Last week the New Jersey Division of Gaming Enforcement (NJ DGE) released a 2014 year-end review of iGaming in the state, and now industry analysts GamblingCompliance have done likewise. The two reports generally paint the same picture of the first full year of online gambling in New Jersey, but do so in very different ways and from two different perspectives.
The DGE’s report emphasized the numerous regulatory successes during New Jersey’s first full year of iGaming and touched upon the state’s plans for further improvement in 2015 and beyond, such as interstate or international compacts, and the introduction of new credit card merchant codes for legal online gambling transactions.
GamblingCompliance’s report was released just days after the DGE’s, and provided a nice compliment to the generally rosy and bullish DGE report, which was regulatory focused. GC’s report was more industry focused and bearish, with sections on the struggles of the market, particularly online poker, as well as which operators rose to the top of the pack and the state’s regulatory successes.
Anyone trying to get a handle on Year 1 of iGaming in New Jersey would benefit from reading both reports. You can read my takeaways from the DGE report here, and my colleague John Mehaffey’s thoughts here.
GamblingCompliance highlights 6 key takeaways
GamblingCompliance designated six “lessons learned” in their report on Year 1 of online gambling in New Jersey.
Lesson #1: The Market Disappointed
As GC notes, Internet gambling failed to halt the downward trend of Atlantic City’s casinos and gaming in the state. Even with the addition of iGaming, total gaming win declined for the eighth straight year, with online gambling accounting for just 4.3% of total gaming win.
GC also notes that initial projections, including their own, were way off the mark. The closest was Econsult which missed by 69%, followed by GamblingCompliance whose initial forecast was more than twice the amount New Jersey iGaming sites actually generated over the course of 2014 – $261million estimated, compared to $124 million of actual revenue.
However, compared to the state of New Jersey the above forecasts were pretty accurate, considering New Jersey’s projections (based off a faulty Wells Fargo report) were off by a whopping 1,200%.
Lesson #2: Poker Struggled
One of the more worrisome findings of the report was the slow decline of online poker during Year 1. Online operators told GC, ” retaining casual players — many of which were quickly beaten by skillful players and have yet to return — has proven to be difficult, or costly, or both.”
This is the exact opposite of what was occurring during the Poker Boom, where for every player that busted two were waiting to fill the seat.
Resolving the online poker attrition rate, and finding cost effective methods for player acquisition, should be top priorities for operators in 2015.
Lesson #3: Casino Performed Relatively Well
On the other hand, online casino games managed to show steady progress throughout the year, as GC reports, “Internet casino win per capita is 53% greater than it was at market launch,” whereas, “Internet poker win per capita is 35% less than it was at market launch.”
Basically, online casino is growing as expected, but online poker has not just stalled, but has regressed.
Lesson #4: Structural and Cyclical Factors Hurt Growth
The report also notes how impactful singular outside forces can be on the market.
In addition to the expected seasonal decline during the summer months, GC suspects the closure of Ultimate Gaming in September contributed to the decline from August to September and TD Bank’s decision to stop processing iGaming transactions contributed to the further decline from September to October.
In a larger, more robust market these factors would likely pass without notice.
Lesson #5: Market Winners Began To Emerge
As GamblingCompliance notes, clear winners emerged in the market, with the top three operators generating 80% of the revenue over the course of 2014.
However, it should be noted that 2015 could further shake things up, as PokerStars is expected to launch this year, and the closure of Ultimate Poker/Casino has left a void that could elevate one of the second tier operators into the Top 3.
Lesson #6: Regulation Worked
The DGE report highlighted the regulatory successes during 2014 (not surprising from the industry’s regulatory body) but this was a big enough achievement that GamblingCompliance also gave regulators a hat tip, a signal of just how important this aspect of the industry is for future growth.
Not a single case of underage or out of state gambling was reported in 2014. From a regulatory perspective, iGaming kept all of the promises it made.