Online poker in the state of New Jersey generated $21 million in revenue for operators in 2019, making it the lowest year on record in the market, according to figures released by the New Jersey Division of Gaming Enforcement.
With the exception of 2016—when the world’s leading online poker provider, PokerStars, made a big splash with its return to the US following Black Friday—NJ online poker revenue has been declining from the high of $29 million it posted in its first full year of operation.
In fact, eight times last year monthly revenue from online poker sunk to a new low for that particular month.
However, the decline of 2% in 2019 easily ranks as the smallest drop of any of the declining years, with the next smallest being 8% in 2017 and all of the other down years posting double digit declines.
In addition, what appears to be a year of stabilization comes at a time when competition for disposable income in the online gaming sector is at an all-time high, following the launch of online sports betting in the state during Q2 2018 and amidst the most successful year for online casino games.
Still, at a tax rate of 15% on gross gaming revenue plus an additional 2.5% earmarked for Investment Alternative Tax Obligations, online poker put more than $3.5 million into state coffers last year.
Additional insights can be gleaned from examining the performance of the three online poker networks operating in the state.
The All American Poker Network
2019 was the first year that the online poker rooms operating under the Caesars license (WSOP.com and 888poker) as part of the All American Poker Network (AAPN) captured a bigger share of the market than any of its competitors.
With $8.9 million in combined revenue, the rooms on the AAPN accounted for 42% of the market in 2019, the highest percentage achieved by any network since PokerStars joined in 2016 to make the market a three-way competition.
Revenue in 2019 was also the highest for the network since it brought in $10.7 million in 2015, the second year of operation of online poker in New Jersey and prior to PokerStars joining the market.
November was the low point for the market as a whole in 2019 and also for the rooms on the AAPN who generated just $619k during the month. However, the competition was only able to surpass AAPN’s lowest point three times throughout the entire year, demonstrating the dominance of the new market leader.
Still, AAPN posted year-on-year declines in four months during 2019, but not only did the gains outpace the declines (which never reached 8%), but four times during the year, annual increases surpassed 40%.
To understand the success of AAPN, one need only know that it is the only online poker network that is currently able to allow its players in New Jersey to play with and compete against players in other states.
The AAPN shares liquidity with its poker rooms in both Nevada and Delaware under the MultiState Internet Gaming Agreement (MIGA), but currently no other New Jersey poker operator has a presence in any of those other states, leaving AAPN with a distinct advantage in the market.
While PokerStars is the market leader in almost every other jurisdiction it operates in, its world-class software and operational expertise are only good enough to carry it to the number two position in New Jersey.
Though PokerStars NJ was the market leader in 2017 and 2018 (and 2016 on a prorated basis), 2019 was a down year in New Jersey for the worldwide leader with just under $7 million collected in rake and tournament fees.
Every month last year, PokerStars posted lower revenue than it did in the corresponding months of 2018, with declines in the first four months of the year ranging between 18% and 30%. That trend carries on from 2018 when PokerStars posted lower year-on-year revenue figures in all but one month.
2019 also saw PokerStars continue its paired back guarantee for its popular NJCOOP (New Jersey Online Poker Championship) series. The operator lowered its series guarantee to $1 million in 2018 (from its $1.2 million guarantee in 2016 and 2017) and continued with its $1 million guarantee in 2019.
But PokerStars is far from giving up in the US. In November, it became the first legal and regulated online poker room to open in the neighboring state of Pennsylvania. And once Pennsylvania joins New Jersey, Nevada and Delaware in sharing liquidity, we will likely see renewed efforts to recapture the market lead by PokerStars.
The online poker rooms operating under the Borgata license on the partypoker network posted the lowest revenue of any online poker network in the state.
Borgata Poker, partypoker and BetMGM Poker (which now appears to be the top brand being pushed by network management) comprise the network and combined to generate $5.1 million in revenue last year, the lowest amount by any network in the history of the market.
In nine of twelve months, the group posted lower revenues than it did the year prior. While such a performance can be viewed as an improvement on 2018 when the network saw every month fail to meet the revenue amount it generated in 2018, total revenue in 2019 was down 10% from 2018.
In fact, not a single time in 2019 did the group exceed $500k in revenue. To put that into perspective, only three times since the market opened has a network other than the partypoker failed to post more than $500k in revenue.
The partypoker network used to host the premiere online poker tournament series in New Jersey, but the Garden State Super Series (GSSS) was noticeably absent from the 2019 schedule as management for the network completed its transition to Roar Digital, a joint venture between MGM Resorts International and partypoker parent company GVC.
New Jersey Online Poker in 2020
Even though 2019 was by most measures the low point for online poker in New Jersey, there are reasons to believe that 2020 will bring good news for online poker operators in New Jersey.
As mentioned earlier, the rate of decline for online poker revenue in the state slowed dramatically in 2019, and that could be an indication that the market is at or near its floor.
There is also the possibility that partypoker could open an online poker room in the state of Nevada. They have been approved by state regulators and circumstances indicate that a Nevada launch may be in the works even though company officials have tried to tamp down rumors stating that an online poker launch in Nevada isn’t a priority at this time.
But perhaps the most significant event that will have an impact on online poker revenue figures this year is the fight between the New Hampshire Lottery and the US Department of Justice over the Wire Act.
The case that will likely clarify if the 1961 law prohibits online poker operators from combining their players in multiple states at the same online poker cash games and tournaments will make its way through the appellate court process this year.
And though a persistent DOJ under the Trump administration could push the matter all the way to the Supreme Court if its appeal is rejected, a change at the top of the US executive branch resulting from the current impeachment proceeding in Congress or the November presidential election could put an end to the single biggest obstacle standing in the way of the growth of online poker in America.
Should the revised DOJ opinion of the Wire Act be shelved for good, it is very likely that we will see Pennsylvania join MIGA which will allow at least one New Jersey operator to begin sharing liquidity across state lines, a factor which will undoubtedly boost revenue in the Garden State.
Additionally, such a seismic event could also encourage operators and regulators to launch online poker in West Virginia. The state legalized online poker last year but has yet to roll it out, likely due to the limited potential of operating in a state one fifth the size of New Jersey.
Michigan also legalized online poker in 2019, and a favorable resolution to the Wire Act case could also serve to motivate operators to launch in that state, knowing that the it will be clear to join the other states that have legalized online poker in MIGA.
Then there are states such as New York and Kentucky which look ready to legalize online poker this year. While it is unlikely that they would also be able to launch their markets in 2020, the passage of legislation in those states would likely cause online poker operators to invest in their curt markets as a way of preparing for what may turn out to be a new online poker boom in the US.