The New Jersey online gambling industry stumbled a bit coming out of the blocks. But it has since been on an upward trajectory ever since.
Three years in, the industry is still posting strong year-over-year revenue numbers. According to Chris Grove and Adam Krejcik of Eilers & Krejcik Gaming, the New Jersey online gambling industry still has plenty of room for growth.
This was one of the conclusions the pair came to in its recent forward-looking report U.S. iGaming Industry Update – 2017.
The New Jersey success story
Annual revenue hit $197 million in 2016, on the back of 32 percent year-over-year growth. Grove and Krejcik estimate the casino side of New Jersey’s online gaming industry will grow another 20 percent this year.
Factoring in online poker, the Eilers & Krejcik report estimates total growth of around 17 percent. Combined online casino and online poker gross gaming revenue is forecast to hit $230 million in 2017.
“New Jersey’s regulated online gambling market is a clear success by any measure,” Grove and Krejcik wrote. “We expect growth to continue at a double-digit clip this year, and for the taxes paid by the industry in 2017 alone to eclipse $40 million dollars.”
|Historical look at New Jersey online gambling revenue|
|Year||Gross Gaming Revenue||Tax Revenue (15% + 2.5%)|
|2014||$123 million||$21.5 million|
|2015||$149 million||$26 million|
|2016||$197 million||$34.5 million|
|2017 (est.)||$230 million||$40 million|
Grove and Krejcik surmise the 20 percent online casino revenue increase equates to an additional $35 million in revenue generated by the state’s online casinos.
On the other hand, poker (which accounts for a small fraction of the online gaming market in New Jersey) will shrink by about six percent, or $1.5 million, according to the analysis.
The continued decline of online poker is one of the more disappointing conclusions from the report, considering total online poker revenue grew over 10 percent in 2016 thanks in large part to the March launch of PokerStars.
But as Grove and Krejcik point out, most of the gains occurred soon after launch, with online poker falling to its previous numbers rather quickly.
Casinos will continue to be the growth driver
Where will this online casino growth come from? Likely from a couple of places:
New casino brands
In addition to continued market maturity, the analysts believe at least two more unique casino brands will launch in the New Jersey market in 2017.
Several new brands launched in the past three years, including sub-brands of:
Furthermore, online gambling has sparked innovation in what was seen as a stagnant market.
Virtual sports are expected to roll out at two New Jersey online casinos — Resorts and Golden Nugget — in the first quarter of 2017.
Golden Nugget is also expanding its live dealer hours of operation, and there has been some behind-the-scenes talk of other casinos exploring partnership opportunities with Golden Nugget on the live dealer front. This would allow them to pool their live dealer players, with all games originating from Golden Nugget’s on-property live dealer studio.
Finally, Grove and Krejcik posit online casinos will continue to roll out top-tier and exclusive content, particularly titles that do well in the land-based casinos.
Don’t sleep on poker
Even though the market is restrictive, poker operators did find some late-year success running big online tournament series. A renewed emphasis on tournaments over cash games could potentially prevent online poker from experiencing further degradation.
Local land-based brands outperforming online brands
While individual breakdowns vary by operator, it’s clear local brands are dominant in the New Jersey online gambling market.
Using Grove’s and Krejcik’s estimates, the main casino brand is responsible for a majority share of all online casino revenue. Some of Atlantic City’s casinos generating 70 to 80 percent of total iCasino GGR.
Of note, no single sub-brand contributes less than 15 percent of a brand’s total online casino revenue.
“The big winners in New Jersey’s regulated online gambling markets are familiar names, with land-based brands like the Golden Nugget, Borgata, Tropicana, and Resorts leading the way when it came to online gambling revenue in 2016,” Grove and Krejcik stated.
Online gambling has been a lifeline for struggling AC casinos
Two years ago, I called online gambling a critical backstop for Atlantic City casinos.
In 2016, online gambling was a growth vertical that brought about the first revenue increase for AC casinos since 2006.
On this front, Eilers & Krejcik’s report makes the case that not only is online revenue growing, but this growth is also translating into land-based growth and a symbiotic relationship between online and land-based offerings.
“Online gambling is becoming a highly effective tool for Atlantic City’s casinos,” the report states. “Revenue from online gambling reversed a decade-long revenue slide in Atlantic City in 2016, and increased integration between the online and live casino appears to be driving additional play and visitation at land-based properties.”