Herald Online – Fitch reaffirms its 2014 forecast for New Jersey online gaming revenues in the $200 million – $300 range as we expect meaningful sequential growth to continue throughout the year.
The New Jersey gaming regulator reported $9.5 million in gross gaming revenue for the month of January, a 28% improvement from December’s $7.4 million. Although the January figure annualizes to only $114 million, we think the 10% sequential growth rate needed to reach achieve the low end of our estimated range is achievable.
Several factors will drive sequential growth. The primary driver will be the ramp-up in players’ awareness of online gaming as a result of operators’ marketing efforts. Online operators’ executives have been open about the importance of marketing aggressively early on, which is at least partially driven by the industry’s tendency to consolidate around two or three major operators. In New Jersey, top two online license holders – Borgata and Caesar’s – already control 73% of the online market. Success in capturing market share in New Jersey could also be perceived as crucial for platform providers and operators to have a “foot in the door” as online gaming expands in US.
Online gaming advertising is abundant as one drives through New Jersey’s highways or listens/watches radio/television in the state. Advertisements are often buttressed with promotions featuring bonuses and deposit matching offers. The number of online gaming accounts increased by 57% in January (197,782) from December (126,231), which attests to the swift ramp-up in customer awareness.
Other factors driving growth include technology improvements, users’ adaption to the available payment methods and rollout of mobile products. One issue reported early on was instances of false negatives when identifying the location of the players (a player needs to be within New Jersey’s borders; the location is primarily verified through WiFi signals). GeoComply, a provider of geolocation services for 10 of the 11 sites in New Jersey, recently stated that their false negative rate declined to 3%-5% from around 10% when online gaming launched in November.
