Feature: The state of play

As New Jersey approaches its second full year of operation, Martyn Hannah looks at how the market has shaken out

As New Jersey approaches the end of its second full year of licensed and regulated online gaming, the headline figures make for positive reading. Gross gaming revenues are up around 15% year on year, total player accounts have passed 750,000, and a handful of new operators are still looking to get in on the action. What’s more, operators and suppliers are continuing to invest in product development, while some are launching truly innovative products like Gamesys’ 90 Ball Bingo game which went live on TropicanaCasino.com and its own VirginCasino.com brand earlier in the year. [private]

The revenue growth is undoubtedly impressive, but look beyond the monthly GGR numbers and there is still cause for concern. The state’s online poker market is dying a slow and painful death with little sign of improvement, payment processing is still crippling new player signups despite the arrival of PayPal, and mobile continues to lag along way behind what is currently available in European markets.

But despite the turbulent conditions, New Jersey still remains the benchmark for regulated online gaming in North America. And while some operators have struggled to survive the first 24 months – Ultimate Gaming was an early casualty – others are starting to thrive with plans to upgrade platforms, overhaul mobile offerings, and launch boundary-pushing products such as live casino. Indeed, the importance of having a broad and innovative product offering, and in particular a large portfolio of games, has become the key differentiator between the market leaders and the also rans.

Size matters

“There is not a ton of difference in terms of the platforms, where differentiation is more in the back end and the type of bonuses you can offer,” says online gaming consultant Itsik Akiva “But a lot of differentiation comes from the games, so it’s all about pushing content right now. But it’s also the type of games you have in your portfolio; do you have the very popular titles such as Quick Hit [from Bally] that you see on the casino floor. Those are the games that are doing really well; we learned early on that players were being conservative and going towards to games they recognized.”

Golden Nugget has been the clear leader with its game offering, which currently stands at 222 titles on desktop and 70 on mobile – 50% more than the market average. The operator has consistently added new titles to GoldenNuggetCasino.com each month, and its strategy is clearly paying dividends with revenues up 184% year on year in August to $2.25m. In comparison, 888Casino.com has just 27 desktop games. But with the likes of IGT and Bally now having made the vast majority of their game inventories available online, operators will have to look elsewhere to bolster their portfolios.

Supplier NetEnt is well established in the European market providing its content to the likes of William Hill and 888, and in September received approval from the New Jersey regulator to launch its games to players in the state via its agreement with bwin.party the Borgata. NetEnt also has deals in place with Caesars Interactive and Golden Nugget. But how does Björn Krantz, MD of NetEnt Americas, think his firm’s content will compete with the established games, and why is now the right time for NetEnt to enter the market?

“We have been working in the space for over 20 years, so we know what online players want,” he says. “We believe that we have a great deal of knowledge and competence to bring our content to the US market. What’s more, our games are different from those already live in New Jersey because first and foremost they have the online player in mind. And the timing is definitely right to launch online-only games, we have seen the market growing for the past couple of quarters now, which is very encouraging. We work very closely with our partners to help them optimize their operations around our content and we see an opportunity to leverage our confidence and experience,” Krantz adds.

While the online casino market continues to go from strength to strength in the Garden State, poker is just about clinging to life. Poker revenues were down 12% year on year to $2m in August, with just Caesars Interactive and bwin.party operating sites in the state. There are numerous reasons for decline, including operators scaling back marketing spend, ongoing issues with the banks refusing to process the majority of debit and credit card transactions, and a lack of liquidity. The long-awaited return of PokerStars and Full Tilt, however, has the potential to bring the market back to life.

“It feels like there is a buzz back in the market,” says Ed Andrewes, former head of digital at UK bookmaker Ladbrokes and consultant to Resorts Casino.  “I think PokerStars will have a huge impact on poker in New Jersey through their ambitious marketing spend, particularly in terms of getting the message across that online gambling is now legal in New Jersey. They have got greater brand recognition than their rivals, and they have deep pockets,” he adds.

The next battle ground

The next battle ground in New Jersey will be mobile. The vast majority of operators have been slow to capitalize on the mobile opportunity, with platform quality and gameplay lagging a long way behind what is available in other markets such as Europe. There are two main reasons for this: operators have been focused on bringing their desktop platforms up to speed before investing in mobile, while the regulated nature of the market means it can take time for platform upgrades and new content to pass through the regulator’s testing labs.

“Mobile is a long way behind Europe if you look at the quality of product,” says Golden Nugget’s head of online gaming, Thomas Winter. “Very few truly native apps are available. But more than real-money gaming apps in Europe, the new benchmark is social casino apps, which are fantastic. So there is room for improvement for sure. That being said, 55% of our players use a mobile device, 30% wager only on mobile and 45% of our revenues come from smartphones and tablets. So that is where the growth is, and so is our focus,” he adds.

The headline figures will undoubtedly continue to climb in New Jersey over the next 12 months, but the real acid test will be what role the state plays in the wider US market. New Jersey has yet to pool poker liquidity with another regulated market – Winter says Nevada or Delaware would help, but the UK would be better – while its “benchmark” regulatory model has yet to be adopted by another state mulling regulation. For the Garden State to become a hub for internet gaming in North America, and to reach its full potential, both of those things need to happen.