Powered By Casino, the NJ Online Gambling Industry Stands To Shatter Last Year’s Revenue Record

Should the inspiring growth of New Jersey online gambling continue throughout the rest of 2016, then there’s little doubt that the industry will book its first $200 million year.

Through the first seven months of 2016, the state’s 13 online casino and five online poker sites have combined to generate $112.2 million in gross gaming revenue; just $10.7 million less than in all of 2014, and more than three-quarters of the industry’s 2015 total.

And at least on the online casino side, operators have more momentum than ever before.

Online casino on schedule for 40 percent growth

Propelled by an ever expanding game catalog, creative and frequent promotions, and stronger land-based integration, the state’s online casino arm continues to grow its share of the market.

So far in 2016, the industry has set a new revenue record in six out of seven months, with May being the sole exception. Last month, it generated $15.36 million, bringing its total for the year up to $96.44 million.

That’s nearly $3 million more than it grossed in the entirety of its first full year in operation, 2014.

By extrapolating revenue earned thus far in 2016 out over the remaining five months, we reveal a total of $165.3 million in annual revenue, representing year-on-year growth of 32 percent.

However, this simplistic model ends up selling the industry decidedly short.

Historically, NJ online casinos have had their best performances in the latter half of the year, particularly December, when gamblers are drawn to a sea of holiday promotions. Accounting for the strong impact of seasonality, our baseline projection jumps up more than $6 million, to $171.6 million.

There is also momentum to consider. Through the first seven months of the year, online casino revenue has grown by 23.1 percent. And as of now, there is no clear indicator that the industry will soon reach a stabilization point.

By contrast, in 2015 it grew just 14.9 percent over an equivalent span. This, despite improvements in the payment processing department, and the launch of a new casino site (Resorts Casino in February).

Intangible factors are also working in favor of the industry:

• Golden Nugget Casino recently introduced Live Dealer games. Others, particularly those who host Live Casinos in international markets (PokerStars, Betfair), are likely to follow suit.
• New gambling formats, such as virtual sports betting, are on the horizon.
• Increased revenue affords operators more flexibility with their promotional and marketing schedules.
• New games have been introduced at an accelerated pace so far in 2016, with many operators expanding their libraries to over 200 games.
• Thanks to the inclusion of prepaid cards and other cashiering options, payment processing is easier than ever before.

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Bottom line

Seasonality, positive momentum and a favorable environment for growth should lead to new revenue records for NJ online casinos in the latter part of 2016.

Projection: $175 – $180 million, up 40 – 44 percent over 2015

A slight rebound year for online poker

So far this year, the online poker industry has surpassed the pace set in 2015. Through July, it has generated $15.75 million, up 10.8 percent year-on-year.

However the uptick is mostly a consequence of the initial hoopla surrounding PokerStars’ mid-March launch. In actuality, the industry isn’t in a much better place than it was twelve months ago.

To illustrate, in July, online poker generated $2.01 million, up just 6.7 percent over last year. That’s a far cry from the more than 30 percent growth the market experienced in April and May.

What’s worse is that the year-on-year growth numbers are trending downward, which suggests that PokerStars’ presence is having a mostly cannibalistic impact on existing operators.

Simple extrapolation reveals that online poker should generate roughly $27 million in 2016. However, given what now appears to be artificially inflated tallies for April and May, we find that this model provides an overly optimistic projection.

More likely, is that NJ online poker will produce even smaller year-on-year gains in the months to come, nearly flattening out by December. The running of a live PokerStars sponsored tournament at Resorts may brighten the outlook slightly, but not so much as to seriously impact online poker revenue.

Bottom line

With the novelty of PokerStars’ launch having almost completely waned, and no major online tournament series’ announced (yet), there’s little reason to suspect online poker revenue will be up much more than 5 percent for the rest of 2016.

Projection: $25 – $26 million, up 5 – 9 percent over 2015

Early outlook for 2017

As mentioned, recent revenue trends suggest that NJ online casinos will continue to enjoy continued growth. However, the hard population cap of the New Jersey market dictates that stabilization will eventually rear its ugly head.

This leveling off process could begin as early as 2017. Given this, and the unlikelihood of new online casino launches, it’s difficult to envision the industry replicating the growth rate of 2016.

Instead look for more tempered growth in the 10 percent range — possibly more should Golden Nugget expand its Live Casino, and other operators adopt the format.

Online poker revenue, on the other hand, is likely to decline slightly.

That being said, the outlook could change dramatically by 2018, as by then, there’s a real possibility that Pennsylvania and/or New York will share online poker liquidity with the Garden State.

Until then, operators will continue to struggle in the small market, and this time around, there will be no big launch to temporarily cauterize the bleeding.