Hard to tell what Internet poker market will look like

Apr 2, 2013 3:08 AM

What will the initial market for Internet poker in the U.S. look like? It’s too early to tell, Caesars CEO Gary Loveman was saying during a recent discussion about industry trends.

The size of the early market will depend on the type of interstate agreements Nevada and New Jersey are able to make. These are the two states expected to be the first out of the gate with their as-yet undefined offering, thanks to speedy early action by lawmakers and regulators in the two states.

Players in New Jersey and Nevada being able to participate in a single pool will be a “big step” forward, he noted, “and if little Delaware adds itself to the list that would not be bad either.”

Loveman thinks there could be “potential” international involvement, a move that would obviously benefit Caesars since the company owns the UK-based London Club Casinos, an area where there is already a lot of Internet gaming activity.

The potential is large, Loveman and other gaming executives agree, but the list of uncertainties and still-to-be-decided issues is a long one. Lawyers and business strategists look to get everything they can out of existing laws.

The likelihood of International agreements seems strong considering a number of non-U.S. service providers have already been approved to do business in Nevada. They bring existing agreements with them that could add a lot of mass to the initial action.

The plan by PokerStars (based on the Isle of Man) to buy an Atlantic City casino so it can be part of the Internet business there is a good example. Then we’ve got companies such as MGM and Caesars each of which has a huge database and significant presence on the Internet with non-cash games.

Some analysts believe gaming company strategists should not write off the possibility Congress will eventually pass the kind of 50-state strategy companies such as Caesars, MGM and others were looking for last year. Senate Majority Leader Harry Reid, the Nevada Democrat, who once chaired the state’s Gaming Commission, was recently saying he still hopes this can be done.

But Congress’ continuing inability to deal with thornier national issues makes this unlikely. A variety of forces at a state level are standing firm on an insistence that they be able to draft their own plans for Internet gaming of any kind.

“We can’t frame the size of the market entirely yet,” Loveman said, “but looking at the normal parameters for the penetration of online gaming across all categories – and in New Jersey it involves more than poker – you can see that it is quite a meaningful market. We think it should be quite profitable.”

Loveman did not miss the opportunity to point out Caesars has opened new doors, so to speak, that boost the company’s ability to exploit Internet opportunities. It is beginning “vertical construction” on a Baltimore casino this month. That property will be open by the middle of 2014.

The company co-owns and operates the land-based Horseshoe Cleveland, which has resulted in more than 400,000 new names being added to the Caesars Total Rewards database since its opening about a year ago. There are no figures available yet for the recently opened Horseshoe Cincinnati.

As for Penn National, CEO Peter Carlino senses a lack of understanding among some companies looking for get-rich-quick opportunities in regional gaming markets.

Those opportunities are more difficult than ever to find, he says, as competition increases across the U.S. “There is clearly an irrational exuberance in some of what we’re hearing from competitors.”

Carlino said Penn tends to frown at situations that have companies bidding against each other for a new opportunity.

Why? “There is always somebody out there who is willing to try something that is completely nonsensical. And we are just not willing to be that person or that company.”

Carlino appeared to think about that for a moment, adding, “We expect to always be competitive right up to the point where we think only a moron would go further. There’s always the chance that somebody else will do something that they ought not to do. We’re not going to let that kind of action affect our judgment. A lot of people do not understand these regional markets.”

Regional gaming opportunities – Penn’s specialty – have become what he terms “a very mature business. It’s a good business but it is one that requires some pretty careful management.”

Penn owns the M Resort in Las Vegas, which it acquired by buying up outstanding debt, and continues to look for a property in the mid-Strip area. The Rio, Mirage and Cosmopolitan have all been mentioned repeatedly as possibly targets of Penn’s focus.

But as Carlino was saying, “We’ll be competitive up to the point of suicide, then we’ll let the other person commit suicide.”

Phil Hevener has been writing about the Nevada gaming business for more than 30 years. He can be reached at [email protected].

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