April 2016 marks the third anniversary of Nevada’s online poker market and the establishment of regulated, real-money iGaming within the U.S.

 The evolution folks.. iGaming over last three years has provided casinos in Nevada and New Jersey with important opportunities for revenue generation; and with new states set to manage online gambling, the potential for Internet wagering is as relevant as ever. Even in jurisdictions where promulgation of real-money iGaming appears remote, free-play social casino products offer operators an avenue to milk the growing acclaim for online gaming.

The road to iGaming growth has not been without its obstacles however, as evidenced by the evolution of the marketplace since Ultimate Gaming, majority-owned by Las Vegas-based Stations Casinos, dealt its first hand of virtual poker in April 2013. Other Nevada-based operators soon followed suite with their very own online poker sites—WSOP.com from Caesars Interactive and Real Gaming from South Point Casino are two leading examples—and by July 2014 the state’s iGaming market was generating $1.04 million per thirty days in revenue. But loss of cash liquidity in Nevada operator online poker games—due largely to the small, 2.8 million population of the state—has stunted overall market growth. Consistent with Eilers & Krejcik Gaming, a California-based boutique research firm, combined Nevada online poker revenue averaged $750,000 monthly in 2015, well below its 2014 high-water mark.

“We see little room for [Nevada online poker] growth in CY16 and beyond,” Eilers & Krejcik Gaming said in a prepared report.

If Nevada’s population and exclusive deal with online poker has constrained growth, neither factor limited New Jersey’s iGaming market when it went live in November 2013. With a population of 8.9 million, the state allows casinos to provide products in both the web casino and poker verticals.

The New Jersey Division of Gaming Enforcement (DGE)’s cross-vertical method to iGaming helped the market enjoy significant growth. In 2015, revenue rose 21 percent year-over-year, and tellingly the web casino vertical, which grew by 33 percent annually, was a fundamental factor.

“For the net casino product in New Jersey, growth was tremendous,” said Chris Grove, senior consultant at Eilers & Krejcik Gaming. “The product is comparatively immature in comparison to European online casino products, so New Jersey will have how to go before it reaches a ceiling for casino.”

Given that a new monthly revenue record of $14.6 million was reported by the DGE for January 2016, Grove’s forecast could well be right.

SPREADING THE WEALTH

It’s likely these improving iGaming results from New Jersey are influencing for-money Internet gaming legislation in other states. Indeed, Eilers & Krejcik Gaming predicts various type of legalized online wagering could soon exist in Pennsylvania, California and New York.

The Pennsylvania legislature is currently considering HB 649 which, if eventually passed, will reform state gaming laws and legalize online wagering. “In Pennsylvania it’s certainly plausible that legislation is enacted in 2016, and within THREE HUNDRED AND SIXTY FIVE DAYS its market goes live,” Grove said. Importantly, just like the Garden State, Pennsylvania is calling to control online casinos in addition to poker.

In contrast, California is purely seeking to regulate online poker. However, its population of over 38 million would likely overcome the liquidity issues experienced by Nevada. “There are scenarios that California passes online poker legislation in 2018,” Grove said.

Another highly populated state, New York, which has over 19.7 million residents, is anticipated to control online poker by 2019, in line with Eilers & Krejcik Gaming. “We expect only incremental progress this year and next,” said Grove, who emphasized that the Empire State is currently excited by its land-based casino expansion.

Beyond New York, Eilers & Krejcik Gaming forecasts that Massachusetts’ and Connecticut’s iGaming markets could go live by 2020. 

REAL-MONEY POTENTIAL

For casinos in these five states, the advance of real-money iGaming products offers an a variety of benefits. These include an extra revenue stream, a brand new marketing and brand-building channel for the valuables in addition to an engagement tool to extend customer lifetime values and procure new patrons.

The issue of extra revenue was initially a priority for casinos, fearing that online growth would ‘cannibalize’ on-property revenue. “We’ve not seen anything within the numbers and anecdotes from casinos in New Jersey that online revenue comes on the expense of land-based casino revenue,” Grove said.

The Tropicana Atlantic City, which launched its real-money online casino TropicanaCasino.com in November 2013, is one such casino. “Our statistics show that TropicanaCasino.com has only served to support the expansion of Tropicana Atlantic City,” said Luisa Woods, vice chairman of online and online advertising at Tropicana Entertainment. She adds that the Tropicana integrated its Trop Advantage loyalty program with TropicanaCasino.com, so customers playing online slots and table games too can earn points redeemable on-property.

