The Media Narrative For Regulated Online Gambling Is Changing In A Subtle, But Critical, Way

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Media coverage of America’s first year with regulated online gambling has hewed to a generally negative tone.

Headlines such as “So Far, Online Gambling Revenues Have Been Pathetic” and “Online gambling revenues fall short” epitomize the overall media narrative for the early days of legal online betting in the US.

That narrative would be fine if it were accurate or harmless. Unfortunately, it is neither.

Fortunately, it’s also (slowly) becoming yesterday’s news.

Actual performance becomes the yardstick

As we move toward the one-year anniversary of regulated online gambling in New Jersey, an inevitable shift is underway: the actual performance of the market is becoming the yardstick for evaluating short-term numbers, as opposed to the projections for the market.

Two recent examples help illustrate the point.

Example #1

WSOP helps Nevada crack $1 million revenue mark for online poker

This article from Howard Stutz at the Las Vegas Review Journal tidily captures the narrative shift that happens when you switch the baseline from projections to actual performance.

If compared to projections, the $1mm+ in revenue might have been headlined “tepid” or described as “falling short.” But, compared to actual performance, June’s revenue numbers “crack the $1mm revenue mark” – a far more positive characterization.

We’ll see more headlines like that in the months to come, driven not only by the shift from projections to performance, but also by the natural narrative cycle of the media, which eventually engenders contrarian views once a story becomes too homogeneous in the telling (see: every presidential campaign ever).

Example #2

Ratings Firm Cuts New Jersey Online Gambling Projection.

Slightly different example, but same concept. With half the year in the books, Fitch Ratings recently cut their 2014 projections for NJ online gambling revenue to $120-$130mm.

Why does that matter? First, other firms will follow, and eventually the gap between projections for online gambling performance and actual performance will shrink to a reasonable level.

That’s important, because much of the negative coverage has focused on the massive gap between projected revenue (mostly Christie’s) and reality.

Second, Fitch could actually be aiming too low. New Jersey is at $63mm six months in to 2014 with some of the strongest months of the year ahead.

So it’s completely realistic that, come January, we could be seeing headlines like “New Jersey Online Gambling Beats Analysts Forecasts” – a headline you’d simply couldn’t see in the status quo.

But revenue is still the wrong story to tell

Of course, even focusing on revenue in the right way is still the wrong approach for evaluating the performance and potential of regulated online gambling in the United States – a point well made recently by UNLV’s David G. Schwartz.

Relevant barometers include things such as:

  • The performance of (heretofore untested) geolocation technology in real-world conditions.
  • The ability of technology and regulatory systems to prevent unauthorized play.
  • The impact of regulated online gambling on the availability and popularity of unregulated options.
  • The ability of operators and regulators to identify, mitigate and respond to fraudulent use.
  • Proof of concept that all relevant stakeholders – operators, customers, technology partners, marketers and regulators – can successfully interact within the regulated system.

Measured by those goals, regulated online gambling in the U.S. has enjoyed a stunningly successful debut year:

  • While consumer experience with geolocation has been subpar, the technology has by and large succeeded in keeping online play located within the borders of New Jersey, Nevada and Delaware.
  • For the tens of thousands of players that have tried regulated online gambling, there have been virtually no reports of underage play or other unauthorized play.
  • Since the launch of regulated online poker, several major offshore sites have decreased their presence in NJ, NV and DE or exited altogether.
  • Reports of fraudulent use have been minimal. The few publicized cases serve as proof of the system’s efficacy.
  • While there have been bumps in the road in all states, the general story has been of a market cooperatively striving for improvement, not of a broken market with unresolvable deficiencies.

Or, as Schwartz put it, “the real accomplishment of the first few months of American online gaming may be its very existence: Three states have enacted regulatory controls that have allowed players to bet online with no major snafus.”

But those goals are more amorphous, less headline-friendly and downright non-traditional when compared to the revenue number, meaning none are likely to dethrone revenue as the common shorthand for expressing the health of the regulated online gambling industry anytime soon.

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