PokerStars is expected to be licensed by the New Jersey Division of Gaming Enforcement and launch its online poker room in conjunction with its partner, Resorts Casino, in the next 30 to 90 days, according to Amaya CEO David Baazov.
The impact of PokerStars in New Jersey is unlikely to be the game changer a lot of players seem to be expecting, but this doesn’t mean PokerStars’ impact will be negligible. Far from it.
The reason for this is that PokerStars will shore up many of the New Jersey online gaming industry’s weaknesses. The company’s strengths are a perfect fit for New Jersey.
As evidenced in the chart below, online casino revenue in New Jersey is doing quite well.
After the early surge, the market experienced a slight decline before leveling off for several months. This was followed by the current six-month upswing.
A look at New Jersey’s online poker revenue tells a different story.
Online poker peaked even earlier than online casino, and by June of 2014 had settled into a holding pattern with revenue constant at right around $2 million per month.
Unlike iCasino revenue, iPoker hasn’t experienced a second bump.
If PokerStars can return the state’s online poker revenue numbers back to their previous peak of $3.5 million, it will have an enormous effect on the perception of online gambling in New Jersey.
With online casino revenue approaching $11 million per month, and $12 million per month looking like a real possibility by the end of the year, the difference between the current online poker operators pulling in $2 million per month and the addition of PokerStars pushing this number to $3-$4 million is marked:
By my calculations, the revenue cap for the market without PokerStars is the low end estimate with PokerStars.
That’s how important reversing the regression of online poker is in New Jersey, and this is something I’m extremely confident PokerStars can do.
Of all the online poker sites that launched in New Jersey, PokerStars is the only one potential players might actually remember by name or by sight.
Not to mention all three products are visually different than their previous U.S. incarnations (partypoker even adopted a new logo and branding), diminishing any chance that the sight of the product might bring back memories.
On the other hand, PokerStars continued to operate in the U.S. for an additional four years, until April 15, 2011. PokerStars’ name and product are simply fresher in people’s minds.
The brand is also well thought of by the poker community, and despite being embroiled in the Black Friday indictments, it’s widely believed that PokerStars saved online poker and made sure the players from its chief rival, Full Tilt Poker, were refunded.
PokerStars will be coming into an established market and despite its powerful brand, the company will need to market heavily.
Thomas Winter, the Head of Online Gaming for Golden Nugget, told attendees at the C5 Online Gaming Conference that Golden Nugget and its competitors invested some $50-60 million in marketing alone during the first year of online gambling in New Jersey.
Winter went on to say that 50% of this spend occurred during the first three to four months of 2014, and by December of 2014, marketing spend had dropped from a peak of around $10 million per month to just a couple million per month.
Winter theorized that this early marketing spend helped the industry get off to the good start evidenced in the charts above, and the winding down of these marketing efforts might have been a factor in the industry’s decline that began around the same time operators slashed their marketing spend.
This initial outlay not only helped the individual brands, it probably had an industry-wide effect as well, acting like a PSA initiative and getting the word out that online gambling was now legal in New Jersey.
Unfortunately, this message fell on a lot of deaf ears, as a significant percentage of New Jersey residents are still unaware online gaming has been legalized by the state.
If PokerStars comes into New Jersey and spends heavily on advertising, it will not only inform New Jersey residents PokerStars has returned, but that the company has done so fully licensed and regulated by the New Jersey Division of Gaming Enforcement.
By promoting New Jersey’s legal and regulated online gambling industry, PokerStars’ marketing dollars will bolster the other operators in the state. It is a perfect example of the axiom “a rising tides lift all vessels.”
Furthermore, it will likely force other operators to increase their marketing spend or be overwhelmed by the PokerStars wave.