Weak start for Delaware online gaming

Only about 4,000 players have signed up to gamble online in The First State. If more players don't find their way to log on at the Internet gaming sites operated by Dover Downs, Harrington Raceway and Delaware Park, the first year of operation will bring in only about $1.7 million.

Delaware officials are confident though that marketing and promotion over the next few months will attract more players and boost revenue, said Vernon Kirk, director of the Delaware Lottery, which oversees gaming in the state. The State of Delaware collects 100 percent of the first USD 3.75 million of online revenue in a given year, so casinos have yet to see a profit from Internet gaming.

Currently just two poker websites exist in Nevada, UltimatePoker.com and WSOP.com, and the state's gaming control board won’t release Internet gaming revenues until a third site is operating.

A primary culprit for the low take in New Jersey and Delaware has been poor credit card cooperation, especially Visa. Only 20 percent of Visa transactions have processed, while about 80 percent of MasterCard payments have gone through. Many banks and credit card processors turn down online gaming transactions, but people in the industry are confident banks will re-examine their policies concerning Internet gaming in the future.
The current alternatives to fund gaming accounts are more time-consuming or inconvenient: mailing in personal checks, bank transfers and ACH withdrawals. Another popular route for casino operators has been creating a prepaid card that customers can load with their credit or debit card. Winnings are also credited back to the card.  "There is a massive financial incentive for casinos to find ways to get money into an online account with relatively little friction," Chris Grove, editor of the industry publication Online Poker Report,

State officials had estimated us$5 million in revenue in year one, a goal that may be hard to achieve. The first $3.75 million goes directly to the state, with the racinos beginning to get a cut after that total is reached.

“When you are doing online gaming in a state like Delaware, there is just not enough population to bring in much revenue,” Jay Masurekar told Delaware Online. “Unless you have bigger states involved, it’s not going to work,” the KeyBanc Capital Markets investment banker added.
Those bigger states are Nevada and New Jersey. Discussions regarding partnership agreements to boost online poker player liquidity have been broached among the three states, but the talks have been of a preliminary nature.

Delaware remains plagued with geolocation issues that have kept some state residents who live near the border from gaining access to the sites. Depositing via credit cards has also been a problem, with Lottery Director Vernon Kirk indicating that 30% of Mastercard users and 70% of Visa card holders are being rejected by credit card companies who continue to question the legality of processing payments for Internet gambling sites.

State officials still consider Delaware's online gambling regime to be going through growing pains and believe that action will pick up as time moves on. Increased promotion and marketing efforts, as well as the addition of new online casino games, are on tap in order to attract more players.

“It might be two, three years from now, we might say this [online gambling] is a nice little business in Delaware,” said Frank Fantini of Fantini Research, a Delaware gaming publication. “But right now, it’s pretty slow.”

Delaware officials remain optimistic the state’s internet gambling will grow over the coming months as new marketing and promotion efforts focus on driving more players to the gambling sites. Furthermore, Delaware is looking to add other games, such as craps, to its online slots, blackjack, roulette and poker offerings, and as Vernon Kirk, director of the Delaware Lottery, explains:“In and of itself, it’s not going to be the thing that solves everybody’s financial issues. It’s a piece of the puzzle, and it’s got a lot of potential.”

Last year, Delaware’s land based casino industry generated 406 million in revenue, down from $526 million in 2012, and representing is lowest revenue total since 2000. It was then hoped that online gambling would help reverse the worrying downslide, but at bes it may now take two to three years before online gambling becomes a l money spinner for Delaware.

Crucially, in the future Delaware may seek to form compacts with other US states which adopt online gambling, and as investment banker Jay Masurekar from KeyBanc Capital Markets, explains: “When you are doing online gaming in a state like Delaware, there is just not enough population to bring in much revenue. Unless you have bigger states involved, it’s not going to work.”