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New Jersey online gaming figures disappoint analysts, but Boyd, Caesars undismayed

New Jersey’s first revenue figures from online gaming disappointed Wall Street but not Boyd Gaming Corp. or Caesars Entertainment.

The two Las Vegas-based companies brought in 73 percent of the state’s total online gaming revenues for December and a portion of November.

New Jersey gaming regulators Tuesday said Internet gaming operations, which are controlled by Atlantic City casinos, reported revenues of $8.4 million during its first six weeks. The figure represented 3.6 percent of the $207.1 million in total gaming revenue produced by Atlantic City during the reporting period.

Initial estimates saw online gaming producing anywhere from $10 million to $15 million per month. The state might get there, but it will take some time.

“This was generally below initial expectations,” Janney Montgomery Scott gaming analyst Brian McGill told investors. “From a historical perspective, many land-based casinos often disappoint initial expectations before growing and we expect a similar situation in New Jersey. Even if the market does ramp, we think it is unlikely to be a game changer for the operators initially.”

Macquarie Securities gaming analyst Chad Beynon said the initial results were “disappointing” but it was just one month.

“We continue to remain relatively cautious with regards to both online gaming net revenue expectations and more importantly profitability,” Beynon said.

The big winners were Boyd Gaming, which owns the market-leading Borgata, and Caesars Interactive Entertainment, the online arm of Caesars Entertainment, which operates four of the 11 Atlantic City casinos. Together, the companies operate eight of the 15 New Jersey online gaming websites.

Borgata, which operates online in partnership with European Internet gaming giant Bwin.party, reported almost $3.8 million from its online casino. Caesars, which is a partner with Gibraltar-based 888 Holdings and operates a site based on the World Series of Poker, collected nearly $2.4 million from online gaming.

Las Vegas-based Ultimate Gaming, which is operating a website for the Trump Taj Mahal, reported $883,037 in online gaming revenues for the period. The company is majority owned by Station Casinos.

Nevada has just two online poker websites, UltimatePoker.com and WSOP.com. The Gaming Control Board won’t release Internet gaming revenues until a third site is operating.

Analysts said issues with geo-location technology in New Jersey and a slow ramp-up in marketing efforts by some Atlantic city casinos might have slowed the market’s initial results.

“While Internet gaming is starting off slowly, the pace of growth will accelerate,” said Moody’s Investor Service gaming analyst Peggy Holloway.

In a statement, Boyd Gaming CEO Keith Smith said online gaming was “complementary” to the company’s land-based gaming business at the Borgata, which saw revenues climb less than 1 percent in 2013.

Smith said Borgata and Bwin.party would “refine” the marketing effort, improve customer experience and launch a mobile gaming product. He said New Jersey was “a good first step” as online gaming activities begin to move forward in other states.

“We are looking forward to opportunities in other markets as well,” Smith said.

New Jersey gaming officials said the online customer base is expanding.

At the end of December, 126,321 accounts were activated. In the first six days of January, the account base grew 17.5 percent, adding about 3,694 accounts per day.

“The New Jersey online marketplace has significant potential and will start a secular wave of online legislation on a state-by-state basis,” Wells Fargo Securities gaming analyst Dennis Farrell Jr. said. “This secular trend should help the gaming industry evolve with domestic customer spending patterns.”

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Follow @howardstutz on Twitter.

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