NJ Online Poker Revenue Up 12.5 Percent In Year Three

NJ Online Poker Year Three In Review: Market Expansion And Renewed Commitment Only Spur Incremental Growth

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It was an eventful yet ultimately underwhelming third year for the NJ online poker industry. One marked by a new arrival, previously unseen ambition, and just a hint of growth.

Industry revenue is only in a slightly better spot than 12 months ago. Cash game liquidity is down. This, despite the long-anticipated entry of PokerStars, and a strong willingness on the part of all operators to push the limits of the market.

As positive as these changes were for the health of NJ online poker, their smallish impact on the raw numbers hammers home the notion that real market growth is intimately tied to other variables, namely interstate expansion.

The good news is that when that expansion does come, (most) existing operators will have the experience and foresight to thrive. But for now, incremental gains are about the best one can hope for.

Recapping year three of NJ online poker

The past twelve months certainly brought more highs than lows, with a few unexpected twists thrown in.

November 2015 – February 2016: Market stagnation, Borgata considers move

In the months between PokerStars’ regulatory approval in late September 2015 and its actual March 2016 launch, the industry struggled to tread water.

Year-over-year revenue wasn’t down by the same double-digit percentages it was during the first three-quarters of 2015, but declines were still the norm.

The annual seasonal uptick too, was less than inspiring, with cash game liquidity up only 5 percent from November to early March. (Data provided by Poker Industry Pro via PokerScout.)

The only significant news occurred in February 2016, when it was reported that the Borgata was considering breaking ties with bwin.party. The news came on the heels of GVC’s takeover of bwin.party.

It is believed that the Borgata was having doubts about GVC’s ability to secure a NJ license. These doubts were not without merit, as GVC immediately reopened Party Poker to a number of grey markets.

But there may have been more to it than that. While a strong contender, the Borgata’s performance in the online sector wasn’t nearly as dominant as it was among land-based venues in Atlantic City.

On the online casino front, lesser names Tropicana and Golden Nugget were matching it stride-for-stride. And the Borgata only controlled roughly 55 percent of the two horse NJ online poker market.

GVC’s arrival may have provided just the excuse Borgata online needed to latch on with another, more promising provider. The Borgata went as far as persuing a relationship with Game Account Network last spring.

Looking back, it does appear that the Borgata was merely taking precursory steps in case GVC’s didn’t receive a license. Since GVC was approved by NJ regulators, there’s been no mention of Borgata going rogue.

But that’s not to say Borgata won’t consider other options in the future, especially if its software provider continues to struggle.

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March 2016 – May 2016: Fresh blood reinvigorates market

After numerous delays, PokerStars returned to the NJ online poker market on March 16, 2016. The impact was strong and immediate.

At first it looked like PokerStars would greatly expand the market. Revenue for March was up 10.5 percent year-on-year, despite PokerStars being live for only half the month. In April, that figure had grown to over 30 percent, with PokerStars accounting for a 45.5 percent market share.

PokerStars’ strong start was just as much a product of novelty and curiosity, as it was a result of robust marketing. The site’s launch was supported by generous welcome packages, April’s Run It Up Resorts Rumble, and daily streams by Twitch Poker pioneer Jason Somerville.

The introduction of the Spin & Go format also drove traffic to the site, and many of Stars’ early promotions were focused on the lottery-poker hybrid. The running of the first NJSCOOP in May looked to all but solidify PokerStars’ return to dominance in New Jersey.

In this instance, looks would prove somewhat deceiving.

June 2016 – September 2016: The novelty fades

By June, it became apparent that PokerStars’ impact on the market was more cannibalistic than additive. Year-over-year revenue increases had dropped to single digits, and total revenue was lower than it was during the months prior to Stars’ launch.

PokerStars’ position too, was waning quickly. From the period of June to September, the operator only averaged a 38.4 percent market share. While marketing pullback and declining hype contributed to the falloff, other circumstances looked to have played a role.

