GPWA Times Magazine - Issue 27 - February 2014

Online gaming in the USA Less dawdle, more doodle By Vin Narayanan O nline casinos, licensed and regulated by the state of New Jersey, opened for real-money play onNov. 26, 2013. Between Nov. 26 and Nov. 30, online casinos and poker rooms licensed by New Jersey gen- erated more than $980,000 in Internet win (Gross Gaming Revenue minus the state’s 15 percent tax). In December, the first full month of online wagering in New Jersey, the state’s online casinos totaled $7.39 million in Internet win. Not a bad opening. But it wasn’t without its glitches. New Jersey players had to contend with early bugs in geolocation software that was supposed to guarantee players are actually in New Jersey while placing bets. Players who were in New Jersey were being told by the software that they weren’t. (The GPWA’s Dan Podheiser has more on that on page 25.) And pay- ment processing proved to be a problem as banks continued to block many credit card transactions. In Delaware, where the state lottery pro- vides, regulates and operates the software – in this case a combination of 888 and Scientific Games – and the brick-and- mortar casinos provide the customers, on- line gaming generated about $3.8 million in wagers and saw about 2,800 signups in its first month of operations. Those figures, which State LotteryDirector Vernon Kirk made public to local media provider Newsworks, are the only publicly available data points on Delaware’s foray into online gaming, which began on Oct. 31, 2013. But given Delaware’s relatively small stature (925,749 people) in com- parison to New Jersey (8.9 million), that’s not a bad start. Nevada only licenses and regulates online poker. As of press time, there are only two operators in the state – Ultimate Poker (backed by Station Casinos) andWSOP.com (Caesars). Because Nevada regulations don’t require online gaming revenue to be disclosed until there are three operators in business, no revenue figures are avail- able. (Jeremy Enke takes a closer look at how online poker is doing in the U.S. on page 28.) The early returns for European suppliers – like bwin.party, which is working with the Borgata, and 888, which is working with Caesars – are fantastic. They’ve in- vested a lot of money into breaking into the U.S. market, and their efforts are fi- nally paying off (many via a rev share). You can practically hear them humming “Yankee Doodle” in their offices. Analyzing the early returns The initial revenue reports affirm some assumptions industry executives made about the New Jersey and U.S. markets and yield some surprises. For years, online gaming veterans have suggested loyalty to brick-and-mortar brands would heavily influence the U.S. market. The reasons for this went beyond the fact that land-based casinos would be the ones receiving the online gaming li- censes. Unlike Europe, American custom- ers already have strong existing affinities for large brick-and-mortar casinos, and those affinities were likely to transfer to the online brand in a heavily regulatedmarket. The December revenue figures in New Jersey reflect that brand affinity. The Borgata, which is easily the most popular casino in Atlantic City, generated the most revenue ($3.35 million). Caesars, which operates the second most popular (collec- tively) land-based casinos in Atlantic City, generated $2.03 million. The Trump Plaza, one of the least popu- lar casinos in Atlantic City and operating under the Betfair brand online, generated the second-fewest dollars in New Jersey ($401,933). TheGoldenNugget,whichhad the lowest Internet win, $177,653, didn’t launch until the middle of December. While the performances of the Borgata and Caesars were expected, the fact that poker rooms led the way for both com- panies was a bit of a surprise. Typically, online casinos generate more revenue than online poker. But for the Borgata and Caesars, online poker revenue edged out online casino revenue (see table). What accounts for this? First, online poker players were likely early adopters in New Jersey. Since Black Friday, online poker players living in New Jersey either haven’t been playing, have been playing at rooms with liquidity issues, or have been playing at rooms they don’t have a high degree of confidence in. A regulated online poker market in New Jersey provides a significant upgrade, and they’ve jumped on it. Second, both the Borgata and Caesars have strong poker brands. The Borgata’s poker room is the most popular land-based pok- er room in New Jersey. Caesars operates WSOP.com, which builds on the extreme- ly popular World Series of Poker brand. Will poker continue to lead the way for the Borgata and Caesars? Probably not. The universe of casino players is larger than the universe of poker players, so at New Jersey December revenue Site/Network Internet Win (GGR – 15% NJ tax) Casino Poker Borgata (BorgataCasino.com, BorgataPoker. com, NJ.PartyPoker.com) $1,621,222 $1,727,790 Caesars (CaesarsCasino.com, HarrahsCasino.com, WSOP.com, 888.com) $962,369 $1,068,996 Trump Taj Mahal (UCasino.com) $736,999 $88,083 Tropicana (TropicanaCasino.com, VirginCasino.com) $603,579 - Trump Plaza (Betfair.com) $401,933 $38 Golden Nugget (GoldenNuggetCasino.com, GoldenNuggetPoker.com) $177,653 - 22 Online gaming in the USA: Less dawdle, more doodle

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