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Prospects Poor for Regulated Online Poker in New York

Posted on by John Lathram

New YorkThis week has seen pro-regulation affiliates and anti-gambling columnists publish articles relating to gambling in the Big Apple. Both sides have their merits and their faults, but one look at the facts will tell you the prospects for regulated online poker in New York are poor – at least for the present.

If you were to have a quick flick through poker news websites this week, you could be forgiven for thinking something dramatic happened in New York. “NY Online Poker is Back, Back, Back” screams one headline, while another states “Bill Returns Weeks after Pennsylvania Made its Move”.

What actually happened is that, on January 3rd, time officially ran out for the Assembly to consider the Senate´s proposals to regulate online poker in New York, so the Bill got sent back to the Senate´s Racing, Gaming and Wagering Committee – unconsidered.

Strictly speaking, both headlines were correct. The Bill that would create the framework for regulated online poker in New York is “back, back, back” to the committee stage, having returned (to the committee stage) weeks after Pennsylvania made its move.

New York´s Bad Bet on Casinos

While pro-regulation affiliates should hang their heads in shame for trying to make something out of nothing, NY Daily News columnist – Errol Lewis – should go back to school for the appalling howlers he made in his article entitled “New York´s Bad Bet on Casinos”.

In his article, Mr. Lewis describes the gambling expansion in New York as being led by “fanciful hopes and dreams” and comments that residents have not seen the cuts in property taxes they were promised by pro-expansion campaigners due to the poor revenues the casinos have generated.

Mr. Lewis also claims the social costs of opening the casinos have exceeded the revenues that have actually been achieved, while 32% of people taken on to work in the casinos were either fired or quit their jobs within the first six months of the casinos opening.

The Negative Spin vs the Positive Spin

Mr. Lewis´ article was generally slammed for its inaccuracies and its spin on the rate at which casino gambling breeds addiction. However, pro-regulation affiliates were also guilty of spinning up their articles to justify why regulated online poker in New York is a certainty for 2018.

States do not necessarily pass legislation because neighboring states have. So just because Pennsylvania has passed a Bill to regulate online gambling, and just because the existing regulated states have agreed to a compact, it doesn´t necessarily mean New York will follow suit.

If that were the case, Maryland, Ohio and West Virginia would also be on the verge of passing legislation – just because Pennsylvania has – and the pattern of neighbor copying neighbor would continue to its ultimate conclusion, when the state of California would regulate online poker and form a compact with the rest of the country – just because Pennsylvania has.

Disappointing Revenues and Market Saturation

The truth of the matter is that the prospects are poor for regulated online poker in New York because the brick and mortar casinos have failed to deliver the revenues they projected and the blame is being attributed to market saturation.

Back in August last year, I wrote the article “Poor Casino Revenues Threaten Online Poker in New York”. In the article, I noted the first of the new casinos to open – Tioga Downs Casino – had generated 35% less revenue than projected. At the time, Governor Andrew Cuomo commented that the casinos were just starting out and the revenue projection didn´t bother him that much. But now things are worse.

Having just completed its first full year of operations (twelve months to end of November 2017), the Tioga Downs Casino missed its projected first-year revenue of $40.3 million by a staggering $17.7 million or 44%. Furthermore, according the figures published on the New York Gaming Commission website, the Gross Gaming Revenues at the casino have fallen consecutively for the past five months.

The cause of the problem – according to experts in the industry and racino owners – is market saturation. In August, Alan Woinski – President of Gaming USA Corp – commented it was unfeasible to have so many casinos, racinos and tribal casinos in such close proximity, while – speaking to CNYCentral.com – racino owner Gary Greenberg told reporters:

The new casinos’ revenue shortage is due to an increasingly over-saturated market of gaming facilities in upstate New York.

How Do Casino Revenues Affect the Prospects for Online Poker?

There are two ways in which the disappointing casino revenues affect the prospects for regulated online poker in New York. Firstly, legislators will be aware that “fanciful hopes and dreams” about how much money the state will receive should be taken with a pinch of salt – especially as the plan is only to regulate online poker and not online casinos.

Secondly, the word that makes pro-regulation affiliates recoil in horror has reared its ugly head again – “cannibalization”. Comparing market saturation with cannibalization when not comparing apples with apples (i.e. brick-and-mortar vs online) does give a misleading picture, but it has to be remembered it is politicians who will make the decisions, not statisticians.

According to a spokesman for the New York Gaming Commission, the state will wait to see third-year revenue results before deciding whether to push ahead with further expansion of the brick-and-mortar casino industry. By then, he said, the state will have better metrics for analysis as the casinos will be more established in the marketplace. It is my belief politicians may also delay regulated online poker in New York until the full impact of the gambling expansion is evident.

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