Eilers projects that NJ online gambling will grow by an additional $33.2 million in 2017, representing a year-on-year increase of 17 percent.
That projection is certainly not out-of-bounds, and may even tend toward the conservative side given the recent trajectory of the market:
All this, despite the addition of just two new operators in 2016 — PokerStars and Play SugarHouse — both of which (as estimated by Eilers) have yet to capture more than a smallish segment of the online casino market.
PokerStars did make waves on the online poker front, occupying a 32.9 percent share in 2016 despite only being in operation since mid-March.
But as Eilers points out, this came primarily “at the direct expense of Borgata / Party and WSOP / 888.”
Of the $33.2 million increase expected, Eilers sees more than 100 percent of that figure coming by way of online casino growth (+$34.8 million / +20 percent). Which means that online poker revenue is projected to decline.
Sure enough, the numbers do suggest a murky path forward for online poker.
In 2016, the vertical experienced an 11.3 percent uptick. However, there should be a bold asterisk next to that figure, as the increase can be directly attributed to the entrance of PokerStars.
Before PokerStars entered the equation, y-o-y revenue had been slipping: down 6.4 percent in January 2016, and 2.5 percent in February — more if one accounts for the extra day in February 2016. And from 2014 to 2015, industry revenue had dipped a rather alarming 18.1 percent.
Furthermore, the crux of PokerStars’ impact hit right after the launch phase, when novelty and presumably, marketing spend, were at their peak. In April and May, y-o-y revenue was up 30.4 percent and 33.3 percent, respectively.
But since, single-digit percentage growth has been the rule rather than the exception.
The report comments on the PokerStars effect:
“PokerStars has had a meaningful, but not transformative, impact on the NJ online poker market, which rose 11% year-over-year.
Further, the impact heavily concentrated in the months immediately following launch and appears to be fading (to say it another way, the positive impact of PokerStars is no longer overcoming the natural decline of the market at large).”
Supporting this theory, industry cash game liquidity has already fallen 16.8 percent in 2017 (data provided by Poker Industry Pro via PokerScout), primarily during a stretch when volume typically rises.
Given this, Eilers’ projection of a $1.5 million drop for online poker hardly feels pessimistic.
The report highlights the influence branding has on revenue, suggesting that land-based brand performance is somewhat predictive of how an equivalently-branded online site will perform.
But the correlation is at is strongest when the online property first launches, after which, factors specific to online gain more traction.
The Borgata, which saw its online casino and poker properties get off to a torrid start before falling into the pack, is cited as an example.
On the flip side, the lesser-known Golden Nugget, utilized its superior game library, strong promotional/bonus structure, and array of payment processing vehicles to drive growth.
It’s also worth noting that the Golden Nugget’s online gambling partner Betfair is estimated to be the only non-Atlantic City brand to generate more than 20 percent of a license holder’s online casino revenue.
As far as new brands poised to enter the equation in 2017, Eilers projects “at least two, and as many as four, new casino brands” will launch in the NJ online casino market.
Among those most likely to see the light of day are MGM, which would presumably launch under the Borgata license, and in my estimation, would have an immediate impact on the market.
TEN could also launch an online casino brand, pending it ever opens. And it’s not out of the question for another international brand to try its hand in the US market.