Inside Golden Nugget's rise to New Jersey number one

The December figures from the New Jersey Division of Gaming Enforcement (DGE) confirmed what most industry experts already knew: the Golden Nugget is the largest operator in the New Jersey market and widening the gap on the chasing pack. The casino and its partners posted a December online GGR of $4.8m, setting a new state record in the process.

“It’s clear that the operator is on a different level than competitors,” analyst firm Eilers and Krejcik said in a recent note.

The results concluded a phenomenal 12 months for the operator, which saw it grow revenues by 36% from an already relatively large base. According to the casino’s senior vice-president of online gaming, Thomas Winter, the growth was the result of a concerted investment in product, innovation and marketing, and Winter sees no reason to change a winning formula. “All these factors should support our growth in 2017 again,” he says.

Solid foundations

The base for growth was put in place in December 2015, with the switch to an NYX Gaming platform and the subsequent launch of new sites and apps, with streamlined functionality and a slicker user interface. And according to Winter, the ability to focus on a single market (New Jersey) and a single vertical (casino) has given the firm an edge over the past 12 months.

“For half of the New Jersey brands, it is one market among many others, not necessarily the most profitable one and therefore not a priority,” Winter says. “And it’s always a plus when you focus on a single product,” he says, pointing out that poker has been relatively stagnant in the Garden State while casino continues to see year-on-year growth in excess of 30%.

However, the exec refuses to rule out the addition of other verticals like poker, DFS or even sports betting if it was legalized, but suggests these might not be added any time soon.

“Poker for example requires a lot of attention and resources, which the current market size hardly justifies,” he says. “I would not bet on any significant change this year against 2016. You’ll always have poker players but players in their 25-30s go for DFS or eSports today, while 10 years ago the hype was about poker.”

The sharp casino focus has also enabled the Golden Nugget to build a vast 331-game library, with Eilers and Krejick noting recently: “We suspect it is no coincidence that Golden Nugget has both the largest library and the largest casino revenue total.”

Winter confirms the size of its portfolio of games has been a focus, explaining: “Now, you also have brands with half our content who do well too, either because they had a stronger commercial start a couple of years ago, or they offer exclusive games or features but we think a large library of games is a must; even better if some of it is exclusive.”

Controlled aggression

This product focus has been supported by a relatively aggressive marketing spend of roughly 25-30% of GGR throughout 2016, with Winter seeing no reason to dial it back in 2017.

“We haven’t seen any recent slow-down in the market lately, quite the opposite in fact,” he says. “New Jersey players trust online gaming more than they did three years ago.

“We see the market growing another 20-25% in 2017 and target closer to 40% for Golden Nugget,” says Winter. “To keep us growing at this massive rate, the acquisition has to be at least as high as last year. As long as we see there is room for growth we will keep making sustained investment in the market.”

Live and kicking

That includes TV advertising and affiliate deals, but the best acquisition tool of all may be the Golden Nugget’s live casino product, which launched last August and has already been expanded in terms of tables and opening hours.

“The past couple of months, our player acquisition has reached levels not seen since Q1 2014,” says Winter. “New players are partly coming from competition but a number of them are completely new to egaming.”

The draw is of course the only live dealer product in New Jersey, which helps attract those who are skeptical of RNG-powered casino products, as well as those looking for a more realistic casino experience from the comfort of their own home.

Live blackjack and roulette don’t yet generate the same revenues as their RNG counterparts, but Winter says it could be the case by the end of the year, even though the RNG games are also growing rapidly thanks to the influx of new players.

“In time, we are confident that live dealer will account for more than 10% of our total revenues, perhaps even 15%,” Winter says.

“It’s also a very efficient cross-sell tool. Players who play only live dealer tend to spend less than our average patron – that’s because of limited opening hours and higher pay out on table games –  but altogether, live dealer players are more profitable than others because live dealer largely comes on top of RNG games play.

“We see that close to 50% of our new players place their first wagers on live dealer tables then get to realize that we have the largest selection of slots in New Jersey.”

Other operators in the market are rumored to be mulling a shared live dealer studio, but they’ll have to move fast, with the Golden Nugget willing to keep investing in the product to press home its advantage.

Winter says the casino is working on a number of enhancements with provider Ezugi, including common draw games like hybrid blackjack, where the player bets against the dealers’ cards, while his own are chosen by an RNG. This allows a virtually unlimited number of customers to play at a single blackjack table.

