Latest Revenue Reports Reveal The Perilous State Of New Jersey Online Poker

New Jersey online poker revenues struggled to crack the $2 million barrier in February, all but nullifying the positive momentum of the prior two months.

Conversely, the Garden State’s online casino industry continues to hold its own, posting slight year-over-year gains, and generating more than four times the revenue as the poker product. This growing disparity between the two subsets of the industry reveal the increasingly fragile state of regulated online poker in New Jersey.

NJ online poker performance in a nutshell

According to revenue figures released by the New Jersey Division of Gaming Enforcement last Thursday, New Jersey’s two iPoker networks (WSOP / 888 and Party / Borgata) generated a combined $2,045,655 in February.

A couple of notable comparisons:

• Month-over-month: NJ iPoker revenue dropped 11%, down from $2,229,426 the month prior. During an equivalent time frame in 2014, the market exhibited a nearly identical downward trend (-10%).
• Year-over-year: In February 2014, when the industry was still in its infancy, the market’s then four poker operators generated $3,109,203 in gross revenue. The final tallies for February 2015 were a rather alarming 28.3% lower.

The chart below illustrates these talking points:

More:

• Market share: The online partnership of the Borgata and PartyPoker ($1,103,501) captured a nearly 54% share of the iPoker market, with WSOP / 888 mopping up the remaining 46% ($942,154).
• Liquidity: According to data gathered from PokerScout, WSOP / 888 ring games averaged 220 concurrent players for February. Party / Borgata averaged 156 grinders.

The latter two points tell us that in order to become the market share leader, Party / Borgata had to overcome a seemingly insurmountable cash game traffic deficit (29%).

While there is no obvious answer as to how Party / Borgata offset its competitor’s ring game liquidity edge, it’s conceivable that the network generated a larger percentage of its gross revenues from tournament and Sit & Go fees. Another theory suggests that average player value is significantly higher on Party / Borgata.

Month-over-month drop not as bad as it initially seems…

Considering that February is the shortest month of the year (and January one of the longest), a more accurate depiction of market health can be gleaned by measuring performance in terms of daily revenue averages.

From this angle, February’s revenue figures stack up rather neatly against January’s:

• January 2015 daily average revenue: $74,175
• February 2015 daily average revenue: $73,059

When compared to the 11% descent initially observed, a paltry 1.5% loss is far more palatable, especially when one considers that the global market is already exhibiting early signs of entering its seasonal decline.

…but year-over-year drop may be worse

Unfortunately, no such easy justification exists for why the New Jersey online market has bled off over one-quarter of its monthly gross revenue since last year.

While it’s easy to point the finger and blame market maturation as the primary culprit (we’ve certainly witnessed this phenomenon before), an examination of the casino side of New Jersey’s regulated industry strongly suggests that the poker industry’s troubles are independent of the market’s as a whole.

To illustrate, here’s an amended graph that includes casino revenues:

Notice that in February 2015 the casino market generated 16% more revenue than the year prior, a disparity that would have been far more pronounced if Betfair did not award a $1.5 million jackpot to a high-rolling Let it Ride player.

Factor that amount back in and casino operators reaped just shy of $10 million last month, for both its biggest win to date, and year-over-year growth of 37%.

Also note that in January 2014, casino revenues exceeded poker wins by a less than 2-to-1 margin. Fast-forward one year later and that gap has swelled to more than 4-to-1.

The casino market’s remarkably steady growth reinforces the notion that the NJ online casino market is not the one that’s struggling, it’s poker.

The question then becomes, “Why?”

While there is no catch-all answer, several theories emerge, which if taken together may at least partially account for why the poker arm of the industry is moving in the opposite direction of its casino counterpart:

Stronger casino brand awareness

New Jersey’s iGaming industry is comprised of approximately a dozen casino sites and two poker networks. There are simply many more opportunities for casino operators to market and cross-promote their brands.

Liquidity headaches

Due to the poker market’s smallish size, there is a hard cap as to the number of game types operators can offer and the size of tournament guarantees.

Players dissuaded by these limitations may have abandoned the regulated market to play on more liquid, unregulated sites, or not at all. To the casino goer, liquidity is irrelevant.

Connectivity issues impact poker players more than casino players

Sixteen months after its inception, technological failings still hobble the industry. Unfortunately, connectivity issues and software crashes have a monetary effect on poker players, causing them to lose cash game pots and to be blinded out of MTTs.

Casino players experiencing the same problems feel inconvenienced, but are rarely impacted monetarily.

Strength of promotional schedules

One year ago, poker operators were literally throwing money at customers. The well has since run dry. Casino operators opted for a more calculated approach to their promotional schedules, which are as strong (if not slightly stronger) today then they were when the industry first opened its virtual doors.

Granted, these are not the only issues hampering the industry (payment processing and customer support leave a lot to be desired), but they are the most prevalent problems independent to poker.

Without immediate action, poker revenues will stumble

If history is any indicator, then the poker market’s troubles are going to get worse before they get better.

Consider that between February 2014 and June 2014, iPoker revenues dwindled by 34%. Granted, a portion of last year’s sharp decline can be attributed to one-time variables, such as operators cutting their welcome promotions and the novelty of the newly-minted market wearing off, but other factors, such as the seasonal downtrend, persist.

Thus, don’t expect this year’s falloff to be quite as dramatic, but do expect a falloff to happen. That is unless poker operators quickly get a handle on the issues they have the influence to improve.