Last updated: November 24, 2013 2:52 pm

New Jersey to join online betting world

The residents of New Jersey are promised a deluge of TV, newspaper, digital and billboard advertising as the Garden State prepares this week to step into the highly competitive world of online gambling.

New Jersey follows Nevada and Delaware into the nascent US market, and land-based Atlantic City casinos and predominantly European-based operators are teaming up to lure customers on to a host of websites.

The timing of the launch could not be better for operators. Freezing night-time temperatures are ideal for encouraging punters to gamble from the comfort of their living rooms and convenience of their laptops.

After a five-day “soft play” trial, mainly to iron out technical glitches and ensure regulations such as age verification work properly, the full launch is expected on Tuesday. The New Jersey online market is restricted to casino games and poker, with sports betting excluded.

Watching closely are regulators in Pennsylvania, Illinois, New York and California. As states look for new taxation revenue sources, the industry hopes New Jersey sets off a domino effect and that it can regain some of the pomp and swagger that made online gambling sites such a hot stock play in the mid-noughties.

No fewer than 17 websites will vie for New Jerseyans’ attention – and that is just for the initial launch. Each of them is set up by partnerships forged between Atlantic City casinos and mainly European-based operators schooled in the technological requirements of online gambling.

Seven out of the 12 Atlantic City casinos have so far won licences. Each casino can operate up to five websites.

Five websites are being launched by Caesar’s Bally’s Park Place casino, driven by UK-listed operator 888 Holdings. Borgata casino is running three websites powered by another European operator, Trump Plaza has a website put together with the UK-based operator Betfair.

For, the New Jersey launch marks a return to the US after a seven-year absence, after European operators quit the lucrative market in the wake of a US Congress clampdown on online gambling. Its lead marketing phrase in the venture is “back in the game”.

888, which also retreated in 2006, stepped back into the US in September when it teamed up with Caesars to break into the nascent online gambling market in Nevada.

“It looks crowded, but online gambling in Europe is pretty crowded too,” said Breon Corcoran, chief executive of Betfair. The group is offering free flights to Hawaii and London on its promotional website.

With other states likely to follow suit, the New Jersey market is a vital “signal of intent” for operators, said Mr Corcoran.

“It is about being there early and showing you have the capabilities of competing in the US,” he said.

According to Ivor Jones, Numis analyst, a mid-range estimate of the size of the New Jersey market is about $500m of annual revenues for a population of about 10m. “That is the equivalent of a midsized European online gambling market like Holland or Belgium,” he said.

While some casinos may view the revenues as incremental to their land-based operations, others such as Borgota and Caesars view online gambling as an important additional revenue stream.

The casino websites can all happily survive in competition, said Mr Jones, but the number of poker network operators may fall to no more than two or three because these offerings depend on high volume and liquidity.

The biggest overall loser could be PokerStars. The world’s biggest online poker site last year, it settled a US Department of Justice lawsuit alleging bank fraud and money laundering by paying $713m, though it did not admit wrongdoing.

But the hangover of that settlement appears to be affecting its ability to gain a New Jersey licence. It admitted last week via Twitter that it had not got approval to be part of the November 26 launch, saying it was continuing to talk to the state’s division of gaming enforcement.

The winners are likely to be those operators with the right combination of marketing savviness, technological competence and brand strength.

But Mr Jones said: “It will take a year to work out the size of the market and the opportunity.”

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