Here’s How I’d Run PokerStars NJ For The First Six Months

Finding success in the New Jersey online poker market stands to be the most difficult task to date for PokerStars.

Not only has the operator been notably absent from U.S. soil for over four years, but at best, the New Jersey market figures to be about a quarter of the size of PokerStars’ struggling ring-fenced operations in France, Spain and Italy.

Yet, so long as PokerStars addresses the primary challenges of the market, and abides by the same ideals that made it the world’s top operator, there’s little reason it can’t establish a lasting bond with NJ players and draft the blueprint for success in the U.S. regulated poker market – all within a six month time frame.

Here’s how I’d make that happen.

Come out swinging, but avoid the fire sales

When legal online poker first went live in New Jersey in November 2013, players were treated to an influx of lucrative rakeback specials and giveaways. As inconceivable as it seems now, $1 million dollar giveaways and 80 percent rakeback deals were the norm.

Although the promotions artificially pumped liquidity, the capped market size made it impossible for operators to reasonably sustain anything close to their initial efforts.

Compounding matters, players had become so accustomed to sites literally throwing money at them that when the well dried, they abandoned the poker rooms in droves. According to Poker Industry Pro via PokerScout.com, liquidity plunged nearly 50 percent from late January to early June of 2014.

It has yet to recover, prompting both 888 Poker and Party Poker to all but relinquish their promotional efforts.

All of this is not to say that PokerStars shouldn’t come out swinging, but by taking a more measured approach to promotional spend, the operator can sell players on the cornerstones of its operation: a strong platform, stellar customer service and a clever player rewards program.

Consistency is the key to building trust, and trust leads to retention. Promotional fire sales are only effective at drawing “bonus whores” and will only divert attention away from an operation’s underlying flaws for so long.

Launch an all-in-one client

PokerStars has a unique opportunity in New Jersey to launch a platform that supports three gaming verticals: poker, casino and daily fantasy sports.

Based on recent statistics, they’d be unwise not to.

In Q2 2015, 320,000 of PokerStars’ active users participated in the operator’s online casino games, representing a 25 percent cross-sell. And for the first time, online poker represents less than 90 percent of Amaya revenue.

These are fairly significant figures for a company that spent the first 13 years of its business dealing exclusively in poker, and which has yet to actively market its nascent online casino vertical.

By integrating casino games into the PokerStars client, Stars targets a demographic that accounts for 85 percent of New Jersey iGaming revenue, and potentially sells U.S. poker players who remember Stars as a poker-only site on a second vertical.

Moving to daily fantasy sports, PokerStars has only begun to dip its toe in the water. Victiv was just relaunched as StarsDraft earlier this month. Amaya CEO David Baazov has stated fairly adamantly that the company has no plans to match the momentous marketing efforts of perennial market share leaders FanDuel and DraftKings, choosing instead to adopt a wait-and-see approach.

Fair enough, but there’s little denying that one way to grow StarsDraft organically and cost effectively is to leverage its gaming licenses to offer DFS in as many jurisdictions as possible by way of the PokerStars client.

Sports fans, poker aficionados and gamblers all signing in to one PokerStars NJ client – the cross-promotional opportunities are nearly limitless.

Host a live PokerStars-branded tournament series at Resorts

Speaking of cross-promotional opportunities, a PokerStars-branded room and tournament tie-in series at Resorts brings with it a slew of positives:

• Raises PokerStars’ brand awareness.
• Establishes Resorts as a secondary poker playing option behind the Borgata in Atlantic City.
• Provides temporary yet regular upticks to online liquidity, especially if live events are accompanied by online series.

I’d argue that a PokerStars-sponsored tour in New Jersey would pose more benefits for Resorts/Stars than the Borgata Poker Open and accompanying Garden State Super Series/NJCOP do for Party/Borgata.

For one, with regards to brand recognition, the Borgata is more a local celebrity, whereas PokerStars is world-renowned. What this translates to is more out-of-state and out-of-country players visiting the Garden State for, say, a stop on the revitalized NAPT (North American Poker Tour), than stops at the Borgata for WPT-sponsored events.

Going further, there will be nothing stopping PokerStars from hosting online satellites to live NJ-based events on both PokerStars NJ and its worldwide client. Borgata is limited to recruiting players from its own backyard.

