What Will Become Of New Jersey Online Poker Between Now And PokerStars’ Launch?

When the Division of Gaming Enforcement cleared the path for PokerStars to return to the United States in late September, the long-term prospects of the New Jersey online poker market immediately took a turn toward the positive.

As for the industry’s short-term outlook, that’s an entirely different story.

PokerStars’ approval may result in existing operators temporarily scaling back their efforts, instead waiting until what many industry analysts believe to be the site’s early 2016 launch to jockey for position.

What results is a market that will struggle to grow throughout a period when online poker typically thrives.

Current industry trends paint a pessimistic picture

It hardly takes in-depth analysis to realize that since launching in November 2013, New Jersey online poker has been in an almost habitual state of decline.

Online poker revenues have fallen precipitously since January 2014, when in its second full month of operation the industry reaped a still-standing record $3.44 million.

By comparison, this September represented a new low for the industry, one in which it struggled to generate half that amount.

Not surprisingly, cash game liquidity has also taken a tumble. According to Poker Industry Pro via PokerScout.com, average traffic hovered around 500-600 throughout most of January and February of last year.

Thus far in 2015, cash game averages have spent nearly as much time below 300 than above it.

Granted, market novelty and promotional fire sales played a significant role in the industry’s early windfall, creating a greater divide than what would normally be observed.

To account for this, I used May through September of this year and last as the focal points of my analysis.

The results aren’t exactly inspiring:

• On average, NJ online poker revenue is down 13 percent.
• Cash game liquidity has dipped approximately 14 percent.
• Major tournament overlays are more prevalent in 2015.

Assuming these rates of decline hold, existing operators can expect to generate somewhere between $1.65-$2 million per month from now until February, with revenue falling along the higher end of that spectrum in December and January.

As far as cash game averages, expect incremental gains from 280-290 in November up to 320-330 by February, with the increases entirely a byproduct of positive seasonal trends.

Of course these figures assume an absence of major shakeups to the NJ online poker landscape, of which there have been plenty.

Short-term implications of PokerStars’ approval in NJ

The way I see it, two scenarios could unfold between now and the time PokerStars deals its first real-money hand in New Jersey:

• Existing operators seek out a strategic alignment with the online gaming behemoth, ultimately resulting in the consolidation of the market.
• Both Party/Borgata and WSOP/888 stay the course, spending the next several months planning how to remain competitive once Stars enters the equation.

In either case, it seems unlikely that either operator will dedicate much of its financial and creative resources to the here and now.

Furthermore, the announcement of PokerStars’ approval may coerce players to budget their online poker playing time until they see what Stars has to offer. This alone could account for a 5-10 percent dip in liquidity.

Other factors that may impede market growth

PartyPoker third party and VIP program changes

PartyPoker is in the process of instituting a number of amendments to its online poker model, not the least of which are the removal of downloadable hand histories and traditional cash game waiting lists.

Although there is currently no timeline as to when these changes (which all but render HUDs redundant) will go live in New Jersey, there stands to be a mass exodus of professional and semi-professional grinders away from the site when they do.

What’s more, the operator recently overhauled its player loyalty program. These changes have gone live in New Jersey, effective October 1.

Now, players will find achieving Silver status to be significantly easier than before, at the cost of the program’s higher tiers (Gold and Palladium) requiring increased play.

The highest and sole quarterly tier, Palladium Elite, and all the supposed benefits that came with it, is no longer available.

While the point requirement changes and elimination of Palladium Elite may drive some grinders off the site, the increased point exchange rate (up to 30.7 percent) may compel just as many back.

With regards to its short-term impact on liquidity, let’s call the loyalty revamp a slight detriment.

All of this is not to say that Party’s paradigm shift is a net negative for the industry, just that like we witnessed with Full Tilt, there are short term consequences to making life more difficult on site regulars.

Cutbacks to tournament guarantees

The currently in-progress Garden State Super Series III features fewer events and a 20 percent lower series guarantee ($800,000) than its predecessors.

WSOP’s Fall Poker Classic guarantees just $60,000, spread out over eight events.

While it’s difficult to fault operators for wanting to dodge mass overlays, downsized events are less likely to attract recreational players, especially when the average buy-in tends toward the higher side.

A dearth of promotions on 888 and Party

Both 888 Poker and PartyPoker have all but abandoned their promotional efforts.

Absent from PartyPoker’s promotional page is anything resembling a potentially lucrative promotion.

The situation on 888 is just slightly better, as the site is hosting daily $1,000 freerolls from now until October 31, and a single $5,000 freeroll on November 1. Still, 888’s efforts pale in comparison to last year, when daily $5,000 freerolls were the norm.

Which leaves the Borgata and WSOP.com to pick up the slack. Unfortunately, the best either operator has mustered recently is a $1,000 reload bonus (Borgata).

Otherwise, their October promotional schedules come off as repetitive and lazy. Should this trend continue, it’ll do little to convince players to ramp up their play, and even less to attract new players to the virtual green felt.

Conclusion: NJ in for a bumpy ride

All in all, the aforementioned variables shouldn’t completely offset the traffic surge expected from the seasonal uptick, yet may result in gains that are more incremental in nature, with cash game liquidity perhaps topping out as low as 310 cash game players.

The good news is that when PokerStars does enter the equation, New Jersey online poker traffic will receive a notable uptick.

How much is anyone’s guess, although a reasonable starting point appears to be approximately 20-30 percent.

Image Nadezda Murmakova / Shutterstock.com