Borgata/Party Poker Expects To Turn NJ Profit By Year’s End

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Wednesday, May 7th, 2014 | Written by Charles Washington

Despite having made a $3.2 million loss for the first quarter of 2014, multi-jurisdictional gaming company Boyd Gaming is hoping its New Jersey online gambling operation, alongside its platform partner bwin.party, could soon return positive results, with Boyd Gaming CEO Kevin Smith stating that it expects online gambling to be “cash flow neutral or profitable by the end of the year.”

Borgata/Party Poker NJ market leader

Boyd Gaming is co-owner of the Borgata Hotel Casino & Spa in New Jersey, and provides online gambling games, including poker, via its Party Poker NJ and its BorgataPoker.com websites. It also happens to be the state’s dominant online gambling room with $4.4 million in revenues for March, representing 37% of the total market. As CEO Kevin Smith stated after March’s results were released:

“Borgata has been New Jersey’s land-based gaming leader for more than a decade, and is cementing its position as the state’s online gaming leader as well. We continue to see solid growth in online casino gaming, and are working to further strengthen our poker business.”

In March, NJ.PartyPoker.com and BorgataPoker.com also had an average of 180 cash game players over a seven-day period, ahead of nearest rivals Caesars (WSOP.com) with 120 players, Bally’s (888 Poker) with 80 players, Trump Taj Mahal (Ultimate Poker) with just 6 players, and the recently launched Trump Plaza (Betfair) with none at all.

Boyd Gaming Reports online losses in Q1

Being the market leader, however, has not transferred yet into profits for Borgata and Party Poker NJ, who reported a $3.2 million operating loss for Q1 2014. That situation is expected to change as the year progresses, though, as much of the losses were taken up by nonrecurring expenses including “startup costs and launch advertising.” As Boyd Gaming CEO Kevin Smith, explains:

“Like any start-up business we invested heavily in marketing and advertising. Of the $3.2 million operating loss reported by our online business during the quarter, about $2 million was due to onetime nonrecurring expenses.

Established brands benefit from brand awareness

Already having a strong established land-based casino brand was obviously of huge benefit to the Borgata when it decided to enter New Jersey’s nascent online gambling market. A Commercial Intelligence poll of 506 NJ online gamblers, for instance, revealed 34% of them chose Borgata as their favorite land-based casino, followed by Caesars (24%), Tropicana (14%), Bally’s (12%), Trump Taj Mahal (11%), and Trump Plaza (4%).

When asked about their favourite online brands, the same respondents voted in the following order: Caesars (78%), Borgata (63%), Tropicana (36%), Golden Nugget (26%), Trump Taj Mahal (19%), and Trump Plaza (12%).

Prudent approach to marketing expenditure in future

Having spent millions promoting its online product to New Jersey residents, Boyd Gaming said it would now be adopting a more prudent approach to its marketing campaign, which should then be reflected in lower operating costs over the coming quarters. Responding to a question by Thomas Allen of Morgan Stanley whether lower marketing expenditures could ultimately result in Borgata losing its online dominance in The Garden State, CEO Kevin Smith, commented:

“I think a lot of our market share that we’ve gained is not due to the $2 million or so that we spent in marketing and start-up advertising. It really has to do with the power of the Borgata brand. So we’ll continue to market and advertise in a prudent fashion where we think we need to, when we think we need to and provide the right incentives to our customers to keep them on our site. But we don’t think kind of pulling back to a more normal run rate is going to impact our market share or our ability to continue to run a good business there.”

Expanded NJ igaming to further boost forecast

In addition to other cost saving measures, Boyd Gaming is hoping that further growth in New Jersey online gambling will help give a further boost to its end of year financial results. In March, for instance, the state reported a 15% increase in revenues to $11.9 million, up from the $10.3 million it generated in February. Meanwhile, February’s tally was an improvement on the $9.5 million taken in January, which in turn was up 28% compared to the $7.4 million generated in December 2013.

Furthermore, while online casino games continue to grow and currently account for around two-thirds of all igaming revenues in NJ, online poker has remained fairly flat. This has lead analysts to speculate that in the future New Jersey may have to seriously consider subscribing to Nevada and Delaware’s poker-only interstate liquidity sharing agreement. It has been estimated such a move could net NJ an immediate 30% plus increase in its player pool, with the subsequent impact on revenues being exponential.