In Pennsylvania, PokerStars will have the opportunity to do something that it hasn’t in any other state that has legalized online poker: launch when the gates first open.
PokerStars is undoubtedly excited by the prospect, with representatives of the company leaving little to the imagination regarding its plans in Pennsylvania. In a recent Q3 earnings call, Stars Group CEO Rafi Ashkenazi had this to say:
We are poised to take advantage of the positive momentum in the growth of online gaming globally and the continued march towards regulation, including in the United States where we aim to be among the first operators to launch in Pennsylvania when that state opens its door to online poker and casino.
But will a first to market status vault PokerStars to the same kind of dominant status it enjoys internationally, or will its struggles in the legal US online poker market persist?
A bumpy ride so far
If PokerStars was expecting a warm return to the US after its multi-year absence, it was in for an unpleasant surprise. Fact is, the industry has grown at less than a snail’s pace, with New Jersey, Delaware, and Nevada all going live with their respective operations in 2013, and Pennsylvania only just becoming the fourth state to legalize online poker.
And presumably, it will be up to another year before the PA industry starts dealing out cards, making it five calendar years since the available player pool has increased.
There have been some significant events in the interim, but the most notable of them — an interstate online poker agreement between NJ, NV, and DE — only happened recently and hasn’t gone live yet.
In the states that have regulated online poker, PokerStars does not have a presence in Delaware, and due to bad actor provisions, has been effectively shut out of the Nevada market. It’s only live in New Jersey, but even there the operator was forced to alleviate regulator concerns and undergo a vigorous vetting process before being let in, resulting in a nearly two-and-a-half-year delay. PokerStars NJ finally flipped over the open sign in March 2016.
Factor in a prolonged and ultimately failed lobbying effort in California and the overall decline in online poker, and it goes without saying that PokerStars has had a rough road of it on its way back.
In NJ, PokerStars is winning, but not convincingly
If there has been one pseudo bright spot for PokerStars since it was effectively kicked out of the US in April 2011, it’s the operator’s performance in the New Jersey.
Non-Atlantic City branded poker rooms have struggled mightily to carve out a niche in the market:
- Upstart Ultimate Poker “ultimately” failed to make any headway in the market, and shuttered its doors in late 2014.
- Betfair, despite becoming one of the industry’s most popular online casino, put forth an embarrassing performance on the poker side, and left the market.
- Pala Poker (launched in June 2017) is still around, but its traffic numbers are paltry, and that’s putting it mildly.
- Party Poker and playMGM are aligned with Borgata as part of a three-site network. Of them, Borgata Poker accounts for the overwhelming majority of market share.
Besides PokerStars, the only operators that have thrived are WSOP and 888 Poker, which support a combined network in New Jersey, and are bolstered significantly by the popularity of the World Series of Poker brand.
But even WSOP/888 hasn’t proven as popular in New Jersey as PokerStars, which regularly outperforms both it and Borgata in monthly revenue. In fact, there hasn’t been a single full month since it launched that PokerStars has conceded the revenue lead to either of its competitors.
That being said, PokerStars hasn’t exactly dominated the New Jersey landscape either. For the first nine months of 2017, the operator has accounted for just a 40.5% market share. And while that sounds somewhat impressive, consider that New Jersey is really only a three-dog race where average market share is 33.3%.
That, and internationally, PokerStars averages a whopping 7.5x as much cash game traffic as 888 Poker, which is the second biggest site to service Europe.
Also, the entry of PokerStars has done little to grow the NJ market. In September 2017, online poker generated just 7.4% more revenue than the same month two years prior, which was before PokerStars launched. This firmly suggests that a majority of PokerStars’ traffic was siphoned from existing networks, and not new to the industry.
With PA online poker, comes hope
Despite the tepid results in the US so far, there’s reason to believe PokerStars will return at least partially to form when the gun fires on Pennsylvania online poker.
Being first to market comes with select advantages. As witnessed in New Jersey, there is a hype surrounding the launch on new online poker sites, with the industry enjoying its best months in the first half of 2014. PokerStars can leverage its strong brand and bottomless pockets to capitalize on the influx of new signups; something it’s been shut out from doing previously.
By contrast, PokerStars NJ launched when the industry was in the midst of a steep decline, presumably due to the state’s small market cap. Market size will still be an issue in Pennsylvania, but less of one, as Pennsylvania boasts approximately 1.43x the population of New Jersey. Going further, there is at least a possibility that Pennsylvania will join the multi-state liquidity sharing pact on Day One, allowing PA operators to service a population of over 25 million players.
In that scenario, not only will PokerStars be able to capitalize on increased appeal in Pennsylvania, but it may spark revitalized interest in New Jersey, whose players will suddenly have access to more games, and bigger tournament guarantees.
That said, PokerStars will likely face fierce competition from 888 Poker in Pennsylvania, as the operator will presumably be the only one to boast operators in all four states in which online poker is legal.
PokerStars can nullify 888 Poker’s advantage by partnering with a land-based casino known for poker. In New Jersey, PokerStars aligned with Resorts AC, which doesn’t support a poker room. PokerStars has tried to take advantage of the arrangement, going so far to host live events at a makeshift poker room in Resorts, but turnouts were disappointing. The poor results were presumably due to a lack of poker awareness among Resorts visitors.
However, by joining forces with a Parx or even a Rivers, PokerStars can position itself to more effectively spread brand awareness, resulting in better turnout for live events. More importantly, it can utilize these live events to drive online poker during the critical early stages of the industry.
All said, PokerStars’ will still probably not reach the level of recognition or enjoy the same beloved status it did in the US seven years ago, but there’s fair chance it will widen its lead.