NJ iGaming Weekly: Revenue Report Reveals Modest Growth, Cash Game Volume Trends Upward

It was a relatively quiet week on the New Jersey iGaming front, marked by slight cash game traffic increases and noticeable tournament entry falloffs.

The biggest news of the week occurred off the virtual felt as last Tuesday New Jersey’s Division of Gaming Enforcement released its monthly revenue results.

Despite revenue gains falling significantly short of Governor Christie‘s lofty and largely unrealistic projections, NJ’s iGaming market continues to exhibit sustained growth – a trend that appears likely to continue into March and beyond.

In this week’s iteration of NJ iGaming Weekly, we’ll take an in-depth look at how the market is trending, both from a birds-eye view and on a site-by-site basis, concluding with an analysis of why the Governor’s initial market expectations were so unfeasible.

NJ’s iGaming operators reap the rewards of a steadily growing market

First and foremost, thanks to Marco Valerio for his Breakdown of New Jersey Online Gaming Revenue + Comparisons to December 2013 report.

Numbers reveal that in January, the Garden State’s online poker market brought in $3,442,371, a $557,354 increase over the month prior. That’s a growth margin of nearly 19.2%.

Online poker sites accounted for 36% of the state’s total iGaming revenue take, a percentage that carries even more weight when two additional factors are considered:

• Tropicana and the Golden Nugget, which both host online casinos, do not yet offer online poker.
• Generally speaking, table games and slots are bigger money makers for casinos than poker.

That being said, in December 2013 online poker accounted for 39% of total revenue gains, 3 percent more than in January. And online casinos grew at a 33.6% clip, nearly twice that of online poker rooms.

DGE numbers also reveal that there are approximately 200,000 active iGaming accounts, although the ratio of registered accounts to individual participants is still currently unknown.

In total, last month the state brought in  $9,461,057 from iGaming – up $2.072 million (28% percent) over the month prior.

To view a snapshot of the DGE’s January 2014 revenue report, click here.

The Division also released a more detailed supplementary report that breaks down revenue gains by casino and game type.

Three networks locked in battle for cash game supremacy

Ask me a month ago if 888poker.com and WSOP.com stood a chance of usurping Party/Borgata for the majority share of NJ’s cash game market, and I’d say you’re borderline delusional. I’d also be wrong.

Since mid-January Party has seen its stranglehold nearly dissipate, losing nearly 10% of its cash game faithful, some of which presumably moved onto other sites.

Here’s what changed:

On January 16th, Party’s 7-day moving average of cash game activity stood at 250. The rest of the market, which is comprised of 888, WSOP and Ultimate Poker saw an average volume of 288.

In short, one month ago Party controlled 47% of the cash game market, while its closest competitor WSOP held 31.5% – not an insurmountable lead, but formidable.

Fast forward to February 16th, and Party now plays host to 230 of the 575 players, on average, who are enjoying NJ’s cash game offerings. That’s 40% of the market, or 7 points less than a month prior.

Over the same time period, WSOP’s 7-day averages have grown by 13.7%, and the All American Poker Network NJ’s (888) a staggering 33.3%.

However, 888’s gains are likely inflated due to its ongoing 80% Rakeback promotion.

To conclude, WSOP has effectively cut Party’s cash game volume lead in half, and if the current trends continues, New Jersey could be crowning a new cash game champion as early as mid-March.

Data provided by PokerFusePro via PokerScout.

But Party / Borgata is still the tournament king

PartyPoker is still the only NJ network to fulfill its MTT guarantees on a consistent basis – quite the accomplishment, especially when you consider that its guarantee-to-buy-in ratios are higher than those found on any other NJ poker site.

That said, over the course of the past two weeks, WSOP’s Sunday Majors have also performed admirably.

As a mode of comparison, here’s a snapshot of how this weekend’s Majors performed:

• Party / Borgata’s newly revamped $50k Guarantee ($185+ $15 buy-in) drew 329 runners, and its Saturday $10k Guarantee ($91 + $9) 157. Together, the two tournaments covered their guarantees by a respectable $15,152. Party’s tournaments are performing so well that the network is replacing its Sunday Major with an unprecedented $100k Guarantee on March 2nd.
• WSOP’s Sunday $10k Guarantee ($100 + $9) performed well, exceeding its guarantee by $5,400. The site’s largest major, a $25k Guarantee ($200 + $15), also fared reasonably, drawing 135 runners and exceeding its guarantee by $2,000.
• 888 Poker’s “Big Sunday” hardly lived up to its namesake. This week’s $10k Guarantee ($185 + $15) drew a rather pedestrian 47 runners, missing its guarantee by $1,305.
• Ultimate Poker’s guarantees have shown signs of life, undoubtedly due to the launch of its creative NO-verlay promotion. Sunday’s $5k Nightly ($45.50 + $4.50) drew 70 runners, coming up $1,815 short, while the site’s biggest weekly tournament, a $20k Guarantee ($91 + $9) drew 126 participants – missing the target by $8,534. Yes folks, these numbers are an improvement.

A word on Governor Christie’s first-year revenue expectations

John Brennan recently posted an article detailing the reasoning behind Governor Christie’s exorbitant first-year iGaming revenue projections.

In brief:

• Christie’s $1.1 billion first-year gross iGaming revenue projections were based on the market going live in July. Considering that the fiscal year begins in July, the Governor was counting on the market generating revenue in all 12 months. In reality, NJ’s iGaming market rolled out on November 26th.
• The projections were based on a “Wells Fargo report that was far more optimistic than more typical industry projections.”
• Most sites experienced a slew of geo-location and other technological issues, some of which persist to this very day.

Yet, I’d argue that even under ideal circumstances, NJ’s newly-minted iGaming market stood little chance of generating even half the revenue projected by Governor Christie.

For argument’s sake, let’s imagine a scenario in which a whopping 1 in 20 New Jersey residents each created three iGaming accounts. Taking New Jersey’s population of 9 million into account, that’s 1.35 million first-year accounts.

Of course not all of these imaginary accounts would have been created on day 1. For simplicity, let’s say that 300,000 were created in the first month, and approximately 100,000 in each of the subsequent 11 months.

We’ll also assume that the market went live in July, and that iGaming operators were projected to generate only $550 million dollars in gross revenue over the industry’s first year.

After crunching the numbers, I concluded that:

• Under optimal conditions, in order to generate half of Christie’s initial first-year projections,  iGaming operators would have to win an average of $57.29 per account per month. Double that number to $114.29 and Christie’s full expectations would be met.
• According to Marco Valerio’s report, the average “online spend per account” in January 2014 was $48.

The point is, Christie’s projections should in no way be an indicator of market performance. Enough said.

Next week, we’ll take a small detour from our usual template, instead discussing Ultimate Poker, and why it’s deserving of a bigger piece of NJ’s iGaming pie.