Could A New Jersey Poker Site Possibly Close In 2019?

February 6, 2019
Could A New Jersey Poker Site Possibly Close In 2019?

Online poker sites in New Jersey just endured their very worst year for revenue in 2018. So, given the lack of activity in the market, it is possible that one or more sites could shut down in 2019.

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Things are not looking too good for online poker sites in NJ

New Jersey poker sites only managed to draw $21.3 million in revenue last year. That figure represents a $3 million reduction from 2017’s figures.

In fact, $21.3 million is $2.5 million less than the market’s previous nadir in 2015. Of course, in 2015, there were also only two networks active, and PokerStars was still a year from entering the market.

Two years later, only one licensee in New Jersey is making any revenue gains in online poker. It’s not PokerStars, either — it’s the Caesars license that houses both WSOP and the 888 networks.

Alarmingly, PokerStars is not even the highest earner in New Jersey anymore. Despite the millions in marketing money poured into the state, the worldwide leader has slipped into second place in the Garden State.

Perhaps the most concerning part about the outcome of 2018 is that New Jersey poker sites were able to use the multi-state compact for much of the year. Since late April, New Jersey poker players have combined with players from Nevada and Delaware to form one large pool of potential table occupants.

It hasn’t helped. At best, poker revenue has remained roughly level since then and dipped below $1.8 million in each of the last four months of the year.

Things are not looking better for 2019, either. The Department of Justice (DOJ) issued an opinion in January that the Wire Act, which prohibits betting over electronic devices in specific contexts, actually affects all online gambling.

If the DOJ happens to instruct its prosecutors to place the enforcement of this opinion high in their priorities, the multi-state compact may become a thing of the past. Even though it hasn’t helped New Jersey sites, taking it away wouldn’t be a good thing either.

It’s not like the operators don’t have other options

Operators may also be growing tired of expending resources to keep such a low-profit venture going. From their perspective, there are far better uses of time and money than online poker in New Jersey.

One of those uses is online casino gambling. On a pure revenue basis, online gambling has earned more than seven times the revenue of online poker since each of their launches.

The situation grows even direr as time passes. In December 2018, online casinos held $27.2 million against online poker’s $1.8 million. In other words, online casinos now earn more than 15 times what online poker does.

Gaming operators could also reasonably turn their attention toward sports betting before online poker. Online sports betting in New Jersey earned $14.7 million in December 2018.

Like all businesses, casino operators must consider the opportunity costs of their various endeavors. In other words, they must determine how much business they will lose in pursuing a particular option versus how much that option will pay off.

Unfortunately, there are plenty of legitimate reasons that New Jersey site owners could decide that poker simply isn’t worth the trouble.

So, which sites are on deathwatch?

There are three license holders in New Jersey that have poker networks active on them. They combine to host four networks and seven sites or skins. They are:

Of the license holders that host poker, Borgata is the weakest of the three. The four sites or skins that operate on Borgata’s network have struggled to earn $400,000 per month since the introduction of the multi-state compact.

So, we have to consider Borgata Poker, playMGM Poker, partypoker and Pala Poker to be on the bubble. Dividing $400k between these four sites doesn’t seem to be worth the time, particularly for a company the size of MGM.

However, there are indicators that MGM is committed to online poker, generally speaking. Pennsylvania is now accepting applications for online gambling from outside interests, and MGM included online poker in its application to operate in Pennsylvania. To do so, MGM had to pay a $4 million licensing fee.

So, it’s possible that providing online poker is a matter of principle for MGM. We just don’t know how much MGM values principle over profitability.

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