GPWA Times Magazine - Issue30 - October 2014

The cornerstone: New Jersey The cornerstone of many affiliates’ U.S. iGaming strategy is New Jersey. Of the three states that regulated real-money on- line gaming in 2013, the Garden State has the most potential. Delaware is limited by its population of around 900,000, and though Nevada’s 3 million residents make it a larger market, the state’s iGaming of- fering is restricted to online poker by law. In contrast, New Jersey has a population of 9 million and permits online casinos as well as poker. Since it went live in Nov. 2013, New Jer- sey’s iGaming market has enjoyed a very promising first phase. Although operator revenues have been lower than Governor Chris Christie’s overly optimistic forecast, their total revenue still averaged $10.2 million per month between Dec. 2013 and June 2014, according to New Jersey’s Division of Gaming Enforcement (DGE). While the revenue figures from this first phase are respectable, they are likely to increase substantially for two reasons. The first relates to unlicensed operators. In late May, Bovada, the largest unregu- lated brand operating in the New Jersey market, announced it had decided to stop accepting registrations from play- ers in the state. Bovada’s withdrawal fol- lows the departure of smaller unlicensed operators Merge Gaming Network and Winning Poker Network earlier in 2014. This exodus and Bovada’s decision in particular will almost certainly lead to an influx of players at the six DGE- licensed operators. These operators will also benefit from the second recent development, which im- pacts affiliates even more directly than the first. In June, the DGE announced that it had decided to loosen its regulations on affiliates. Previously, vendor registra- tion, which is free to obtain and requires minimal paperwork, restricted affiliates to media-buy partnerships. If they want- ed to promote brands with performance- based cost-per-action (CPA), cost-per- click (CPC), cost-per-impression (CPI) or revenue-share commission structures, they had to apply for an Ancillary Casino Service Industry Enterprise (ACSIE) li- cense, which costs $2,000 and requires ex- tensive background checks. Understand- ably, these restrictions deterred affiliates. The DGE’s June changes to affiliate li- censing have made promoting New Jer- sey-facing brands much more attractive. Now affiliates only need to apply for ven- dor registration if they want to promote brands via a flat-rate CPA, CPC or CPI commission structure, though an applica- tion for an ACSIE license is still required for revenue-share or hybrid deals. These changes will almost certainly breathe new life into New Jersey’s iGam- ing affiliate market. Affiliates will gain ac- cess to an important revenue stream in the short term and build relationships with key U.S. operators and service providers, which will place them in an enviable posi- tion when the New Jersey market matures and, above all, when other states’ affiliate markets emerge. Online poker and casino beyond New Jersey The recent liberalization of the New Jer- sey affiliate market begs an important question: Will Nevada and Delaware fol- low New Jersey's example and start em- bracing affiliates? Aside from their small populations, Nevada and Delaware’s cur- rent regulatory restrictions have slowed the development of an iGaming affiliate market. However, this may soon change. Regula- tors in Nevada and Delaware may follow the DGE’s example and make licensing more attractive. Even so, affiliates may still be deterred by the size of both mar- ket. This, however, would be a mistake. Although New Jersey should remain the core of affiliates’ real-money strategy, both Nevada and Delaware do hold fu- ture earning potential for affiliates, espe- cially when the two states start sharing liquidity for poker. Of course, any discussion of the future of real-money gaming in the U.S. must New Jersey governor Chris Christie. Image obtained through Creative Commons license 2.0, courtesy of Bob Jagendorf. The recent liberalization of the New Jersey affiliate market begs an important question: Will Nevada and Delaware follow New Jersey’s example and start embracing affiliates? 16 How the West will be won