NJ Online Poker Revenue Climbs, But Doesn’t Exactly Soar, In 2016

January 17, 2017
NJ Online Poker Revenue Climbs, But Doesn’t Exactly Soar, In 2016

The New Jersey online poker industry ended a volatile 2016 on a very average note.

According to figures published by the NJ Division of Gaming Enforcement, the state’s three networks combined to generate $2,101,485 in December. The tally represents a 0.9 percent increase over November. That’s a slight decrease when normalizing for December’s extra day.

As has been the case since it entered the market in mid-March, PokerStars led the charge. It captured a 38.5 percent market share ($808,849). WSOP NJ 888 finished second at $667,264, and struggling Party Borgata brought up the rear with $625,372.

For what seems like the umpteenth time, NJ online poker was completely overshadowed by online casino, which set yet another monthly revenue record. Casino revenue for December was $16,280,959, marking a 35 percent year-over-year increase.

For the year, NJ online casinos generated nearly $170.2 million, compared to just a tad over $26.5 million for online poker.

That said, 2016 was an up year for poker. But given the high hopes associated with the return of PokerStars to US soil, the surge may not have been on par with what most industry experts expected.

Christmas boon or Christmas bust?

Surprisingly, the operator that lost the most traction in December was also the one who did the most to capture the attention of players.

From November 28 through December 28, PokerStars hosted the Christmas Festival, a promotional extravaganza that culminated in a popular Milestone Hands segment. According to PokerScout figures, Milestone Hands sent 7-day average cash game traffic on PokerStars zooming past the 200-player mark.

For perspective, average traffic on PokerStars peaked at just over 180 in March, when the hype associated with the site’s launch was arguably at its highest.

Yet, despite the big uptick, monthly revenue was down 2.5 percent (5.6 percent after normalizing).

What likely happened was that during Milestone Hands, players gravitated from their normal higher stakes games to the micros in order to maximize their risk-reward ratio. As a result, the average rake collected per hand was significantly lower than it was during a normal stretch.

This goes to show that cash game liquidity is not always an accurate predictor of revenue.

Also, there wasn’t much in the way of Spin & Go promotions. In the absence of a dedicated Spin & Go promo, it’s plausible that players took a break from the poker/slot hybrid to participate in formats that are less lucrative for Stars.

Moving on to WSOP/888, despite appearing to scale back on its promotional spend, the network experienced a mild uptick in December. Revenue was up 5.5 percent, probably thanks to an end-of-month liquidity surge.

Revenue on Party/Borgata was relatively flat, up 0.6 percent.

Total NJ online poker revenue was up 5.9 percent over last year, it’s lowest YoY gain since before PokerStars entered the market. Although hardly worth writing home about, that’s still markedly better than the industry’s December 2015 performance, when revenue was down 3.6 percent YoY.

And the market share leader of 2016 is…

This one may come as a shock, but Party/Borgata captured more revenue in 2016 than either of its competitors in 2016.

Of course, the primary reason for this is that PokerStars was absent from the market for the first two-and-a-half months of the year. But even still, that’s pretty remarkable for a network that’s finished in last place in six of the 12 months of 2016.

In total, the network accounted for 34.7 percent of industry revenue, compared to 32.9 percent for PokerStars, and 32.4 for WSOP/888. A tight race indeed.

Just don’t expect the market share distribution to look anything like that in 2017.

Below is a chart that depicts market share over three time periods: all of 2016, April 2016 onward, and H2 2016:

Notice that since launching, PokerStars has held a formidable lead over the competition.

Of course, some of that can be attributed to novelty. But even in the past six months, PokerStars has held a 39.25 percent market share, versus 30.8 percent for WSOP/888 and 30 percent for Party/Borgata.

Given the relative stability of the market, expect numbers along these lines in 2017, with perhaps WSOP/888 and PokerStars gaining slightly more share, and Party/Borgata losing more of its player base.

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Just how much did PokerStars grow the NJ online poker market?

While PokerStars did have a net positive impact on the market, it wasn’t a profound effect.

  • Compared to the last eight months of 2015, online poker revenue was up 15.4 percent over the same time frame in 2016.
  • In the second half of 2016, it was only up 11.2 percent. Considering PokerStars’ near 40 percent market share during that span, this figures suggests that most of the site’s revenue was cannibalized from existing operators.

In PokerStars’ defense, the NJ online poker market isn’t exactly hospitable:

  • The low population cap makes it difficult for any one operator to greatly expand the market.
  • PokerStars had been absent from the US for nearly five years at the time it returned.
  • NJ online poker, and online poker in general, has been in a multi-year decline.

There are a couple upshots to PokerStars’ entry that aren’t immediately evident. For one, NJ online poker revenue was on a downswing when Stars’ launched. That rendered the market’s turnaround that much more significant.

Secondly, PokerStars has contributed to the market in other ways. One firm example of this is the PokerStars Festival at Resorts, a live tournament event that brought live poker to Resorts Casino in Atlantic City, and helped spread PokerStars awareness.

All told, PokerStars may not have completely revitalized the NJ market, but it did set a strong precedent. It could be well-positioned for when legal online poker goes live in more states — particularly neighboring ones such as Pennsylvania and New York.

Image credit: Olga Vasilyeva / Shutterstock, Inc.

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