The real deal

The Golden Nugget recently launched North America’s first online live casino product. Brad Allen weighs-up its chances of success and the potential impact on the New Jersey market

When it comes to online gambling, the US is by and large several years behind Europe. It took Betfair 15 years to launch its exchange in New Jersey, for example, but operators in the US appear unwilling to wait that long to introduce live casino, with the Golden Nugget launching North America’s first such offering back in August.

In Europe, live casino has exploded in recent years, and is expected to grow at a rate of 30% in 2016. In the last six weeks alone, major players like Unibet, LeoVegas and GVC have all debuted or revamped live casino offerings. The exact size of the market is difficult to determine given the multiple geographies and providers, but live casino is undoubtedly more than just an add-on product exclusively for mature markets.

In Spain for example, which was only regulated in 2012, live roulette made up 48% of a Q2 roulette handle of $272m. Those are the kind of numbers which can’t be ignored, but as Betfair and numerous other companies have shown, it’s not as easy as simply transplanting a European product into the US and clicking the on button. So is live casino a natural fit in New Jersey?

The jury is still out, with supporters claiming a live product helps tap into New Jersey’s entrenched land-based casino gamblers, while pessimists warn the market isn’t big enough to support the stifling upfront costs of a live dealer studio.

As Ed Andrewes, the CEO of Resorts Digital, puts it: “It’s a very cost-heavy product to run. Whether it’s sustainable for a single operator to run a studio in New Jersey remains to be seen.

“While we’re conscious about looking for product differentiation, I think the size of the New Jersey market means you’d need to partner with another operator to make this viable from a cost point of view.”

Andrewes’ view is shared by Pierre Cadena, the vice-president of corporate development at Caesars Interactive Entertainment (CIE), who adds: “We looked at this a couple of years back and honestly we realised we couldn’t make it work from a standalone operator’s perspective.”

Cadena instead calls for “a healthy level of co-operation”, with operators sharing the hefty start-up costs and setting up a studio together. “We’re watching the Golden Nugget very eagerly to see how it moves the needle after the first month of going live,” Cadena says.

“If it is something that Caesars would like to pursue going forward – and we are evaluating it – it is not going to be by setting up a live studio in Caesars Atlantic City or Harrahs and trying to win business like that. There would have to be some level of co-operation.”

Flying solo

But of course one operator has already done exactly that and dived into the market alone. So what is Golden Nugget doing and what does it think it knows that others don’t?

The Golden Nugget Atlantic City launched the US’ first live dealer product in August, in partnership with provider Ezugi. The product will initially feature blackjack, American roulette and Dragon Bonus Baccarat and be available eight hours a day from 5pm to 1am EST from a new purpose-built studio inside the Golden Nugget resort.

The operator said it had taken the plunge in an effort to “clearly differentiate” itself from other offerings in the market, while also delivering cross-sell opportunities via a “true convergence” between the casino floor and GoldenNuggetCasino.com.

However, despite the positives, Thomas Winter, vice president of online gaming at the Golden Nugget, is aware that a return on investment is uncertain in the short-term.

“The start-up costs are huge and if you want several tables going several hours a day, it’s very expensive. We know rival operators considered the market too small to be viable, and while the economics are changing as the market grows, it’s still an unknown,” he admits.

“But here’s what we think; firstly we will be the only live casino product in the market for the foreseeable future [the project took 15 months to get off the ground from start to finish] and any online player in New Jersey who wants to play live casino table games will come and play with us.

“Secondly, we know that live dealer players in Europe tend to be higher value players than traditional online players and we believe the US will mimic that, so we expect more high rollers to play with us,” Winter adds.

“After that we want to be profitable with the product in itself but there are other benefits. One of them is player acquisition. There are 13 brands operating casino in New Jersey and it’s increasingly difficult to get true differentiation. Live casino is a unique selling point and will give us an edge in acquiring new players.”

He also says a live platform will help the firm access an older demographic who perhaps distrust online random number generators.

