The nascent market for regulated real money online gambling in the United States has some growing to do before it can challenge the market for fake online gambling, according to a report from Adam Krejcik of Eilers Research.
Krejcik’s research, covering 1Q14, puts the total revenue generated by social casino games – games where players can purchase chips but never cash out any winnings – at roughly ten times the amount of revenue generated by traditional online gambling in the regulated markets of New Jersey, Nevada and Delaware.
As the chart from Eilers below shows, social casino games collectively pulled in some $350mm in 1Q14, compared to just under $35mm for regulated real-money online gambling:
The single factor responsible for the vast majority of that revenue gap is, of course, availability.
Real-money online gambling is available in only three states, and those three states represent just about 4% of the total population of America. Social casino games, by contrast, are available nationwide.
That advantage is likely to persist well into the future. The state-by-state rollout of regulated online gambling is a slow process that will inevitably bypass large chunks of the country. Krejcik sees both California and Pennsylvania “moving forward” toward some form of regulated online gambling (poker only in California’s case, Pennsylvania TBD), but the picture after those two states is hazier.
Krejcik identifies five factors that he believes are artificially depressing real-money online gambling revenue.
In addition to the oft-cited issues with geolocation, payment processing and a “slower than expected ramp-up in marketing and general lack of awareness in states that have approved iGaming,” Krejcik also turns the blame on a “lack of premium slot content” at NJ and DE’s online casinos and at Delaware’s unique tax structure, which calls for the first $3.75mm in revenues to be paid directly to the state.