The annual gross gaming revenue report for New Jersey was issued last week. While the document reinforced the declining popularity of gambling in Atlantic City, it was the first report that included a month revenue report for the state’s newest segment of the gaming industry, iGaming.
For the land-based casinos, revenue dipped below $3 billion for the first time in 22 years. Most casinos experienced declines but three casinos posted gains from 2012, Revel (up 27 percent), the Atlantic Club (up 11.6 percent) and the Borgata (up around 1 percent). Ironically, the Atlantic Club closed down early last week after Caesars bought it, with the casino’s gaming equipment going to the Tropicana. Caesars determined that the casino had to close.
For online gaming, the 13 online casinos in operation produced gross gaming revenues of $8.4 million since the launch of iGaming on November 26. Two casinos dominated the market, however, with Caesars Interactive and the Borgata taking $6.1 million of the total. Caesars has the popular WSOP.com site, and Borgata features the PartyPoker.com address.
The totals:
Borgata (bwin.party) $3.7 million
Caesars (888.com) $2.4
Trump Taj Mahal (Ultimate Gaming) $.88
Tropicana (Gamesys) $.75
Trump Plaza (Betfair) $.43
Golden Nugget $.18
Keith Smith, the president of Boyd Gaming, which owns half of the Borgata (MGM owns the other half), said the numbers were gratifying for his company and for the industry as a whole.
“Our network has attracted the largest pool of players in the New Jersey online market, allowing us to offer our customers a wide selection of games and table stakes at all times,” said Smith. “This gives our network a significant competitive advantage and positions us for further success.”
He says the concern that iGaming would cannibalize the gambler who enjoys the live experience was a non-issue.
“When matching our online and land-based databases, we found that 60 percent of online casino customers had not been to Borgata in over a year, and over 75 percent had made fewer than two trips to Borgata in the past year,” Smith said. “And on a combined basis, online and land-based poker revenue at Borgata was up more than 40 percent from our land-based play in December 2012. Clearly, online gaming is complementary to our land-based business, not competitive.”
American Gaming Association President and CEO Geoff Freeman said the report indicated that iGaming is working in a legal, regulated environment.
“New Jersey has responded to consumer demand for gaming entertainment in an innovative fashion—creating a safe and secure online environment with strict regulatory controls and consumer protections,” he said. “More than 150,000 accounts have been created, and undergone rigorous review and approval with respect to the safety and integrity of this online marketplace since it opened in late November 2013.”
Freeman said it demonstrates that iGaming won’t cannibalize land-based casinos, but will prove to be a benefit to the industry.
“New Jersey’s online gaming structure will likely strengthen the economic contributions brick-and-mortar casinos already deliver through job creation and increased tax revenues,” said Freeman. “The New Jersey experience is a testament to the power of effective regulation and I am optimistic the bold move into online gaming will later be viewed as a positive and pivotal time for the gaming industry, our employees and the communities we support.”
The total revenues had to be a disappointment to the governor who legalized iGaming, Chris Christie. While the governor had more problems than low iGaming revenues with the explosion of the “Bridge-gate” scandal last week, the number fell far short of the $1 billion his administration were eyeing in the first year.
Prior to the release of the revenue numbers, Union Gaming Group was estimating revenue between $10 million and $15 million. Nevertheless, Union Gaming said no one should read too much into the first revenue report.
“We think at this point roughly half of the eligible players (in-state and over 21) have not been able to log-on given either payment processing or geolocation software issues,” the group said in a report to investors. “Currently, essentially all credit cards that are tied to large banks (Wells Fargo, Citi, and Bank of America) will not accept online gaming transactions. In addition, initial marketing efforts were pretty minimal and we are just starting to see advertising ramp now. Finally, online mobile gaming is just beginning to rollout. We think as these issues are resolved online gaming revenue should improve throughout the year. We expect the Atlantic City online market from a revenue standpoint when ramped to generate $530 million in annual online gaming revenue (versus the likely $1.2bn the state is forecasting) growing to $840 million after a five-year period.”
Joe Pappano, senior vice president of payment processing company Vantiv Gaming Solutions, told GGB News that a collection of banks, credit card companies and other players in the field have agreed to form a committee to address the legalization of iGaming in the U.S.
“There have been various patches to get around the coding of iGaming transactions,” he says. “But for the first time, the four groups—Visa, MasterCard, Discover and Amex—have come together to create one unified scheme to deal with online gaming. We’re helping to nurture, drive and educate during that process, but they’re coming together because they know it’s not a matter of if this is going to happen. It’s here and it represents tremendous growth and acceptance opportunities for those card brands.”
The division of the play between poker and online casino games was also instructive. According to iGaming blogger March Valerio, poker played a much stronger role than it plays in the land-based casino environment.
“Online poker revenue made up approximately 43 percent of the total iGaming revenue if one considers only the sites that offer online poker, and 38 percent of total iGaming revenue by including the ones that don’t,” Valerio reported, nothing that sites like Betfair (partner with Trump Plaza) and the Golden Nugget do not offer a poker product.
Analysts believe that poker players’ familiarity with online gaming is responsible for the strong showing by the poker games, and that casino gamers will grow exponentially as they become more comfortable in an online environment.
Individual yield per account is also an interesting exercise, according to Valerio. With approximately 150,000 accounts set up by the end of January, each account is worth around $56. But considering that players likely set up multiple accounts at different online casinos, the yield per player is likely to be much higher.
