Last week, Nevada Governor Brian Sandoval
announced that online poker operators in Nevada
will begin pooling players in as little as four to six weeks
While most industry experts suggest that the first interstate liquidity sharing compact in US regulated history will be remembered more for the precedent it sets, rather than its material impact on market liquidity, both markets stand to benefit in varying degrees from the alignment.
Liquidity compact alters regulated iPoker landscape
The Nevada online poker market is currently comprised of two sites. One, WSOP.com, is powered by 888’s software and is the Silver State’s overwhelming market share leader. The other, Real Gaming, is a virtual non-factor and ineligible to participate in the interstate compact.
H1 2015 will likely see the launch of two new online poker rooms, an 888-branded site and a Treasure Island-branded site that will also be powered by 888. Together with WSOP.com, the triumvirate will form Nevada’s All American Poker Network (AAPN).
Whether that will happen before WSOP.com begins sharing liquidity with players in Delaware is currently unknown.
In Delaware, 888 provides the software for each of the state’s three racino-affiliated poker rooms. The three sites already share liquidity with one another as part of the AAPN in Delaware.
Thus, at minimum the compact will involve four poker rooms, and presumably as many as six.
Delaware stands to benefit greatly from player pooling
Current average daily player counts in ring fenced markets (provided by Poker Industry Pro via PokerScout.com) clearly illustrate the underwhelming performance of Delaware’s iPoker market:
- Nevada: 150 cash game players, 2.8 million population; 54 players per 1 million residents
- New Jersey: 385 cash game players, 8.9 million population; 43 players per 1 million residents
- Italy: 2,600 cash game players, 59.8 million population; 44 players per 1 million residents
- France: 3,370 cash game players, 66 million population; 51 players per 1 million residents
- Delaware: 7 cash game players, 936,000 population; 7.5 players per 1 million residents
Notice that on average, ring fenced poker markets attract somewhere around 50 players per 1 million residents. Yet, in Delaware, the player-to-population ratio is only approximately 15% of that figure.
Why is that?
- Small resident population: Delaware’s population falls below the critical mass necessary to sustain a viable online poker community, and as a result, per population rates have deteriorated. Even if Delaware averaged a respectable 40 players per 1 million residents, the market would be too small to support all but a smattering of micro and low-limit cash games.
- Lack of brand awareness: Despite its current status as the world’s second largest online poker provider, the average US poker player has never heard of 888 Poker. That’s because the publicly traded 888 Holdings was forced out of the US by the UIGEA of 2006, and didn’t return until legal iPoker went live some seven years later.
- New Jersey: The New Jersey market relies heavily on players from nearby Pennsylvania and New York to fill its virtual seats. It’s at least conceivable that players from these states would flock to Delaware if the New Jersey market didn’t exist. Instead, it’s the players from Delaware that are crossing state lines to partake in six figure tournament guarantees and a more diversified menu of online cash games.
While shared pooling will do little to raise Delaware brand awareness (DE players not have access to any new, more recognizable sites), it does allow the market to circumvent the limitations of its small resident population. It also may prevent Delaware residents from looking for their fix in New Jersey.
Strictly based on current traffic figures, liquidity sharing will increase average daily player counts on Delaware sites by a factor of 15. Factor in the players who were initially dissuaded by the market’s piddling liquidity but now compelled to give the regulated market a second chance, and suddenly the prospect of a thriving Delaware poker scene doesn’t seem that outlandish.
Delaware liquidity projections
Based on the aforementioned and several other miscellaneous factors, we can make a reasonable guesstimate of Delaware’s post-merger liquidity:
- Partial or total liquidity sharing: While it’s presumed that each site will maintain separate promotional schedules, it’s unknown whether Delaware and Nevada will share cash game liquidity across the board, or only at certain stakes. The degree to which liquidity is shared will have serious implications on market growth.
- Time zone difference: A side benefit of uniting two markets from different time zones, is that peak traffic hours will last longer. Expect traffic in Delaware to begin picking up in the early evening hours, explode around 9 pm, and remain healthy until approximately 3 am. Longer peak hours will lead to higher traffic averages.
- Increased cash liquidity: Bigger buy-in tournaments and heftier guarantees will encourage Delaware players to deposit more funds into their accounts, resulting in a cash-rich poker ecology, and by extension, higher operator revenues. Presumably, a portion of these revenues will be filtered back into the poker economy via spot bonuses, freerolls and promotional vehicles.
It’s unlikely that Delaware will ever exceed Nevada’s high player per population ratio – the poker climate is simply too unfavorable.
But under ideal circumstances where liquidity is shared across the board and operators increase spending, its safe to assume that the average number of players per 1 million residents could climb to as high as 40, effectively quintupling participation rates.
What about Nevada?
On the flip side, Nevada, despite its paltry population of 2.8 million, has managed to attract more players per million residents than any other ring fenced market listed.
Nevada possesses several unique attributes that have allowed it to overcome its population limits:
- Favorable demographics: There is a higher proportion of poker players in Nevada than in perhaps any other location in the world.
- Brand recognition: Players identify with and trust the WSOP brand, and the presence of the live WSOP in Las Vegas presents lucrative cross promotional opportunities that are not available elsewhere. Additionally, the WSOP’s placement on the calendar (late May – mid July) virtually ensures that WSOP.com will not be subjected to the same seasonal downtrend as other markets.
- Tourism: Las Vegas boasts an annual tourism rate of nearly 40 million, a minute fraction of which probably spend a portion of their visit playing online poker.
Given these variables, it comes as little surprise that the Nevada market is performing as well as it is.
But is there room for further growth?
That depends on a few variables:
- Treasure Island marketing: Unless WSOP.com cuts all its promotions, welcome bonuses and starts charging 50% higher entry fees, it will likely remain Nevada’s top iPoker operator. It’s therefore TI’s job to attract as many crumbs as it can. The key to this is through a sustained and targeted marketing effort; perhaps one that incentivizes hotel patrons and other casual players to try their hand online.
- Welcome packages: Should 888 and the new TI-branded room offer generous welcome bonuses and strong promotions, it may coerce value hunters that exhausted their WSOP.com welcome packages out of the woodwork.
- Early birds: Online poker liquidity on the east coast typically peaks between the hours of 7 pm – 12 am (4 – 9 pm PST). Nevada players who preference playing during the afternoon hours, but have trouble finding a game, may suddenly log on at 4 pm to find the lobby ripe with fresh faces.
- Larger tournament guarantees: Assuming that Major tournament guarantees are increased, as they were when WSOP and 888 merged in New Jersey, liquidity will rise as well.
Even if everything goes Nevada’s way, it’s difficult to imagine the market exceeding the 65 player per 1 million resident barrier (except during the WSOP), leading me to believe that the market will increase by an average of 20 – 30 players.
Final projections for the AAPN NV/DE network
Accounting for downward seasonal trends, which by the time NV/DE begin sharing liquidity will have already ravaged the industry, I suspect that the new AAPN will average somewhere around 190 players.
I expect that number to climb to approximately 220 during the winter months, and nearly 300 during the live WSOP.
Given these projections, it’s clear that Nevada and Delaware’s pact is a winning proposition for both the parties involved and the nascent regulated market as a whole.