“Very Low” Consumer Awareness Levels Hamstringing New Jersey Online Gambling, Says Station Casinos CFO

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Station Casinos foresees a relatively rough road ahead for their online gambling product, although the company maintains faith in the long-term upside of regulated online poker and casino games in the United States.

That’s per Station Casinos Chief Financial Officer Marc Falcone in a recent investor call covering the company’s performance for the first quarter of 2014.

Station is involved in the regulated market for online gambling via its 57% ownership of Fertitta Interactive, parent company of Ultimate Gaming. Ultimate operates in the Nevada and New Jersey markets for legal Internet gambling.

Listen to the entire call here.

Competition strong in NJ, but consumer awareness soft

During Station’s last call, Falcone identified a handful of factors that were holding back the New Jersey market: consumer awareness, banking, geolocation and competition from illegal sites.

Falcone repeated that list this time around, with additional emphasis on the difficulty operators have encountered educating New Jersey consumers about legal online gambling.

Falcone referred to a “lack of awareness overall, across the state” and characterized the general level of consumer awareness as “very low.”

With the pool of informed, engaged customers smaller than anticipated, Station has found the New Jersey market to be “very aggressive from a promotional standpoint,” said Falcone.

Due in part to that stiff competition and the high acquisition costs it brings, Station reported a $4.8mm loss related to its online gambling operations in Q1 2014.

The company did not provide any granular detail regarding the composition of the loss, but Falcone noted that a “significant” part was due to launch marketing costs in New Jersey.

Company expects losses to continue

While the rate of losses may decline as we move further away from launch, Station expects online gambling to continue to lose money for the company in the near term.

“I don’t think that we’ll be cash flow positive for 2014,” said Falcone. He declined to offer a forecast beyond that point, but added that the company should “hopefully” be getting “closer to break even as the year moves on.”

Falcone’s prediction stands in contrast to some other operators in the New Jersey market. For example, Boyd CEO Kevin Smith recently predicted that his company’s online operations would be at least break even by year’s end.

Listen to the full recording of the call here.

- Chris is the publisher of OnlinePokerReport.com. Grove also serves as a consultant to various stakeholders in the regulated market for online gambling in the United States.
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