Online gaming hasn’t lived up to its hype

Executives thought online gambling would be a savior, a shot in the arm for the gaming industry.

In Nevada, Station Casinos fired first when it delivered the first legal online poker platform via its Ultimate Poker brand. Caesars Entertainment soon followed suit.

“It’s a major accomplishment,” one insider said.

“Nevada is first, and Nevada should be proud,” Ultimate Poker Chairman and founder Tom Breitling said.

All the news was good — for a time. But it seems the excitement about the money generated by this new venture has met a foe: reality.

Adrienne Lu, a senior writer with Stateline and Pew Charitable Trusts, wrote about online gambling not living up to expectations.

New Jersey officials predicted legal online gambling would generate $180 million in 2014. But “by the time Republican Gov. Chris Christie signed the budget last June,” Lu wrote, “the figure had been revised downward to $160 million.” And by the end of May, a month before the fiscal year ended, New Jersey had generated just $9.3 million from online gambling.

In Delaware, officials expected $7.5 million in additional tax revenue, but “because of a delayed rollout and one-time startup costs, Internet gaming made no net contributions to the state budget in fiscal 2014,” she reported.

Nevada didn’t make any bold predictions, which proved prudent: The state pulled in about $700,000 in tax revenue through April on $10.2 million in gaming wins.

In March, Morgan Stanley lowered its estimate of the U.S. Internet gambling market to $3.5 billion by 2017. Initial forecast? $5 billion. In the long term, the company said it expected online gambling to generate $8 billion by 2020.

“While we remain bullish on the online gaming opportunity in the U.S., we are lowering our estimates to better reflect the insights we have gained following the first few months of operations in New Jersey, Nevada and Delaware,” the company wrote in a research note.

So what happened? Lu notes a couple of common problems. One has been breakdowns with online gaming platforms’ geolocation technology, which is designed to ensure a gambler is where he says he is.

Another issue has been communication between gamblers and banks, which in some cases weren’t aware online gambling had been legalized. In New Jersey, for instance, banks rejected about 60 percent of online gambling transactions.

What does this all mean? A betting man might say wait awhile before putting the fate of the U.S. gambling industry on the shoulders of online gaming. This much is clear: We’ve got some kinks to work out first.

Tags: The Sunday