“High-rollers will always prefer to sit at the table but it’s a nice addition to maximize revenues per table and serve more patrons,” confirms Winter.

He also plans to launch new games on top of blackjack, baccarat and roulette as well as unveiling specific live promotions and tournaments. “One thing is for sure, we won’t get bored this year,” he adds.

Good neighbors

Aside from the booming market that Winter foresees in New Jersey, the Golden Nugget will be keeping a close eye on developments in neighboring Pennsylvania.

A bill set to be introduced by state senator Jay Costa would seek to legalize online gambling in return for a $10m upfront licensing fee ($5m for vendors) as well as a 25% tax rate.

Costa is expecting the bill to be passed around April or May, but there is an industry consensus that the fees and taxes will have to come down for the state to actually raise the $100m it needs for its budget deficit.

“I haven’t read the bill yet in detail but 25% tax is a stretch,” agrees Winter. “It’s probably the maximum that operators can afford while being profitable. It won’t maximize tax revenues for the state in our opinion. Around 10% is probably what would maximize revenues but even 15% is workable. Twenty five percent is probably the point where it becomes very difficult to make money in the online space.”

He says the Golden Nugget will “make its voice heard” on the issue, but the main lobbying effort will have to come from the local brick-and-mortar casinos. And depending on how that tax rate and legislation develops, Winter says the Golden Nugget is plotting an entry to the Pennsylvania market and is confident of finding a local partner to get licensure. Of course, the brand would face a slightly different challenge to its launch in New Jersey, where its brick-and-mortar property gives it legitimacy and a marketing head-start.

Says Winter: “More than 70% of the New Jersey online market belongs to brick-and-mortar brands and it’s fair to expect it to be similar in Pennsylvania.

“But that being said, you have some brands like Betfair which are doing way better than some land-based brands. If you have the right product investment and marketing you can beat land-based competitors.

Winter adds: “We would start with better equity than a pure European brand and the Philadelphia market is close to Atlantic City, so we are actively advertising in this area already. We will not have the same advantage as say Sands or Parx, for example, but I think it could work anyway.”

Keep your friends close…

And the rise of a brand like Betfair from a difficult base will have been closely watched by the Golden Nugget, with the casino benefiting from having two of the market’s best newcomers active on its license in Betfair and SugarHouse.

Both of these brands are experiencing rapid growth, according to Winter, but the three firms still share experiences and best practices, despite concerns about potential cannibalization.

“There are some concerns, yes,” says Winter “But I’d prefer [market share] to go to them than others. These new brands also help to grow the market,” he adds.

“Newcomers like PokerStars and SugarHouse probably accounted for more than half of the market growth last year,” Winter says. And of course the success of other brands on the Golden Nugget license is no bad thing for the hotel, with profits trickling down in some way or another, although Winter would not reveal the terms of the licensing arrangements.

Indeed, he suggests that these firms could be more of a threat than “traditional” brick-and-mortar rivals. “Borgata and Tropicana are our closest competitors in revenues but I wouldn’t be surprised if brands like Betfair, Resorts and SugarHouse, which are very actively fighting for market share too, were growing faster this year,” Winter says.

Onwards and upwards

But for now at least, the Golden Nugget has the market by the scruff of the neck, and has no plans to relinquish its hold. Winter predicts the online casino market in New Jersey will continue to flourish, reaching $250m by 2020, and the operator has planned major investments accordingly.

“There’s always room for improvement, at all levels,” Winter says. “Our mobile app is good compared to New Jersey real-money gaming standards but the benchmark is social apps and we’re not there yet. Gamification of the user experience is another interesting area we need to explore.”

Winter says the operator doesn’t have specific ideas planned, but they are looking towards social developers and European firms who have achieved rapid growth using gamification concepts.

“Anything new coming out of social gaming is important,” Winter says. “When we survey our online players, 30% of them play social casino and games and they do so because of the high quality apps and exciting gamification features and we need to find inspiration in what they do.”

Winter also has his sights set on creating a more interactive, social experience for customers online in an effort to recreate the magic of a brick-and-mortar casino.

“In 2017, we’ll focus on bringing new exclusive content, taking live dealer to the next level and we’ll launch virtual sports, which will make the patron’s experience more lively,” he says.

For a company that’s already on a “different level” to its rivals, it’s an ominous sign that there’s no let-up in sight. Competitors may have to get used to scrapping for the silver medal.