Parx Push For In-Person Registration Solves Problems That Don’t Exist, And At Great Cost

According to an article at EGR North America (p/w), Parx Casino is lobbying the Pennsylvania legislature in an effort to have mandatory in-person registrations added to the list of online gaming regulations in the state.

Parx Senior Vice President of Gaming Development Don Ryan – more recently of Betfair NJ – called the idea a way to “strengthen the relationship” between Parx Casino and its customers instead of creating a competing industry, while Dermot Smurfit, CEO of Parx technology partner GameAccount Network, told EGR in-person registrations were “a natural way” to protect investments.

As you’ll soon see, this is faulty logic.

Negative implications for players

Forcing players to register in-person eliminates one of the primary motivators for people who gamble online: they prefer it to visiting a casino.

• Players who live more than a 20-30 minute drive away from one of the state’s casinos would be increasingly unlikely to make the trek.
• Requiring in-person registration also limits competition, as players are most likely going to register with a casino that is located close to their home rather than drive (potentially several hours) to a register at a different casino across the state. This would also give casinos in population-dense areas (such as Parx) an upper hand.
• Players with disabilities, lack of transportation, or other valid reasons for not gambling in-person would still be unable to gamble online.

Negative implications for legislation

Parx’s decision to push for in-person registration could create a wedge issue among Pennsylvania’s land-based casinos, who – with the notable exception of Sands Bethlehem – are generally thought to be aligned in support of Rep. John Payne’s HB 649.

That’s a wedge Sheldon Adelson and the Coalition to Stop Internet Gambling could agitate.

Hopefully Parx isn’t dead-set on the idea and will compromise. If not, we could have another California on our hands, with powerful interests locked in a stalemate over a specific issue.

Negative implications for the industry at large

Caesars: Vast majority of online customers are new customers

Caesars Entertainment, which operates regulated online gaming sites in Nevada and New Jersey, has consistently noted (see here, here, and here) that online gambling has helped their brick & mortar properties.

According to testimony from Caesars Interactive Entertainment Senior Vice President and General Counsel Michael Cohen at a April 2015 House Gaming Oversight hearing:

In our operations in New Jersey we have seen that 90 percent of our online customers are not players at our casinos showing that the online player is a new player. We’ve also seen that 15 percent of our online players who are also brick-and-mortar customers were inactive customers […]

Given that over 600,000 accounts have been created at New Jersey’s regulated online gambling sites, and that Caesars (via the Caesars, WSOP, 888 and Harrah’s online brands) is second only to Borgata in terms of total revenue generated from online gambling in NJ, a conservative estimate would conclude that Caesars has gained thousands – perhaps tens of thousands – of new customers as a result of the launch.

Data similar across the board

In a 2014 earnings call Boyd Gaming’s CEO Keith Smith noted that 75% of the accounts created at the company’s online gaming sites in New Jersey were created by “customers who are not active players of Borgata.”

In May of 2014 a spokesperson for the Tropicana informed me 60% of their online casino players are new customers. These are customers who were unknown to the company prior to their iGaming launch and are now in the rewards program and marketing database.

And according to data from the polling company Commercial Intelligence, 21% of the online gamblers polled by the company in New Jersey had never visited a live casino before they played online.

The impact this would have on the state’s online gaming sites would be significant, and is something Penn National’s Eric Schippers referred to directly during his testimony at a recent iGaming hearing in Pennsylvania.

Schippers called in-person registration a “restrictor plate” that would hamper the industry’s growth.

The conclusion is obvious: Limiting online gambling to in-person registrants undercuts the ability of regulated online gambling to do what it does best – draw new customers into the database of land-based operators.

Parx solving a problem that doesn’t exist

There are several theoretical reasons behind in-person registrations:

1. Requiring players to visit a land based casino would seemingly drive traffic to the operator’s casino property.
2. It would assist in player verification methods.
3. It would prevent online gaming from cannibalizing the casino’s brick & mortar operations.

The problem is, none of these issues are actual problems.

Online gaming has had no noticeable negative effect on brick & mortar traffic/revenue in New Jersey. As noted above, the opposite is true. Online gambling is introducing the casino product to tens of thousands of new customers in New Jersey.

There is zero evidence that player verification methods are failing.

In-person registration for online gaming accounts was also floated by California Assemblyman Mike Gatto in his December 2014 online poker bill. Following criticism from the online gaming industry, who warned of the potential negative impact such a barrier could create, the provision was later removed.

Gatto explained the removal of in-person registration thusly:

After meeting with security experts and hearing from poker players and industry professionals, I have concluded that online poker would be best served by making in-person registration an option rather than a requirement. State of the art technology currently used by operators in other states when registering players accesses many of the same databases used by financial institutions to verify the identity of registrants and prevent fraud.

As for cannibalization, you could argue that, far from preventing it, an in-person registration requirement encourages cannibalization of land-based revenue by functionally limiting participation in online gambling to people who were already predisposed to visiting casinos.