Pennsylvania is gearing up to become the second major state with legalized online casino gaming. With a launch potentially months away, Online Poker Report has identified five lessons the Keystone State can take from the Garden State’s experience.
In the first installment of this series, OPR will dissect the positive and negative aspects of the first-mover advantage.
New Jersey has proven beyond a shadow of a doubt that any advantage in being a first mover is wildly overrated. In some cases it can be detrimental.
Thinking it would help everyone start on equal footing, New Jersey instituted a synchronized launch. The state prohibited online gambling websites prior to the prearranged launch date of Nov. 21, 2013.
What ended up happening was a rush to have a viable product ready by the chosen date. The result: Instead of a company’s best product, New Jersey residents simply got a product that was good enough to pass regulatory tests by the date.
As such, New Jersey’s online gambling sites had numerous shortcomings:
It’s safe to say that the entire first wave of online casinos and poker rooms would have liked more time to work on their product before launch. Unfortunately, at the time they believed they would be at a disadvantage if they didn’t get their product to market alongside their competitors.
Much like a top prospect being called up to the big leagues prematurely, a lot, if not all, of the early websites weren’t ready for prime time. In so doing, many were simply using scaled-back software that was one or more generations behind their European products.
Even worse, as Golden Nugget online casino proved, the rush was completely unnecessary and likely counterproductive.
Golden Nugget was supposed to be part of New Jersey’s first wave online casinos. That didn’t happen.
The company’s online platform was beset by technical issues and went offline during the soft launch period. By the time the issues were solved, Golden Nugget’s launch was delayed by nearly a month.
Think of it this way: Golden Nugget was supposed to be one of seven new restaurants opening in the same strip mall on the same day. It ran into some issues and couldn’t be part of the grand opening, theoretically giving its competitors a leg up.
Now imagine if the air conditioning throughout the entire mall was broken for two weeks, credit card machines weren’t working, and there were an inadequate number of parking spots to accommodate customers.
Under those circumstances, most customers would have a negative association with one of the specific restaurants, and to a lesser extent, the entire mall.
As such, what should have been a negative turned out to be a positive for Golden Nugget. By not being present, it avoided being directly associated with the circumstances that were largely beyond its control.
Golden Nugget Senior Vice President and General Manager for Online Gaming Thomas Winter routinely calls the company’s launch delay a blessing in disguise.
While its competitors were dealing with numerous customer complaints ranging from a lack of depositing options to false-negatives on the geolocation and player verification fronts, Golden Nugget was watching from the sidelines. By the time Golden Nugget launched, progress was already being made on many of the early technical issues.
Further, Golden Nugget began marketing after its competitors had already spent like drunken sailors and tightened their purse strings.
In a 2015 interview with iGaming Business Winter explained the favorable advertising climate Golden Nugget entered:
“As our competitors all launched marketing campaigns at the same time, they really struggled to acquire customers cost-effectively.
“And in most cases, the operators had pulled back from their marketing spend already.
“That gave us the opportunity to achieve a disproportionately high share of voice and acceptable CPAs (cost per acquisition).”
Golden Nugget is far from an outlier.
Several other late arrivers like Resorts, PokerStars and PlaySugarHouse have all grabbed significant market share, once again calling into question the value of being a first-mover.
Resorts online casino launched in February 2015, nearly 18 months after the first online casinos. By April 2016, Resorts cracked the $3-million-month mark, and was on par with established online casinos like Caesars and Tropicana.
A big part of Resorts’ surge was the launch of PokerStars in March 2016. Within a month PokerStars overtook PartyPoker and 888 / WSOP NJ as the top online poker room in New Jersey, despite giving its competitors a two-and-a-half-year head start.
Another later arrival was Philadelphia-based SugarHouse Casino. Its New Jersey online casino launched in September 2016.
The late launch doesn’t appear to be affecting business. According to Eilers & Krejcik Gaming, the PlaySugarHouse sub-brand is responsible for 22.5 percent of Golden Nugget’s online gambling revenue. It also has an eight percent total market share, good for seventh best (out of 18 brands) in the market.
Being first to market has its advantages, but those advantages aren’t enough to make up for an inferior product and/or technical issues.
Pennsylvania would be wise to avoid setting arbitrary deadlines and pushing its operators to bring their products to market before they’re ready. Further, Pennsylvania operators need to understand it’s ok to launch after your competitors.
After all, as the saying goes, you never get a second chance to make a first impression.