Prior to Black Friday, many professional poker players never had to leave their homes because they earned a solid living purely from playing online. Many cottage industries—most of which are gone now—also sprung up because of the substantial marketing dollars being pumped into the poker ecosystem by the likes of Pokerstars and Full Tilt. However, the return of New Jersey online poker is not as simple as Governor Christie signing a bill and flipping a switch – here are some thoughts on how this might play out and what to expect.
In a bit of a surprise move, on Tuesday February 26, New Jersey approved not just online poker but other casino games such as slots, blackjack and craps. The poker community worked hard to separate itself from their luck driven brethren. Their theoretical argument being, if you are a better poker player than the guy sitting next to you, you can absolutely make a profit. With slots and the like, if you play long enough, the math says you’ll 100% lose money in the long run.
Diligence paid off in spades for poker supporters. A historic 2012 ruling by U.S. federal judge Jack Weinstein concluded that skill dictates poker’s outcome, not chance, placing it in a category with different gambling laws than the pure luck casino games (card counters and expert dice throwers excluded). As a result, it came as a shock to those who regard poker as less immoral than luck based casino games that New Jersey went all the way and green-lit everything.
The bill was signed in the beginning of March. Some are saying that online gambling could be live as early as Christmas. But to those looking to get their degenerate friends online accounts for Christmas, you better have a plan B. One of the most important and influential operators in the state is Caesars (they own four of the twelve casinos in Atlantic City), whose CEO told Wall Street to expect an 18-24 month gestation before anyone launches. Given all of the steps necessary to go live, it could take longer. For New Jersey, here’s what has to happen first: state government needs to finalize the rules of engagement for the casino operators and players (e.g., how deposits will be made, how accounts can be opened, etc.), casino operators with land based licenses have to apply and be approved to operate online, land based casinos need to either develop the technology or find an online partner to develop an online offering, physical assets (computer servers, employees, etc.) need to be deployed in the state of New Jersey (this is one of the requirements of the state) and the operators need to find customers. This definitely feels like it’s shaping up to be more of a 2015 event.
How It Will Work For Players
As mentioned, this is still a work in progress but here is what is known:
How Will This Unfold?
Right now, there are tons of meetings taking place in Atlantic City, Las Vegas and throughout Europe about New Jersey online poker and gaming. Casino operators like Caesars and MGM Resorts are sitting in huge conference rooms trying to plot out their strategy. Small casino operators in Atlantic City are trying to figure out how they can make some money off of this too. Technology providers around the globe are studying the Atlantic City market to understand where they might be able to find a partner.
The good news for the casino industry is that the state has not been overly greedy. The gaming tax will be 15%, which is quite favorable (to put that in perspective, New York is at 47%; Nevada is at 8% and Rhode Island is at 74%). For the players, this is a good thing. If they want online gaming to continue, it needs to thrive. And if players want rebates, comps and discounts, a lower tax rate very much helps that cause.
Here is a quick look at the likely players:
The ironic thing is that those economics may not matter. Nevada and New Jersey are going to serve as super important online gaming guinea pigs for the rest of the country. The casino and online operators know this so they have a huge incentive to make New Jersey work. In fact, the money is so large on the federal level (estimated $10 billion annual market) that it could be considered research & development spending if they ended up losing money in New Jersey proper but succeed nationally as a result.
Thinking back to before Black Friday, the U.S. market was structured with two dominant online operators: Pokerstars and Full Tilt, and a long list of barely profitable online operators trailing behind. As mentioned, the larger online operators (Party Poker, Pokerstars, WSOP.COM) with national online aspirations will do whatever they need to do in order to make New Jersey a “success”. This could include overspending on marketing and player acquisitions (promotions, rake-back, etc.). Which means the industry structure in New Jersey could be top heavy leaving only the well capitalized with an opportunity to succeed in the long run.
In the face of large marketing spends from the likes of PartyPoker, WSOP.COM and Pokerstars, the smaller folks need to unite. If there are six or seven operators fighting it out in two years, chances are good the smaller guys will struggle to survive. Instead of going it alone, the smaller players need to join forces and create a company with enough scale economies to compete.
To sum things up, New Jersey online poker is a long way away but there are decisions being made right now that could have a huge impact on the industry’s long term success both in New Jersey and across the country. For the sake of all the poker players out there, hopefully they get it right.