Whether PokerStars will actually follow through on its promise to build a $10 million branded room at Resorts is still a matter of debate, as there hasn’t been too much talk on the subject since way back in late 2013.

It seems likely though.

Be wary of bleeding the economy

A common trend among poker operators is to offset the high cost of regulation by splitting the expense with players, namely via increased rake and tournament entry fees.

There are several issues with this strategy:

• While depositing players don’t necessarily have aspirations of striking it rich, they do want to get the most bang for their buck. Higher rake fees bleed their resources at an expedited clip, discouraging them from coming back.
• Savvy professionals will play wherever they have the best chance to reap profits, in many cases turning to gray market sites if the rake schedules are more agreeable.
• Just as liquidity begets increased liquidity, a small player exodus could precipitate a larger movement away from the cash game tables.

This triad of potential drawbacks has reared its ugly head in just about every country where online poker is segregated and taxed.

On PokerStars France, which features a nearly identical rake schedule as WSOP.com and Party/Borgata in NJ, the impact has been particularly ravaging. Liquidity is down nearly 57 percent  in the past four years.

Conversely, PokerStars.com boasts the lowest poker rake on the Internet.

It is best served preserving that distinction in New Jersey, raking cash games at around 4.75 percent (lower at the smaller stakes), capped at $2.50 – $3.00 (again, stake dependent). The current poker rake in New Jersey is approximately 5.56 percent up to $3.00.

A counterargument can be made that by lowering the rake, PokerStars’ ability to generate profit, and subsequently share those profits with the poker playing community, will be limited.

To that I say PokerStars should be more concerned with setting a strong precedent than generating profits.

No matter how you crack it, the New Jersey iPoker market is too small to alter Amaya’s bottom line. A multi-state poker network, however, can reap significant revenue.

By establishing itself as a operator for the players in NJ, PokerStars places itself in that much better of a position for when the U.S. becomes a significant player in the global iGaming market.

Remember, this is a long game.

Amend the VIP Club for New Jersey

While there is no good reason not to launch PokerStars’ stellar VIP Club in New Jersey, it should be revamped for the niche market:

• Lower the threshold requirements across the board. There simply aren’t enough cash games running in New Jersey for even the highest volume players to achieve SuperNova Elite under the current scheme.
• Keep the current tier hierarchy but distribute a higher proportion of rewards to lower tier members. Doing so will result in a more balanced poker ecology.
• Tend to reward ChromeStar and SilverStar members with access to freerolls and tournament tickets, as opposed to paltry amounts of rakeback.

As a consequence of lowering threshold requirements, PokerStars will also have to lower the monetary value associated with each tier.

That’s still a better result than going down the same path as WSOP.com, which offers an impressive 35 percent rakeback to top tier players – problem being it’s nearly impossible for any player in the New Jersey or Nevada markets to rake $200,000 annually.

Late to market can be a positive

As the core processes driving the U.S. regulated online gaming industry continue to improve, the advantage of being first to market will be just that – an advantage.

In New Jersey, it was arguably a detriment, evidenced by operator struggles in the areas of technology, payment processing, customer service and marketing.

If I were PokerStars, I’d be taking meticulous notes as to where operators went wrong, and conduct thorough analyses on license holders who carved out significant market share despite a late start.

There’s perhaps no better example this than the Golden Nugget Casino.

Part of the Golden Nugget’s strategy was to ramp up its marketing spend as others were winding down their initial efforts.

This, combined with the timely acquisition of Betfair’s NJ operations and the Nugget’s own ability to recognize and improve upon the mistakes of its predecessors, culminated in the operator topping the online casino revenue charts in March 2015.

PokerStars can follow a similar path by:

• Taking advantage of the fact that geolocation and payment processing have improved to the point where they’re practically non-issues.
• Recognizing that one of the foremost complains among New Jersey players is customer service.
• Spending its marketing dollars wisely.

…and the list goes on.

Really, there’s little reason why PokerStars shouldn’t rapidly vault to the market share lead in New Jersey. But in order to maintain that position, and achieve it in every other U.S. state it enters, it will have to do much more than simply leverage its brand name and archaic US database.