Since launch, the Tropicana Atlantic City’s online casino has generated standalone revenue of over $59 million. Vitally, a majority of this may be attributed to new customer acquisition. “We were surprised and delighted to be told that about 60 percent of our online players were new to the Tropicana family,” Woods said. Given the web brand’s integration with the valuables via its loyalty program, this also translated into increased revenue for the valuables itself.

Beyond the purchase of latest customers, an iGaming brand can be used to reengage existing customers. Relating to the approximately 40 percent of TropicanaCasino.com players who were already within the casino’s customer database, Woods said, “Of individuals who had played with us within the past, many had not been to go to Tropicana Atlantic City for a year or longer.” She adds that the real-money online casino has served as “an easy and approachable way for players to go back to our brand.”

An iGaming offering also allows land-based casinos to increase the brand’s presence beyond the physical confines of the valuables with a digital product that may be just as compelling as a real-world casino. For players who live within the same state but removed from the casino itself, a web-based casino allows casinos to maintain players constantly engaged between their infrequent property visits. “Those who're unable to travel to Atlantic City are actually capable of play with us remotely,” Woods said.  

As more states regulate iGaming, compacts between states could allow a casino based in a single jurisdiction to focus on players in another. Regarding the potential of imminent regulation in Pennsylvania and New York, Woods said, “Expansion into new markets would enable us to serve fans of the Tropicana in these neighboring states.”

SOCIAL ATTENTION

Gaming operators in states which can be cold to iGaming legalization can instead pursue online social casino products to derive marketing and fiscal benefits from the web space.

The legal restrictions on real-money iGaming don't extend to social gaming, that is either free to play or involves a freemium model whereby players only pay to procure extra virtual credits for the sport. “With social casino there’s no use for compliance or regulation—it can also be offered in all 50 states and has the entire benefits of real-money iGaming, including revenue,” Grove said.

Alec Driscoll, director of gaming development at American Casinos & Entertainment Properties (ACEP), which operates the Stratosphere Casino, Hotel & Tower and 3 other properties within the Las Vegas area, agrees. “We initially launched acePLAYpoker.com [ACEP’s free-play poker brand] in February 2013 as a precursor to real-money iGaming,” he said. Despite acquiring a Nevada online gaming license, ACEP has yet to launch a real-money online poker offering. A TREMENDOUS explanation for this decision was that social poker provides the similar marketing benefits the corporate sought in real-money play. “AcePLAYpoker.com was an extension of our properties and we used it to bring people throughout the properties’ doors,” Driscoll said.

The brand allowed players to win on-property prizes corresponding to restaurant meals and hotel stays to drive customer visits to the Stratosphere and ACEP’s other properties. “We saw a high level of redemption of vouchers in the case of our free-play poker brand,” Driscoll said. “We raised the price of our customers by segments, reactivating customers at the decline and our mature database.”

As well as customer retention, ACEP extensively utilized its social poker brand as a customer acquisition channel. “We’ve been capable of prospect players and what we did see was they'd more value than our traditional players,” Driscoll said. Another major difference ACEP noted in these new online players was demographic. “We had 75 percent male and the 25-39 demographic was dominating, that is the other of our casinos,” Driscoll said.

To ensure their social brand was driving players that better corresponded with their core demographic, ACEP launched the social casino offering acePLAYcasino.com in December 2015. Its freemium model allows players to shop for credits for the emblem’s social slots and table games. “The strength ofthe marketing is maintained butwe’re adding to the brand and raising the whole volume of our patrons,” Driscoll said.

While direct revenue wasn’t ACEP’s main objective for either acePLAYpoker.com or its successor, acePLAYcasino.com, both have achieved significant results for the corporate. “We’ve seen exponential growth month to month in revenue because the launch of our social products,” Driscoll said.

From revenue to reactivating and raising the lifetime value of existing customers in addition to acquiring new ones, developing a social casino offers many advantages to casinos in all 50 states. For those casinos in any of the five states expected to manage real-money iGaming by 2020, a web-based gambling product provides a majority of these benefits and a revenue stream that may result in even bigger business. 

Read More... [Source: eGaming]