PokerUpdate recently learned that a large online poker room has quit accepting new members. This comes just days after the poker community learned that Real Gaming has all but shut down. The closure of Real Gaming wasn’t all that unexpected but they are the second company to close since regulated iPoker began in 2013.
While this unnamed site hasn’t shut down, the fact they are no longer accepting new members is likely a precursor to that fact. ROW (rest of world) site shutdowns are not uncommon and this site seems to be on its way to be the latest ROW failure. So why do online poker sites fail? Was it due to market conditions or were there possibly other factors. Let’s take a quick look at some possible reasons why.
More than One Online Poker Site Can Survive in Nevada? Get Real!!
John Mahaffey recently wrote an article that’s speculated that Real Gaming has closed in Nevada. While an official announcement has yet to come from the site, it is clear by visiting the site that the company has abandoned the product. I personally logged in and the only games available were high stakes cash games.
Real Gaming has always been the “odd man out” when it came to online poker in Nevada. The site rarely averaged enough traffic to fill a Sit-N-Go and from reports the only regulars on the site only played to try grind out rewards.
Ultimate Poker has a monopoly on the Nevada poker market when they opened in April 2013. WSOP.com would enter the fray later in the year. It was soon apparent that the state couldn’t really support two online poker sites and after a failed excursion in New Jersey, Ultimate Poker eventually closed their doors citing a lack of profitability.
This gave 99.99% of the state’s online poker traffic to WSOP NV. Real Gaming then tried to pass themselves off as the #2 site in the state, but there were multiple problems from the start.
First, very few people even knew that South Point was offering online poker. Despite becoming the first casino to become licensed to offer online poker, they were the third to launch and by that point, few seemed to care. What made things worse was that South Point didn’t appear to really promote the site and offered very few promotions to rival WSOP.com or Ultimate Poker.
Next, the fact that the site only was available through your web browser limited their marketability. While one would think that being browser only would help the product, there are many people that either doesn’t like a browser-only iPoker site or they view it inferior. The lack of a physical client for PC and laptop hurt the company.
Lastly, based on certain interviews with company officials, it appears that Real Gaming was banking hard on being able to expand into California. We all know how quickly that process has been. As many sites have learned in recent years, banking on the expedient expansion of iPoker in the United States is a sucker’s bet. Failing to diversify or take a LONG approach is a recipe for disaster.
More Proof that Companies Need More Than iPoker to Survive in the U.S.
The shutdown of both Real Gaming and Ultimate Poker highlight the reality that most companies will be unable to survive in the regulated U.S. market on iPoker alone. WSOP NV is doing well thus far but they have a monopoly on the iPoker market in the state.
As we have seen in both Delaware and New Jersey, companies need more than online poker to remain viable and experience growth. Online casino gaming profits continue to climb in New Jersey and Delaware Poker probably would have shut down by now if not for casino gaming.
With the exception of California, most states considering iGaming are looking at the whole picture and not just online poker. We’re not saying that online poker isn’t a viable industry as a whole. However, on an individual basis companies need more to make the venture viable.
Until the Poker Boom, poker rooms were a net loss for the majority of live casinos. Due to the current state of the regulated U.S. iGaming market, many iGaming companies are experiencing parallels. That’s why, at least for now, casino gaming is a necessary evil if we want to expand iPoker.
Why Can’t Some ROW Sites Compete?
The failure of Real Gaming and to a lesser extent Ultimate Poker could be foreseen based on the fact that regulated iPoker in the U.S. was, and is still in, its infancy. However, one would assume that it is easier on ROW sites because they are not relying on the U.S. for profit margins. So why do some sites fail?
There are multiple reasons. One of the largest is over-saturation of the market. If you look at PokerScout, you will notice 68 networks and individual sites listed. That’s not factoring the skins on the over two dozen online poker networks listed. There are literally hundreds of sites worldwide and this makes it extremely difficult for a site to break into the market.
Next, some sites have difficulty because they try and do things the right way. They go through the process of becoming legitimately regulated in regions that allow online poker and they stay out of areas where online poker is either illegal or where iPoker is a “grey area.” This reduces the reach of companies and ultimately their profitability.
Also, don’t forget that online poker sites took a massive hit after the UIGEA and this was further exacerbated after Black Friday. Many sites that chose to skirt our laws decided to abandon ship after PokerStars, Full Tilt and Absolute Poker were indicted. Sure there are sites that continue to run unregulated, but they are a complete gamble. Those that fail to acknowledge that fact is fooling themselves.
Lastly, it is extremely difficult to cut into the massive market share of PokerStars. Regardless of the complaints levied against them over the years, they continue to attract nearly two-thirds of the ROW online poker traffic. They have the largest limits, the largest spread of online poker variants and the biggest online poker events in the world.