Online Poker Revenue Projections Cut By Eilers Research

Eilers: US Regulated Online Gambling Outlook “Far More Ominous” Than We Thought

This article may be outdated. Get the latest news on New Jersey here.

The first full year of regulated U.S. iGaming should trigger a comprehensive realignment of expectations for lawmakers, investors and the industry at large.

That’s the upshot of a new report by Adam Krejcik of Eilers Research titled “U.S. iGaming Outlook for 2015 & Beyond.”

Eiler’s revised US iGaming outlook: soberer still

Eilers is one of the most grounded sources for regulated online gambling revenue projections.

I said as much when I wrote up their outlook from December of last year, which offered regulated U.S. iGaming revenue projections that were miles below the consensus.

And Eilers’ updated forecast is miles below their outlook from last year:

US iGaming Revenue Forecast

Eilers’ base case last year called for the U.S. market to generate about $2bn in 2020. Now their bull case for 2020 isn’t even a third of that at $663mm.

More on both reports available via Eilers.

Parsing the challenges of year one

What’s driving the downgrade? Krejcik neatly sums the weaknesses:

The short answer is revenue expectations were unrealistic, new forms of online entertainment have emerged as a viable alternative, the state-by-state rollout is inherently flawed and no, we do not expect things to improve in any meaningful way.

The patently ridiculous nature of official revenue projections in New Jersey have been chronicled at length (even reasonable estimates missed the mark). And a state-by-state rollout is obviously not optimal.

But Krejcik’s third point – new, viable, alternatives to online gambling – is a less-discussed but arguably more existential concern.

The report continues:

[W]e believe the growing popularity of social casino games as well as Daily Fantasy Sports (DFS) have attracted many players and served as a viable alternative. We note neither social casino nor DFS truly existed during the U.S. iGaming “glory” days (e.g. 2003-2006), and while it’s very difficult to quantify the exact impact, we believe it’s noteworthy not only in terms of wallet-share, but also time allocation.

It’s the last bit that should really jump out at operators (online and land-based).

Social and DFS don’t have to make a dollar to cost casinos a dollar of revenue.

Instead, they can (in theory) offer consumers an experience similar to gambling but at a lower cost. So the increasing popularity of DFS, for example, could have an outsized negative impact on casino revenues, one that isn’t properly communicated  by the pure revenue number of the DFS industry.

Growth ahead for NJ – with caveats

Some bright spots (relatively speaking) emerge when Krejcik turns to New Jersey, where Eilers calls for ~10% growth in 2015.

But even that modest optimism comes with a major caveat, as it assumes that PokerStars gets the green light from NJ regulators in “early 2015.”

Despite the ongoing delays surrounding PokerStars’ entry into New Jersey, Krejcik is bullish on PokerStars hitting the market in 2015, putting the chances at “better than 50%” and characterizing a January / February launch as “possible.”

As for Nevada and Delaware, Krejcik sees little to like in either market, projecting a revenue decline of 10% year over year for the former and questioning the ability of the the latter to survive the near term.

More info at Eilers Research.

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Chris Grove
- 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.