“When we surveyed land-based players who haven’t yet played online casino and ask them why, they say they like the experience and the atmosphere of a real casino floor and online games just can’t match that. They also don’t really trust online gaming yet,” Winter explains.

“A live casino addresses both of these issues because they can see the dealer, the cards and the wheel. We want to convert more of our player database to online gaming and we think this will help us do that.”

Slow burner

While it may seem like a bold gamble to take, the entire operation has been precisely planned, with a 15-month lead time between the project’s conception and launch.

Ezugi, for example, was selected over larger providers because of the flexibility it offered in providing the technology but letting the Golden Nugget stream from their own studio with their own employees running the table games.

What is left unsaid though is the possibility that Ezugi might have been the only provider willing to take the plunge into unknown waters alongside the Golden Nugget. The firm also had to make a significant investment upfront and has its incentives aligned with the casino with profits coming from a revenue share deal.

Ezugi also had to apply for a dedicated live casino permit with the notoriously rigorous Division of Gaming Enforcement (DGE). The firm said it was a “challenging process”, with software, hardware and the studio operations needing to be certified and the DGE requiring it to make several changes to the operating model it uses in Europe.

It is this kind of uncertainty and regulatory red tape that has helped keep the leading live casino providers out of New Jersey to date. Swedish firm NetEnt, for example, is already providing traditional online casino games to every tier one operator in New Jersey, and is investing heavily in live casino products around the world, but says it is currently content to watch the Golden Nugget experiment and see how the New Jersey market develops.

“We have been approached by several operators in the market about launching a live casino with us,” says Bjorn Krantz, managing director of NetEnt North America. “But these discussions are still in very early stages and we are still evaluating the viability.”

Krantz agrees there is a market for live casino, particularly because the land-based casino market is so established, and the online market is fast approaching maturity, with online casino revenues up 44% year-on-year in July. However, he says it is “all about timing” when it comes to bringing a product to market.

“I think we need some patience to educate the market and that doesn’t happen overnight,” he explains. “The easy gain was for the first mover. You have the opportunity to promote something that is unique in the market and that is of great value in itself.

“Then the cross-selling between different products offers a great opportunity. The more product offerings you have, the more products you can introduce players to and the more loyalty and stickiness you can build over time.”

Waiting game

Now that the Golden Nugget has grabbed that first mover advantage, providers and rival operators alike are content to sit and wait, with a beady eye on the monthly revenue figures reported by each operator to the DGE.

The early returns look promising for the trailblazer, with casino revenues up 30% in the first month after introducing the product. Winter also claims the Golden Nugget is seeing “a material share” of its live casino players made up by completely new players.

The operator says participation rates led it to introduce a second live blackjack table on weekends, and lower the minimum bet on the additional table to $5 in response to consumer demand. And with a TV ad campaign running throughout September, Winter expects to have two blackjack tables running every day by the end of the month, with the possibility of three tables on weekends.  The next step would be to expand opening hours, with the long-term view of offering live action around the clock, with new side bets and even additional games.

Industry experts are also bullish, with Eilers & Krejcik Gaming saying in a recent note: “We believe that live dealer can play a unique and valuable role in New Jersey, where many consumers remain unfamiliar with (and perhaps distrustful of) online gambling, even following regulation. We also suspect that live dealer games will help to push Golden Nugget past the $4m revenue mark on the casino side before the year is out.”

For the market as a whole, live casino is undoubtedly a positive, helping attract high value new players and building ‘stickiness’ within existing player databases. For individual operators, the Golden Nugget has stolen a march on the competition but may not have the live casino space to itself for very long if the official figures support its claims of success.

Competition could be coming quicker than expected, with rivals working together to lower the barriers to entry and minimise the hefty upfront costs. It remains to be seen whether the benefits of collaboration can outweigh the momentum being built by the market-leading Golden Nugget, but the chasing pack will just be hoping they haven’t already left it too late to join the live party.