Operators in the French market are now in their sixth straight quarter of growth. The first four years of nationally regulated online poker were thoroughly miserable, with the original 22 license holders whittled down to just five.
The market now consists of:
A five-year review published in November 2015 stated that eight out of 11 surviving operators had lost money in every quarter since regulation began.
The key problems were identified by the regulator as high taxes, equivalent to around 37 percent of gross gaming revenue, a lack of liquidity as the market was effectively segregated, and a paucity of authorized game types.
Since then, taxes haven’t changed, but the regulator has expanded the games that are available, so Omaha can now be played.
Italy hasn’t yet joined the shared liquidity pool, but on Jan. 16 this year, PokerStars became the first operator to put French and Spanish players together at the same tables.
On May 23, Portugal’s poker players joined in, creating a single online poker market for a combined population of 124 million.
ARJEL reports that in the first half of 2018, online poker revenues came in at €129 million ($150 million), up six percent on 2017. Cash game revenue increased by 14 percent and tournament revenue rose by 12 percent.
Both Q1 and Q2 revenues from poker were the highest since 2013.
Not all the gain can be attributed to the enlarged player pool. The increase in revenues began in the previous year, so there are other factors in play. Right across the regulated gambling sector revenues have risen.
Sports betting revenues of €328 million ($381 million) were up 61 percent compared to the first half of 2017. Even discounting the impact of the FIFA World Cup this is still an impressive growth rate.
Nevertheless, the new international shared liquidity has been an important revenue driver.
During the earnings call for their first quarter of 2018, The Stars Group mentioned that they had seen a 33 percent increase in revenues since the introduction of shared liquidity.
PokerStars could be expected to be the greatest beneficiary of shared liquidity since it had the largest player pool in all three countries. However, it is not alone. PartyPoker is also seeing the benefits, and on July 10 French operator Winamax began operations through its newly licensed Spanish business.
The French tax rates are brutal, but they are not much better in Spain, and Portugal brought in regulation with tax rates at the very top of the European range.
The turnaround in the popularity of online poker has occurred despite these high tax rates.
It is a reasonable hypothesis to suggest that the negative effects of high tax rates might be partially neutralized by sufficiently large player pools.
It may be that after a certain tipping point, player pools get large enough for marketing strategies and larger tournament guarantees to become more effective.
The chance to win six-digit tournament prizes may be a self-reinforcing mechanism for attracting players away from the unlicensed black market sites and encouraging more people to take up online poker.
When online poker finally gets up and running in Pennsylvania, and assuming that it joins the shared liquidity pool, the population served by the shared pool will almost double. The market will still be small compared to the France/Spain/Portugal pool, but Pennsylvania could be enough to provide a tipping point of its own.
Adding Pennsylvania players might be enough to create a player pool that will encourage greater participation not only from Pennsylvanians, but also from New Jersey residents.
The corollary of this is that other states looking to introduce online poker, especially larger states such as New York and California, may look at the European experience and decide that they too can levy high taxes, and compensate by sharing liquidity.
Pennsylvania has already levied outrageously high license fees for online gambling. But each of nine casinos has put up $10 million for the three license package for online gambling. Sports betting tax rates of 36 percent are shortly to be tested in the harsh reality of the market.
If Europe and Pennsylvania can create a successful online poker and sports betting market with such high taxes, other states must ask themselves if they can do the same.
It’s great to see the French online poker market growing, but the consequences for the industry may not be quite what it expects.