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What Will US Online Poker Look Like If PA Joins Forces With NJ, NV, and DE?

November 8, 2017
What Will US Online Poker Look Like If PA Joins Forces With NJ, NV, and DE?

Two key developments that occurred in October will reshape the legal US online poker market.

First, New Jersey joined Nevada and Delaware in the Multi-State Internet Gaming Association (MSIGA), an interstate online gaming agreement that will allow the pooling of online poker players.

Second, Pennsylvania legalized online gambling. The state is expected to join the MSIGA, bringing the total player pool up to 26 million when all four states are live and sharing players.

The current situation

Here are the current online poker operators in the three legal US online poker markets:

Looking into the future

Even though the total population base will be 26 million, not every online poker operator is currently active in every state, nor will they be when all four states are part of the MSIGA.

We also don’t know what other operators will jump into the online poker business. Rush Street Interactive is a good bet, but GAN, NYX, and other platform providers could also be players.

Here are three potential models of how the market might shake out.

Four state model #1: Bullish market

In this model operators are active in every feasible state, maximizing their reach and access to online poker players.

  • Delaware (population 1 million)
    • 888 – exclusive deal with Delaware Lottery
  • Nevada (3 million)
    • 888/WSOP.com
    • MGM (GVC/partypoker)
  • New Jersey (population 9 million)
    • Borgata/MGM/partypoker
    • PokerStars
    • 888/WSOP.com
    • Pala
    • Rush Street Interactive
  • Pennsylvania online poker candidates (population 13 million)
    • GVC/partypoker
    • PokerStars
    • 888/WSOP.com
    • Pala
    • Rush Street Interactive

Population base each operator is able to draw from:

  • 888: 26 million
  • partypoker: 25 million
  • Pala: 22 million
  • PokerStars: 22 million
  • Rush Street Interactive: 22 million

Projected market share based on market access, current performance in other markets and extenuating circumstances.

Analysis

In this extremely competitive model, 888 and partypoker overtake PokerStars thanks to their access to the Nevada market.

Nevada only has three million residents, but it outperforms other states due to its high concentration of poker players.

Nevada averages roughly one cash game player for every 20,000 residents. By way of comparison, New Jersey has roughly one cash game player for every 37,500 residents.

Nevada is also the only state outside of the Eastern Time Zone. That will help 888/WSOP.com and partypoker increase the length of peak hours.

However, no operator is thriving. In this scenario many of the operators are simply positioning their pieces on the chess board, waiting for more states to legalize online poker.

Four state model #2: Baseline market

In this model Pala foregoes a Pennsylvania launch and MGM stays out of Nevada.

  • Delaware (population 1 million)
    • 888 – exclusive deal with Delaware Lottery
  • Nevada (3 million)
    • 888/WSOP.com
  • New Jersey (population 9 million)
    • Borgata/MGM-partypoker
    • PokerStars
    • 888/WSOP.com
    • Pala
    • Rush Street Interactive
  • Pennsylvania online poker candidates (population 13 million)
    • GVC/partypoker
    • PokerStars
    • 888/WSOP.com
    • Rush Street Interactive

Population base to draw from:

  • 888: 26 million
  • partypoker: 22 million
  • PokerStars: 22 million
  • Rush Street Interactive: 22 million
  • Pala: 9 million

Projected market share based on market access, current performance in other markets and extenuating circumstances.

Analysis

In this model, 888 enjoys a big advantage as the only Nevada operator.

With three other operators drawing from the same pool of players, PokerStars is likely to be the clear number two, with partypoker and RSI fighting for the number three spot.

With its access to players limited to New Jersey, Pala struggles to compete in any meaningful way.

Four state model #3: Bearish market

In our bearish model, the addition of Pennsylvania has no effect on the number of operators in other states.

  • Delaware (population 1 million)
    • 888 – exclusive deal with Delaware Lottery
  • Nevada (3 million)
    • 888/WSOP.com
  • New Jersey (population 9 million)
    • Borgata/MGM-partypoker
    • PokerStars
    • 888/WSOP.com
    • Pala
  • Pennsylvania online poker candidates (population 13 million)
    • GVC/partypoker
    • PokerStars
    • 888/WSOP.com
    • Rush Street Interactive

Population base to draw from:

  • 888: 26 million
  • partypoker: 22 million
  • PokerStars: 22 million
  • Rush Street Interactive: 13 million
  • Pala: 9 million

Projected market share based on market access, current performance in other markets and extenuating circumstances.

Analysis

With Rush Street’s reach limited to Pennsylvania, it loses two-thirds of its market share from our baseline model. Those players are divided up between PokerStars and 888. As such, partypoker also loses a little ground as both 888 and Stars become more appealing, and both begin to thrive.

What type of traffic numbers players can expect

Market share is a great metric for operators, but players are interested in the absolute traffic numbers.

Here’s what they can expect.

There will be an average of 850 cash game players across the four state online poker market.

We estimate peak cash game traffic of 2,500 players.

Using our three models, that works out to average and peak cash game traffic numbers of:

Bull Model Baseline Model Bear Model
Borgata/MGM/party 210/625 170/500 160/475
PokerStars 200/625 240/700 280/825
888/WSOP.com 240/700 280/825 340/1,000
Pala 42/125 10/25 10/25
Rush Street Interactive 150/450 150/450 60/175

One of the most interesting parts of this exercise is seeing 888 strengthen with each operator we remove from the picture. From our bull to bear model 888’s traffic grows by 30 percent.

Ditto for PokerStars.

On the other hand, beyond the top two operators, each successive operator is weakened as the market becomes less competitive.

The bottom line is this: even though there’s far more competition in our bullish model, the bearish model produces a far healthier industry.

Final thoughts

With a population base of 25 million, there isn’t room for more than three operators.

When five operators have access to most players in the market, nobody wins. When we reduce the number of operators with access to most of the players in the market to three we start to see winners and losers.

We also start to see viable online poker rooms emerge, and the foundation for globally competitive sites when more states come online.

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