As we approach the Thanksgiving holiday, all three of the states that have regulated online gaming and/or poker – Nevada, New Jersey and Delaware – have or will pass their first year anniversaries. Of late, however, none of these markets has been the revenue driver that their respective states had hoped for.
Delaware, the smallest of the three states with roughly 900,000 residents, naturally is having the toughest time in drawing customers. The three “racinos” (called such because horse racing tracks operate them) – Dover Downs, Harrington Raceway and Delaware Park – only brought in $32,305 for online poker in September. The numbers weren’t much better when factoring in the casino games that the three sites offered as, in the same month, only $145,000 in gaming revenues were generated, the lowest since the Delaware industry opened last year.
The other state to offer full online casino gaming and poker, New Jersey, has also been hit as we get closer to winter, a time when their traffic should be increasing. In October, New Jersey’s online poker revenues fell below $2 million for the first time in their 12-month history. The overall gaming revenues from New Jersey’s online gaming industry also saw unimpressive revenues, bringing in $9.5 million for the month of October, a $500,000 shortfall when compared to their September operations.
The story from Nevada mirrors that from their fellow online brethren. In the month of September, the Nevada online poker industry (the only one of the three that doesn’t have online casino gaming) recorded their worst month since the beginning of the industry in April 2014. The online poker sites in the Silver State only brought in $693,000, far below their apex during the 2014 World Series of Poker.
The problems for the regulated states is twofold. Player pools large enough to support an online market haven’t materialized as Nevada, with 2.8 million residents, and New Jersey, with its approximately 9 million residents, can’t generate the numbers to support the number of sites in operation. While Nevada and Delaware have entered into a compact to share player pools, the paltry numbers in Delaware (at many times there aren’t enough cash game players to fill a nine-handed table) will not add much to the combined market.
The other problem that is faced by the states is one of oversaturation. Delaware’s three sites is far too many for the customer base and Nevada’s three sites (the Caesars Interactive WSOP.com, South Point’s Real Gaming and the Station Casinos- owned Ultimate Gaming that will shut down operations on Monday) also falls into that situation. Even with its larger population, New Jersey’s online gaming industry of five sites (Ultimate Gaming left the New Jersey market in September) is more than can be justified by its player base.
As seen on Friday, Ultimate Gaming has seen the writing on the wall and will probably step away from the state-by-state online gaming world. “The state-by-state approach to online gaming has created an extremely cost-prohibitive and challenging operational environment,” Ultimate Gaming Chairman Tom Breitling noted when announcing Ultimate’s demise on Friday.
There are some glimmers of hope that exist in the New Jersey and Nevada markets, but they won’t be the saviors for either industry. The Amaya Gaming-helmed PokerStars is patiently waiting for licensing from the New Jersey Division of Gaming Enforcement, but the introduction of a PokerStars-based online poker system isn’t expected to boost traffic to the industry significantly. In Nevada, 888Poker is expected to debut its self-branded product (888 already provides the platform for WSOP.com) during the first quarter of 2015, but it isn’t expected to be a game changer, either.
There are a few things that would revive the online industries in all three states. Should one of the larger states in the U. S. (California, Pennsylvania, maybe New York – we’re looking at you!) enter into the online gaming scene, it would provide a boost to the industry and perhaps give a fuller look at what online gaming could be in the U. S. with the proper player base (player compacts between the states wouldn’t hurt either).The other situation would be the regulation of the online gaming and poker industry on a national basis, but this isn’t expected with either the “lame duck” session of the outgoing Congress or the new one that will be seated come January 2015.
