At a time when the industry is still trying to get on its feet, the financial services corporation Morgan Stanley has lowered its previous revenue estimates regarding the United States’ online gaming and poker market.
According to Wayne Parry of the Associated Press, the analysis of online gaming in the U. S. by Morgan Stanley has resulted in a reduction by nearly half. Back in 2013, the financial company estimated that the U. S. online gaming and poker market would total $5 billion by 2020. With some results from the three states that have legalized online gaming and poker – Nevada, New Jersey and Delaware – as well as a viewpoint on the rest of the nation, Morgan Stanley analysts have lowered their expectations.
In their new report, Morgan Stanley believes that the U. S. online gaming and poker market will reach a respectable $2.7 billion by 2020, but that is far beneath their original projections from 2013. The three states that have regulated online poker and gaming are a key indicator for Morgan Stanley to make their estimations. In 2014, those states had revenues that totaled $135 million, far beneath the forecasted numbers by Morgan Stanley of $678 million.
There are several reasons for the low figures and Morgan Stanley takes these factors into consideration when making their projections. Problems with payment processing, poor advertising, issues with the geolocation technology employed by the states and the continued availability of offshore sites for U. S. players to play on were all cited in their report as to reasons for the low revenues. The analysts also discussed the political situation regarding online gaming and poker regulation and its future in the U. S.
“We continue to believe that there is a material runway for growth, but results have been disappointing,” Morgan Stanley wrote in their report. “Legislative processes continue to be slow as lawmakers remain unconvinced that online gaming is currently worth the hassle for limited tax revenues.” As to the current legislation in Washington, D. C. that would put a federal ban on the online gaming and poker industry, the analysts believe that its passage would be unlikely but that it is a threat to the burgeoning industry.
“We believe a federal ban of online gaming is unlikely given legislators’ split views,” the analysts continued. “However, a recent hearing in a House Judiciary subcommittee on (Utah Representative) Jason Chaffetz’s proposal for a ban suggests it could be gaining momentum. While the bill may advance out of committee, we believe it faces long odds of passing, especially without carve-outs for online lotteries and existing online gaming states.”
In conclusion, the Morgan Stanley staff did have an optimistic outlook as to the future of online gaming and poker in the U. S. By 2017, the analysts predict that revenues from the industry would be $410 million (still down from previous estimates of $1.3 billion), but there would be many more players in the game. Morgan Stanley predicts that 15 states will have passed some sort of regulation legislation – for online casino gaming, online poker or both – and that larger states would be the driving impetus in bringing smaller states into the game.
While making that prediction, however, Morgan Stanley didn’t name states that would be entering the game. It is well known that California is still wrangling with the different factions inside the state over online gaming regulation and New York and Pennsylvania also have broached the subject. As to the smaller states, Iowa is one that has been mentioned but others are still either noncommittal to the subject or not entertaining it at all.
The picture may appear to be bleak, but the Morgan Stanley report is probably more realistic this time around than previously. Although it isn’t the $5 billion previously projected, it is still a sizeable pie at $2.7 billion by 2020 that can be cut up by those participating.
