate online gaming. That memo propted regulators in Pennsylvania to declare that all aspects of its upcoming online gaming industry must happen entirely intrastate. In other words, no sharing online poker liquidity for the foreseeable future.
It’s unclear what will happen to the active NJ-NV-DE player sharing under CIE’s network.
A federal judge recently indicated that the battle over the meaning of the Wire Act is “likely” going to go before the Supreme Court. A favorable ruling for the gaming industry would likely pave the way for more state online poker liquidity sharing. This outcome could take multiple years, however.
Can the existing operators wait for the legal landscape to improve? Probably, considering that we could be near the bottoming out of the market’s contraction. Through March, NJ online poker revenue was down 1.6% compared to the Q1 of last year. You could call it flat. Assuming online poker continues to hover around $2 mm per month, it’s hard to see the vertical disappearing.
NJ-facing online poker sites have shuttered before, but the three left standing are likely going to stand pat. PokerStars still has an iconic brand and a dominant global market share, and Caesars still has the world’s most prestigious tournament festival in the annual World Series of Poker in Las Vegas. MGM is arguably less committed to iPoker, but its Borgata casino has by far the most dominant live poker room in the state.
It’s still too early to write an obituary for NJ online poker.
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