Regulated Online Poker Not Yet The Financial Windfall Predicted By Analysts

Home » Poker News » Regulated Online Poker Not Yet The Financial Windfall Predicted By Analysts

Tuesday, February 25th, 2014 | Written by Lucy Brown

Despite initial predictions over the huge payoffs a regulated online poker industry would offer the US, early indication reveal enacted Internet gambling laws are so far failing to generate the financial windfall that many analysts had forecast.

US online gaming markets off to slow start

In fact, instead of producing overflowing balance sheets for the State’s three regulated online poker markets, Delaware could only muster an inconsequential $253,000 of revenue for November and December, while New Jersey generated just $9.5 million in online gambling revenue for January. Although that figure represents a 28% improvement over New Jersey’s December numbers, it still fell far short of the $15 million monthly revenues anticipated by experts, highlighting the harsh divide between rhetoric and reality.

Nevertheless, the regulated US market has yet to celebrate even its first year of operation, and when Nevada launched its first real-money Internet gambling site UltimatePoker.com in April, 2013, the state said it would wait until three sites were up and running before releasing monthly revenue details. Only last week did South Point Poker then join WSOP.com and UltimatePoker.com, so the industry will have to wait a while longer before discovering the state of online gaming in Nevada and whether it has attained its estimated $200,000 to $500,000 in revenue per month.

However, early indication show Nevada, too, will fall short of the early optimism encapsulated by Reno gaming analyst Ken Adams, who 10 months ago, said: “This is, for Nevada, a new day. There’s been a huge amount of speculation on what online gaming means. Estimates in New Jersey run from $20 (million) to $30 million to $2 (billion) to $3 billion. The only way to find out is when it starts. Up to now, we’ve been talking in theories. Now we’ll get a peek at reality.”

State of US online gaming so far

In addition to the regulated online gambling markets of New Jersey, Nevada, and Delaware, a Gambling Compliance report released in January revealed another ten states would seriously consider Internet gambling legislation in 2014, including California with a state population of 38 million people, Colorado (5.2m), Louisiana (4.6m), Mississippi (3m) and Pennsylvania (12.8m).

However, before jumping on the online gambling bandwagon the larger states mentioned will first be carefully studying the results coming out of New Jersey with its population of 8.86 million residents, rather than the smaller markets of Nevada (2.76m) and Delaware (917k).

Up until now, even though New Jersey’s online gaming revenues have failed to catch the imagination of other states, the nearly 200,000 online gambling accounts created have at least encouraged gaming industry officials, especially in light of a recent poll by Lloyd D. Levenson Institute of Gaming, Hospitality and Tourism, which forecasts that figure may triple by the end of 2014.

The Garden State’s domestic market is currently dominated by two main companies controlling 73% of the market, namely Boyd Gaming Corp (owner of Borgata Casino) with its partner European Internet gaming; and Caesars Interactive Entertainment (owner of Caesars Atlantic City) along with the World Series of Poker, and 888 Holdings.

Encouragingly, New Jersey residents also appear to be abandoning unlicensed offshore big poker rooms, such as PokerStars and Full Tilt Poker, in favour of NJ’s regulated domestic companies, and as Rich Muny, Poker Players Alliance VP of player relations, explains:

“The offshore sites aren’t big names anymore. We’re really seeing them get pushed out of the marketplace by the licensed and regulated games, as it should be. We would all rather play on the domestic sites because it benefits us as consumers. Now a disgruntled player can go to a regulator if there’s a dispute with the site over billing or any issue.”

Analysts remain optimistic for industry’s future

Still, the USA’s nascent online poker industry has a long way to go before its true potential is realized, and many analysts continue to remain optimistic that increased activity by casinos’ advertising their online poker activities, as well as possible agreements between states to pool their players, could help to grow gaming revenues exponentially.

Focusing on the New Jersey market, Fitch Rating Service analyst Alex Bumazhny, commented: “Several factors will drive sequential growth. The primary driver will be the ramp-up in players’ awareness of online gaming as a result of operators’ marketing efforts. Online operators’ executives have been open about the importance of marketing aggressively early on.”