Most notably, after a nearly five-year absence, the PokerStars brand lost some of its luster. Younger players, who tend to dominate the online poker scene, may never have heard of PokerStars.

Of the players who made PokerStars their home, many appeared to be tough regulars. Which makes sense, given that seasoned veterans of the game most likely had roots on the pre-Black Friday version of the site.

The problem, at least from my perspective, was the regulars quickly ate up the net depositing players. And without ways to easily replenish the player pool, liquidity took a tumble.

On a more positive note, another reason why PokerStars’ market share suffered was due to promotional pushback from Party/Borgata, and particularly WSOP NJ. The latter’s efforts were so strong, that by July, the WSOP/888 Poker network leapfrogged Party/Borgata for second place.

That same month, the network’s highly promoted, and softer cash games, began drawing more traffic than Stars’. And by September, it only trailed Stars’ revenue by approximately $100k.

PokerStars had an answer prepared, however.

October 2016: Pushing boundaries

In October, PokerStars reminded the NJ online poker industry why it’s the number one operator worldwide. One of those reasons: it possesses an unparalleled ability to craft attractive tournament series’.

Despite declining margins, the operator did not hesitate to roll out the most ambitious series in the market to date. The inaugural NJCOOP came affixed with a $1.2 million guarantee; just higher than the one attached to Party/Borgata’s GSSS V.

The two series’ couldn’t have played out more differently.

If anything, the NJCOOP served as a counterpoint to the GSSS V, with most events coasting by their minimum benchmarks. On the flip side, roughly two-thirds of GSSS V events failed to make the cut.

More significant still, the NJCOOP ran without a single technical hitch, while the GSSS V was plagued by widespread server issues, cancellations, and inaccurate distribution of player funds.

The NJCOOP helped propel PokerStars to its first $1 million month since May, and the industry as a whole to nearly $2.4 million in monthly revenue. It also sent a clear message to anyone trying to match it stride-for-stride: Don’t.

PokerStars wasn’t done there.

In late October, it held its first live tournament event in the US in over five years. PokerStars Festival at Resorts may have been sparsely attended, but the expenditures that went into providing a premier experience are a testament to its commitment in the US.

As has been the case, Stars’ big moves prompted a response from WSOP NJ, which ran a slew of top-shelf promos the following month. This developing call and answer between the two will only help the industry, incrementally as that may be.

NJ online poker by the numbers

In the past 12 months, NJ online poker has generated $26,268,148, representing a 10.3 percent uptick over the 12 months prior.

A better indicator of market health growth might be to compare revenue from June – October of 2015, to the same period in 2016:

  • June – October 2015 revenue: $9.39 million
  • June – October 2016 revenue: $10.56 million (+12.5 percent)

Based on these figures and accounting for the downward trend revenues were on before PokerStars returned, PokerStars appears to have grown the market by approximately 15 – 20 percent.

This range pales in comparison to the growth rate of NJ online casinos, despite circumstances for online poker that were about as favorable as they could have been.

Year four outlook

Given the recent turn of events, it’s likely that Party/Borgata will temper its ambitions in the ensuing months, focusing mostly on rebuilding player trust.

Its conservatism will probably be more than offset by aggressive moves by WSOP NJ and PokerStars. But with nothing on the same scale as PokerStars’ reentry to shake things up, the immediate impact will probably be small.

Therefore, expect year four revenue to remain mostly flat.

However, that doesn’t mean all efforts will be for naught. In particular, live PokerStars events will continue to spread brand awareness, which will pay dividends down the road.

Also, the more aggressive risks operators take, the more they’ll learn about what works and doesn’t work in the emergent US market. This will well-position them to get off to a hot start in any new state where online poker goes live.

- Robert DellaFave is a game designer and avid poker player. He writes for several publications centered on legal US online poker and the regulated online gambling industries in New Jersey and Pennsylvania.
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