States

PokerStars (Finally) Returns to the US Online Poker Market – Expect A Big, Quick Impact

Robert DellaFave October 1, 2015

Better late than never.

More than one year after Amaya’s purchase of PokerStars reactivated its licensing process in New Jersey, the online gaming behemoth is on the brink of its long-anticipated return.

The company has received approval from NJ regulators to operate a self-branded real-money online poker room, becoming the third site (and first poker operation) to be licensed under Resorts’ Internet gaming permit.

Can the New Jersey market sustain another online poker room?

I’d advise PokerStars not to breathe a sign of relief just yet, as the path to success in the niche New Jersey online poker market is ripe with hurdles:

The market already has two (three if we count 888 and WSOP.com separately) existing online poker rooms. Although it’s presumable that the sale of bwin.party will precipitate market consolidation, PokerStars will be competing against operators that have a nearly two-year head start.
Online poker in New Jersey is in a prolonged slump. Year-over-year revenue was down 10.4 percent in the month of June and cash game averages are generally no higher than 320.
PokerStars has struggled in other regulated “ring-fenced” markets. According to PokerScout.com, PokerStars trails Winamax for the market share lead in France. And in Italy and Spain, PokerStars’ average cash game count is less than 20 players per million in population.
After a strong initial marketing push, Amaya may decide to dedicate the majority of its marketing and promotional focus to its online casino offering. On average, New Jersey’s online casinos generate over 80 percent of total iGaming revenue, and more in recent months.
Although unlikely, PokerStars may attempt to dissuade an interstate compact between Nevada/Delaware and New Jersey, as in the short-term it will grant 888 a competitive advantage.
PokerStars will face many of the same geolocation and payment processing hurdles as the competition, some of which are simply out of its control.
PokerStars generates a significant portion of its revenue from fast-fold (Zoom) poker. The New Jersey market is too small is sustain such a format.

Then again, this is PokerStars we’re talking about:

Currently, cash game liquidity on PokerStars dot-com site is nearly seven times higher than that of second place 888. Suffice it to say, PokerStars is the face of online poker in most of the world.
New Jersey’s online poker operators have been denounced for their poor approach to customer service and lackluster desktop and mobile platforms. PokerStars is renowned in both areas. On the basis of this alone, its launch may invigorate the New Jersey market.
PokerStars is a forward-thinking company, and will take pains to bridge the gap between recreational and professional players — something sorely needed in niche markets.
Resorts has taken a very proactive approach to land-based/online integration, evidenced by the launch of a digital iGaming lounge at its brick and mortar casino, and manager Mohegan Sun’s willingness to extend rewards earned online to its land-based properties.
The poker media will be all over PokerStars’ return to the market, fueling hype and spreading awareness.

PokerStars expected to have a pronounced initial impact on liquidity

As the New Jersey market has declined, so have my once-optimistic expectations for PokerStars in New Jersey.

That being said, I still see the operator as having a strong and immediate impact on the market.

A frenzy of positive (and negative) press and a strong initial marketing push, combined with the frustration players feel with the industry’s current operators, should accelerate PokerStars to market share leader nearly overnight, increasing the size of the New Jersey market by upwards of 20 percent in the process.

Whether it is able to maintain its lead will hinge on a few factors:

Rake and rakeback.
Continued promotional spend.
How well its mobile and web-based offerings stack up to its ROW product.
Its willingness to cross-promote with Resorts, namely through the construction of a poker room and possibly a PokerStars-sponsored live tournament series.

It’s at least conceivable that Amaya views New Jersey as little more than a fertile testing ground for its US-based product. In that scenario, PokerStars will probably become a victim of the same slow and steady decline that has plagued the market’s existing operators.

PokerStars’ path to approval, in review

PokerStars has faced by far the most difficult path to entry of any New Jersey iGaming operator, largely as a result of its dealings in the United States post-UIGEA.

The review of its suitability for licensing by the New Jersey Department of Gaming Enforcement began in August of 2014, according to a PokerStars press release. CEO David Baazov talked about the process in a statement:

“We are very pleased to add New Jersey to the long list of regulated markets that have found PokerStars and Full Tilt suitable to offer real-money online gaming. I want to thank the DGE for their thorough and fair review of our business. We look forward to bringing our popular brands, innovative technology, marketing prowess and world-class security and game integrity to the growing New Jersey online gaming market. We anticipate providing additional details of our launch plans in the near future.”

The release went on to detail some of what took place in the review:

The DGE’s review of PokerStars was extremely thorough and exhaustive, including a detailed review of Amaya’s operations and technology, sworn interviews with more than 70 individuals and visits to approximately a half dozen international jurisdictions. This stringent review found PokerStars to be under strong, ethical and trusted ownership and management with Amaya, and worthy of participating in New Jersey’s regulated online gaming market.

Here is the rest of the timeline for PokerStars’ New Jersey entry:

April 15, 2011: Federal authorities unseal an indictment against PokerStars, Full Tilt Poker and Absolute Poker, under the premise that the companies used fraudulent methods to process payments and were in violation of the Unlawful Internet Gambling Enforcement Act of 2006. The incident was dubbed Black Friday.
December 2012: PokerStars begins negotiations to purchase the Atlantic Club Casino, ahead of New Jersey’s decision to regulate online gambling in February 2013.
May 2013: PokerStars’ parent company the Rational Group files a lawsuit against the Atlantic Club, after the latter extended a termination letter to the company citing that it had missed its chance to purchase the casino.
July 2013: PokerStars enters into an online gambling partnership with oldest Atlantic City casino, Resorts.
August 2013: The Rational Group officially withdraws its attempt to purchase the dilapidated Atlantic Club. The casino shutters its doors the next January.
October 2013: Plans are announced to open a $10 million poker room at Resorts, pending PokerStars is licensed.
November 2013: PokerStars is not among the first wave of regulated sites in New Jersey. Instead, the NJ Division of Gaming Enforcement decides to pause its licensing process until certain criteria are met, namely the expulsion of founder Isai Scheinberg.
July 2014: Amaya’s purchase of the Rational Group appears to fulfill the DGE’s conditions for reconsideration. There are whispers that the company will launch a real-money online poker room in New Jersey as early as October 2014.
October 2014: Amaya/Rational, along with land-based partner Resorts, file for a transactional waiver.
October 2014: PokerStars entry is delayed. A laundry list of possible causes emerge, with one leading theory being that New Jersey Governor Chris Christie is purposely delaying entry to satiate the whims of mega-donor and online gambling opponent Sheldon Adelson.
February 2015: NJ Senator Ray Lesniak goes on record stating that Christie is the reason why PokerStars has not been granted admittance in the Garden State. This wouldn’t be the last time Lesniak would lash out at the Governor.
March 31, 2015: During an earnings call, Amaya CEO David Baazov states that PokerStars is expected to be licensed and operational in New Jersey sometime in 3Q 2015.
April 2015: Resorts AC Owner Morris Bailey reinforces Baazov’s timeline, stating that the approval process is nearing its end, and that he expects to be pleased with the outcome.
May 2015: Baazov reiterates that PokerStars is on track for approval and launch in 3Q 2015.