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5 Serious Questions About PA’s Coming Online Poker Market

The Pennsylvania Gaming Control Board (PGCB) just announced that this summer will see the launch of Pennsylvania casinos’ online gambling platforms. They will host online versions of traditional casino games, including a blast from the US past: online peer-to-peer poker.

Online poker began in the US in the late 1990s and rode poker’s “boom” around 2003 to become a very popular activity in the country. Players could play with others all across the world. All that stopped when the US government destroyed online poker in America on April 15 of 2011. That’s when the DOJ prosecuted the founders of the top US online sites and seized their domain names (blocking access to the sites for US citizens). That was online poker’s aptly named “Black Friday” and ever since, legal online poker in the US has been largely erased. The only exceptions are the small player pools in intra-state sites that operate in Nevada, New Jersey, and Delaware.

Pennsylvania is the country’s 5th most populous state with 12 million people. When Pennsylvania online poker launches in a few months, PA will be the fourth US state to legally re-enter the market and will be the biggest player pool in the country.

Right now, New Jersey is the country’s largest casino gambling market, but it’s expected that PA (with a larger population) will eventually take that spot. Some speculate that if PA achieves success, it will provide an impetus for other states to follow suit (either online gaming, or online poker or both). Legal sports betting (both live and online) is sweeping the nation and it’s natural for legislators to consider one as they consider the other.

There’s a lot going on right now, and it prompts some interesting questions.

What will the online poker revenues look like?

The PGCB has set the offical launch date for online gaming in the state at July 15, 2019.

How big will online poker be in Pennsylvania? It’s hard to say. New Jersey casinos collected $2.8 million in rake during the first full month operating online poker in December 2013. Of course, that was just two and a half years after Black Friday so online poker still held a lot of residual interest around the country.

Unfortunately, being restricted to small intra-state player pools isn’t helping the market for online poker in New Jersey. Revenues have been flat. Last month the NJ online poker sites collected just $1.9m in rake. The same trend shows up when examining annual figures. New Jersey’s online poker revenue in 2014 was $29.06 million (the first year of operation post Black Friday) and the annual revenue numbers have never reached that height since.

Again, this makes sense. It’s hard for poker players to get excited about being limited to playing vs. people in your state when you’re used to a player pool the size of the whole world.

Still, Pennsylvania is a bigger market, so how will online poker fare in it’s first month here (August 2019)? On one hand, more population could yield larger market. On the other, nationwide interest in online poker has diminished since Black Friday.

Here’s a prediction: PA’s first full month of online poker rake revenue will probably be less than NJ’s $2.8 million figure of December 2013. PA has a larger live poker scene than does NJ and clearly there’s still some pent-up desire to play online, but there are serious offsetting factors. Mobile sports betting arrives in PA early in May and once online poker launches, online table games and slots launch as well, competing for eyeballs and interest (and disposable income). For these reasons, online poker’s initial revenues will probably be on the low side.

Despite a slow start, eventually the Keystone State’s larger population and larger live poker player base will exert is influence. In addition, NJ online poker will probably continue to decline. In time -and probably not that much – expect Pennsylvania to reach the #1 spot in US online poker market share.

Does online poker hurt or help live poker?

Live poker in Pennsylvania is larger than in NJ, but the market is still struggling. In 2018, PA’s ten brick and mortar poker rooms took in $55.69 million in rake. That’s roughly 6% less than the total rake collected in 2017, which was very similar to that of 2016.

It’s not like the casino’s aren’t trying. Sands and Parx both recently remodeled their poker rooms (to little effect) and Harrah’s just revamped their poker room as well. Casino management is committed to live poker in PA, it just isn’t thriving. But perhaps that can change?

It has been surmised that there are synergies to be had between a casino’s live poker room and its online poker presence. This theory hasn’t yet manifested in Nevada or New Jersey, where the addition of online poker (albeit a limited intra-state version) did nothing to boost live poker games in those states.

Perhaps a PA casino operator will figure out the technique that sparks live poker action with online poker offerings.

The more likely outcome is that adding online poker to the mix will lead to the closing shop of PA’s marginal brick and mortar poker rooms. Presque Isle Casino and Mohegan Sun Pocano seem the most vulnerable in this regard, with seven and eighteen poker tables respectively. Not only are they among the smaller poker rooms in the state, these casinos didn’t bother acquiring an online poker license.

Who will jump out of the gates first and fastest?

To make the best guess of what the PA market will look like soon we should look at the NJ market right now. Presumably, online poker sites already in operation there should have the initial advantage in Pennsylvania.

The three NJ online poker operators that are relevant to the PA market are Harrah’s Philadelphia (WSOP – a Caesar’s property), Mount Airy (partnered with PokerStars) and MGM/Borgata.

MGM can probably be eliminated as a contender for supremacy in PA. In NJ they are currently the #3 poker room operator and worse, they don’t have a physical poker room in Pennsylvania. MGM is only eligible to operate online gaming in PA due to their receiving Qualified Gaming Entity (QGE) status which let them apply for licenses left on the shelf by PA casinos.

PokerStars is the global leader in online poker but that market power doesn’t translate well in ring-fenced markets. WSOP is also a well-known poker brand and now leads the pack in NJ. PokerStars was tops to begin with, but WSOP took the lead thanks largely to a player pool sharing agreement between New Jersey, Nevada, and Delaware that so far only benefits the WSOP brand.

That last caveat won’t matter in the ring-fenced PA market, so will PokerStars be top dog in Pennsylvania?

Maybe, but there are two more participants to consider. The busiest live poker room in the state (with 48 tables) belongs to Parx Casino. Parx posesses roughly 30% of the live poker market and takes in over 4x the revenue of Harrah’s live poker room. Parx Casino and their partner GAN could do well in the PA online poker market.

The other wild card is long time US online poker veteran PartyPoker, who has partnered with Valley Forge Casino. PartyPoker was dominant in the heyday of the US online poker market in the early 2000s. Another factor: Valley Forge is owned by Boyd Gaming, no stranger to poker in a variety of settings.

What will the mature PA online poker market look like?

It’s not about the start, it’s about the finish, right?

So far, PGCB has issued eight licenses to offer online poker. Even with a population of 12 million, it’s hard to believe eight separate poker sites can all thrive in a limited intra-state player pool. To make things more congested, each license-holder can operate as many skins (brands) as they like. Here’s a list of all the players:

It’s possible not all these casinos will launch online poker, but they are all licensed to do so. Once the dust settles, which of them will remain?

Time will tell.

What about merged player pools? Can’t we all just play together?

For online poker enthusiasts, this is the biggest question of all. Being restricted from playing with the broader worldwide poker community severely retards online poker’s longevity – and profitability.

For starters, can PA join other state’s who are beginning to merge their player pools? Nevada, New Jersey, and Delaware could add other 14 million to the potential player pool. Then there’s the 2 million eligible to play when West Virginia legalizes online poker next year and the 10 million eligible when Michigan soon follows suit.

Currently each of these states is ring-fenced, but that system is breaking down. Nevada, New Jersey, and Delaware have an agreement to merge pools, though only the WSOP/888 network is able to take advantage of it.

More worrying, even that small move in the right direction is now jeopardized thanks to the DOJ’s new “interpretation” of the Wire Act. Pennsylvania’s understandably risk-averse regulators aren’t going to make any moves to expand PA’s online poker player pool until this new DOJ situation is resolved.

Currently, the matter is before a court in New Hampshire and very interested parties across the country are watching closely. Unfortunately, the matter likely won’t be settled until the US Supreme Court weighs in, which usually takes years.

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