New Jersey online gaming: Can PokerStars bring the rain?

PokerStars set to launch, or rather relaunch, in New Jersey on 21 March, Gambling Insider has been considering the brand's potential performance and likely impact on the state's i-gaming market.

As the biggest name in online poker, it's no major surprise that the Stars brand is expected to swiftly challenge for top spot in the Garden State.

"I expect PokerStars will quickly vie for market leadership, given the fact that not all of the New Jersey licensees are currently offering poker", says Lorien Pilling, Director at consultancy GBGC.

Chris Grove of OnlinePokerReport.com agrees that it's "quite plausible that PokerStars will almost immediately become a competitive network in New Jersey" on the strength of their brand and the "significant amount of media attention that will follow their launch".

However he also believes the operator will be "somewhat hampered" by the fact that their land-based partner Resorts "does not have the sort of reputation for offering live poker that Borgata has".

"That land-based reputation has been a big part of why Borgata has found such success in both online poker and online casino," he explains.

Asked how Stars might perform in New Jersey, Victor Rocha of Pechanga.net says: "To paraphrase an old political slogan from the 80s: they’re tanned, rested and ready."

However market leadership or even dominance is all relative, with the key consideration being the overall size of the New Jersey online poker market.

As explained by Alex Bumazhny, Senior Director – Gaming, Lodging & Leisure at Fitch Ratings, operators Caesars and Borgata "now split a relatively small intrastate New Jersey online poker market", generating around $1m of online poker revenue each every month.

Total online poker gaming win for New Jersey for the three months from November 2015 to January 2016 is reported as $1.96m, $1.98m and $2.15m.

"iPoker has been withering on the vine for quite some time now", says Rocha. "We’ll see if PokerStars can bring the rain – it’s an endeavor worthy of Sisyphus."

As for how Stars might fare in expanding this modest market, Bumazhny says: "PokerStars entry into NJ may grow online poker a bit from a very low base."

He continues: "The main issue keeping the market back is the lack of liquidity in intrastate poker."

"Entry by PokerStars may spur poker revenue growth somewhat given that the company has a database of players from when it was operating in US pre-Black Friday, however its entry will not fix the regulatory hurdle of having a limited pool of players."

A recent Digital & Interactive Gaming report from boutique research firm Eilers & Krejcik states that PokerStars' New Jersey entry "could provide a short-term boost, but we remain sceptical that the market can reliably produce anything more than $3m a month long term".

"Realistically, a year after PokerStars’ launch, the market is likely to be back around $2m a month."

Grove says Stars will be constrained by a small market that is "already contested by too many operators".

Bumazhny also notes that PokerStars may force one of the incumbents out of the state's poker market.

The Eilers & Krejcik report says NJ online poker has "already hit and receded from" a hard revenue cap which is unlikely to be lifted without shared liquidity with a "significant jurisdiction".

"Pennsylvania would be a start, California would be a boost, but only international liquidity holds the potential to transform NJ’s online poker revenue potential," it concludes.

As for how PokerStars' New Jersey entry could impact i-poker's regulatory progress in other US states, GBGC's Pilling hopes it will "show that it does not bring about the end of the world and will both spur the pace of e-gaming regulation and remove bad actor clauses from the various state bills in circulation".

Grove adds: "It's not as if approval in New Jersey acts as a golden ticket for other states, but I have to believe that the ability of PokerStars to move successfully through the regulatory process in New Jersey – considered by many to be the gold standard for gaming regulation – will help to mute some of the criticism and questions the company has faced in other states.

Regarding the potential impact on regulation in California specifically, Victor Rocha says: "We’ll see how it turns out – the story for i-poker in California is more convoluted than a Christopher Nolan-on-meth screenplay."