Online poker boosts offline casino revenues, research shows

The regulation of US online poker would boost land-based casino revenues, a joint study by the Universities of Nevada and Hamburg has concluded.

The research found evidence that online poker and offline gambling, rather than competing for the same revenue, complement one another and that the presence of online poker “may increase demand of offline gambling overall”.

“Given a jurisdiction generates an additional US$1m in offline gross gaming revenue, we would predict an additional $2,700 in online poker revenue,” the research found. “Although this effect may appear to be relatively small, the finding is robust across many model specifications, suggesting a stronger argument for validity,” it added.

Authors of the Online Poker in North America: Empirical Evidence on its Complementary Effect on the Offline Gambling Market study, Kahlil Simeon Philander of the University of Nevada and Ingo Fiedler of the University of Hamburg, said: “The results are surprising: overall, online poker and offline gaming do not compete for an identical market and cannibalise each other’s revenue.

“Rather, we found a small but significant positive relationship between those variables. This indicates that the markets reinforce each other and the goods are gross complements and not gross substitutes.”

The paper also revealed the size of the North American online poker market in 2010 pre-Black Friday. Using data from the Online Poker Database of the University of Hamburg it found that an estimated 1.4m US citizens played real-money online poker in 2010 paying $981m in rake to operators as a result. In the same year 307,000 Canadians generated an estimated $220m in rake, however this is nearly twice as many players (0.9% of the population compared to 0.46% in the US) compared to its North American neighbours.

It suggests this is likely to be due to financial transactions between players and operators not being not limited by UIGEA in Canada.