Lottery Style Sit & Go's Are A Good/Bad Balance
Online Poker Report

Are Lottery Style Sit & Go’s A Good Fit For The New Jersey Online Poker Market?

Lottery Style Sit and Gos
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For better of worse, lottery style sit & go’s have altered the trajectory of the online poker industry.

On PokerStars, the 3-man hyper-turbos and their randomized prize pools (Spin & Go’s) have proven particularly impactful, contributing to an 11 percent year-over-year revenue surge for Amaya‘s online poker arm in Q2 2015.

Yet, with the launch of Spin & Go’s came a whole new set of challenges, not the least of which was a severe and yet unrecovered dip in cash game liquidity.

Were Spin & Go’s to be packaged as part of a PokerStars’ New Jersey client, could the industry withstand such a hit, and if not, what would it take for “Spins” to coexist in harmony with PokerStars’ more traditional formats?

Lottery sit & go’s level playing field, attract gamblers

Perhaps one of the most compelling arguments to introduce lottery style sit & go’s in New Jersey is that they’ll balance the poker ecology.

Currently, there is a severe skill divide between the state’s seasoned and casual players. Through its short starting stacks and blistering fast blind structure, lottery sit & go’s all but eradicate that gap.

Liken them to a cash game where the maximum buy-in is only 15-20 blinds deep.

What results is that more money is funneled from professional players down to poker hobbyists, who suddenly possess additional resources to participate in cash games, traditional tournaments, and of course, more Spins.

A secondary advantage of Spins is that they could serve as a viable cross-vertical marketing device in New Jersey.

At present, the state’s online gaming community is mostly comprised of gamblers. Operators generate nearly six times more revenue from online casinos than poker, a divide that continues to grow with each passing month.

By marketing Spin and Go’s as a slot machine with a poker element, as opposed to the other way around, PokerStars could attract a segment of the state’s gambling faithful.

Of course, the semi-regular awarding of top prizes is a powerful marketing ploy in and of itself, akin to the buzz generated when an online casino doles out a progressive jackpot.

Imagine receiving a PokerStars email with the tagline, “Player X just won $50,000 player one of our Spin & Go’s!” Now imagine receiving one every month.

Finally, the 3-handed format is well-suited for markets with population constraints, as the likelihood of them filling up more regularly is just that much higher.

They also spread traffic out more thinly, bleed economy

Based on data provided by Poker Industry Pro via PokerScout.com, cash game liquidity on PokerStars plummeted 10 percent in the week following the launch of Spin & Go’s. Since, volume is down an additional 13 percent.

Whereas PokerStars has enough traffic to sustain such a drop, New Jersey does not, especially considering that the industry is already in a state of decline.

Numbers show that average cash game volume in the Garden State has dropped 10 percent in the past 12 months, currently residing at just under 300 players.

The entrance of PokerStars, coupled with market consolidation and the seasonal uptick will undoubtedly push that figure higher, but it’s difficult to envision a scenario where average liquidity eclipses the 500 barrier – and that’s in the absence of Spin & Go’s.

In their presence, an immediate dip of 10 percent or more is virtually guaranteed, translating into seasonal highs that cap out at around 400-450 players and summers where liquidity stumbles into the mid-200’s.

Or worse.

In the online poker industry, liquidity begets liquidity. If enough players leave their regular cash games in favor of Spins, a domino effect may occur, potentially resulting in the complete abandonment of less popular stakes.

This wouldn’t be so bad if Spin & Go’s didn’t bleed players, but they do. In the ring-fenced and heavily taxed Italian, French and Spainish markets, PokerStars rakes between 5-7 percent per game, depending on the stakes.

A bit of simple math reveals that even at a conservative 6 percent rake, players have to win 35.5 percent of their games to break even.

For the overwhelming majority of players the bar will be set even higher. Assuming the average player never spins one of the top two prizes (1 in 16,667), the rake is actually closer to 7-9 percent.

At 8 percent, a player will have to win 36.2 percent of games to stay afloat, which might be realistic were there a stronger skill component, as there is when playing deep stacked tournaments. But as mentioned previously, Spin & Go’s are extremely effective at leveling the playing field.

What results is a poker playing environment that is more in balance, but one where too much money is funneled to operators. Over the long haul, the rate of attrition will more than offset the positive revenue benefits of lottery sit & go’s.

It’s already happening.

Take Italy, where Spin & Go’s were partially responsible for cash game revenue falling from €58 million to €44.7 million from Q2 2014 to Q2 2015. In that market, skill game revenue (comprised almost exclusively of poker tournaments) dipped 3 percent during the same time period.

It all comes down to the rake

Much of this suggests that Spin & Go’s might not be the best long-term solution for New Jersey. Yet, I believe there is a way they can work.

PokerStars’ strong initial efforts on the marketing and promotional fronts, along with its brand credibility and the launch of lottery sit & go’s will draw increased traffic to New Jersey poker sites – at least for a time.

In order to keep them coming back, they must be provided a compelling reason (or two). Spin & Go’s will do their part, distributing funds more equally between casuals and professionals. But that won’t prevent players from siphoning money to operators at an expedited clip, nor will it necessarily drive traffic back to the cash game tables.

Lowering the cash game rake could conceivably address both problems.

For a market that is taxed at a relatively low rate (17.5 percent), New Jersey’s cash game rake is unreasonably high. At nearly all stakes, the rake is 5.56 percent up to $3.00 ($5.00 in some cases).

That’s just shy of the fees charged on PokerStars.fr, which taxes online poker at a 46 percent clip.

A lower rake will help operators retain their core players, while encouraging recreational players to distribute their playing time more evenly between cash games and Spin & Go’s, thus enabling them to last just a bit longer.

And yes, while an argument can be made that casual players hardly notice the rake, they do notice when they go broke. Reduced fees combined with recreational player-friendly incentives will prevent that from happening quite as often.

To sum up, it’s more vital that New Jersey provide a just environment for skill game players than for Spin & Go aficionados. Gamblers haven’t stopped players Blackjack and Craps due to the house edge, and a higher rake won’t prevent than from spinning it up.

Poker purists, however, will stop coming back if they’re either going broke too often or if their skill edge hardly overcomes an unfair rake.

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Robert DellaFave
- Robert DellaFave is a game designer and avid poker player. He writes for several online poker publications and dreams of one day programming a poker simulation clever enough to beat the pros. Read more by following @RobertDellaFave on Twitter.