Comparing Regulated Online Gambling Performance in New Jersey and Delaware
Contents
The headline for that comparison – “New Jersey Outperforms Delaware” – won’t come as a surprise to many.
But while the conclusion itself may be obvious, there are some insights along the path to the conclusion that may nonetheless prove useful.
All data utilized in this article is through the end of February 2014.
New Jersey and Delaware: Market overviews
[table “” not found /]Both New Jersey and Delaware offer poker and casino-style games, including table games and slots.
Delaware’s online casino and poker offerings are powered by a single provider (888 and Scientific Games) while New Jersey’s market is made up of a wide variety of providers.
Where the revenue comes from
One of the starkest differences between New Jersey and Delaware is the makeup of online gambling revenue in each state:
What makes the difference all the more surprising is that Delaware’s single online poker room (all of the three live sites in Delaware feed into a shared player pool for poker) is tiny, averaging only a handful of players a day.
In short, it’s not a very attractive product from a consumer standpoint.
The takeaway is that casino likely has a good deal of unrealized potential in Delaware.
That potential is starting to be realized – note the dramatic uptick in casino turnover for Delaware in February, which was also the first month that casino revenue outpaced poker – but Delaware still has a bit to go before it hits NJ’s ratio.
Comparing the states on even ground
Obviously absolute comparisons between New Jersey and Delaware aren’t terribly useful, as New Jersey is some ten times larger than Delaware. But a number of adjusted comparisons show that Delaware is underperforming when measured by the bar set by its neighbor to the northeast.
There’s the obvious one: NJ’s overall revenue is far more than 10 times the size of Delaware’s – in fact, it’s roughly 50x. A few other metrics help to round out the picture.
Online gambling revenue per capita, per day: NJ vs DE
This chart shows the revenue per capita for online gambling to date in New Jersey and Delaware:
The numbers were generated by taking the total revenue for each state and dividing by the number of days from launch through February 28th. That number was then divided by the total gambling-age population in each state.
There are a number of reasons why New Jersey’s number inherently should be higher than Delaware’s:
- New Jersey is in a better position to capture drive-in traffic from dense population centers like Philadelphia and New York.
- New Jersey’s launch was more widely publicized.
- Many argue that the tax structure in Delaware (the first $3.75 million in revenue goes to the state) has disincentivized operators from promoting online gambling.
- New Jersey has more individual operators, and therefore greater competition for players.
Online gambling revenue per account created: NJ vs DE
Another way to compare performance is to look at how much revenue is generated on average per created account in each state. Delaware still lags behind NJ here, but by a far smaller gap than any other metric:
These numbers result from dividing total revenue by total number of accounts.
But again, the numbers don’t quite tell the whole story:
- Each customer in NJ can make over a dozen individual accounts, while Delaware customers max out at three accounts. One would assume that the average number of accounts per player is higher in NJ than in DE, which could be artificially depressing New Jersey’s pre-account average.
- Additionally, there is less incentive for players to make multiple accounts in Delaware as the platform and player pool are identical for all three operators.
- Delaware’s account growth is weighted more heavily toward the early weeks than New Jersey’s, suggesting that the average account age (and therefore the lifetime value) is higher in Delaware.
Key differences between the markets explain the performance gap
There are a few core similarities between Delaware and New Jersey: games offered, market age and platform maturity come to mind.
There are quite a few more points of divergence, including:
- Market size. While obvious, it’s worth repeating, because online gambling revenue – especially online poker revenue – doesn’t necessarily have a linear relationship with population size.
- Tourist traffic. New Jersey has access to a greater raw population of out-of-state potential customers than Delaware. In the case where the two states hypothetically compete for tourist traffic (such as Philadelphia and the western suburbs), New Jersey’s superior product (and the marketing done by NJ operators) probably sways the consumer.
- Number of operators. New Jersey features 6 casinos that operate nearly a dozen individual brands and four distinct online poker networks. Delaware features 3 casinos operating 3 brands and one online poker network. The former is generally more attractive to the consumer; more brands tends to result in a greater variety of games and content and more intense competition for players.
- Tax structure. As mentioned above, the first $3.75mm earned by casinos in Delaware goes to the state. At current pace, Delaware will generate $1.81 million in revenue. New Jersey, by contrast, takes a 17.5% cut.
- Marketing. Due partially to the above-mentioned tax structure, marketing efforts for regulated online gambling in Delaware have been tepid compared to the aggressive media push from several New Jersey operators.
These factors are the primary (but not only) reasons why Delaware lags so badly behind New Jersey when it comes to online gambling revenue.
Many are beyond Delaware’s control. But the ones that are not should be of great interest to Delaware regulators, operators and anyone else with a stake in improving the performance of Delaware’s market for legal online gambling.
