When Governor Chris Christie performed a dramatic U-turn and signed sports wagering at casinos and racetracks into law this week, hope sprung eternal for the beleaguered casinos in Atlantic City, and their iGaming partners.
Whilst online wagering may be a while off, New Jersey, the most progressive state on iGaming legislation, has taken another giant leap towards what this writer believes will become known as it’s watershed moment.
iGaming is still behind forecasts in the Garden State. Way behind. The truth is liquidity in poker is everything and online casino play is a minority activity. The NJ state population prohibits closed market liquidity and even if you factor in a partnership with Nevada, for example, the numbers just don’t stack up to building a profitable poker network, notwithstanding competition. The fact that only 1 in 10 people in the state recognized the legality of online gambling only compounds this.
Sports betting broadens gambling appeal to the masses and single-handedly offers up the opportunity for every state that wants to raise funds from online gambling the ability to achieve a critical mass, something most cannot through poker or even casino in a state-by-state rollout.
And what a critical mass it is too. Every Spring, in the region of 100 million Americans complete their March Madness brackets in either business or private prize pools. Even Barack Obama admitted to entering this year. There is a fundamental allure of sports as a gambling pastime that pulls at the strings of most adult American hearts – even when it comes to college sports.
Globally, acquisition costs are significantly lower for sports bettors than they are for poker or casino. This is largely down to the considerable size of the audience and the more tangible and relevant media sources operators can piggyback their marketing activity on to, notably soccer and its widespread television coverage. Hook number one for New Jersey. Budgets go further.
Whilst sports bettors are worth less in their customer lifetime, and portray far less loyalty, European operators – in particular bet365 and William Hill, have built highly effective cross selling programs to migrate customers to gaming products to maximize customer value on the products that really earn – precisely the framework iGaming operators in New Jersey need, and, I’m sure, precisely what Betfair will be looking for as they hang on to their New Jersey existence on the back of Trump Entertainment’s boardwalk bankruptcy.
Those casinos that cling to life in Atlantic City will be salivating with the thought of March Madness hitting the boardwalk. The year on year profit growth demonstrated by Las Vegas strip casinos in March this year – to the tune of 10.9 percent, or $561 million – was significantly attributable to the influx of sports gamblers to the sports books and tables over the month. Cross-selling land-based style…
Here’s the key number. In 2012, $3.45 billion was legally wagered in Nevada’s sports books; the National Gambling Impact Study Commission (NGISC) estimated that “illegal” wagers accounted for as much as $380 billion that same year. When you consider that the rest of the world contributed a meagre $74.3 billion in online betting turnover, with a profit of $5.9 billion – with many markets where in-store betting is more freely available than in the USA, a conservative estimate of the value of a fully regulated American sports betting market would be over $30 billion per annum or on a per capita count, $851 million to New Jersey – just online. Mimicking the existing iGaming tax rate, that’s $128 million lining the state’s coffers every year.
Governor Christie’s about turn may only have come about as an effort to revive a significant economic slump in the State. If New Jersey’s regulators can spin sports betting into the online gambling mix, it could yet prove to be his shrewdest career move from a profit perspective, and that’s factoring in a potential stint in the White House.