The launch of BetMGM Poker earlier this week ended PokerStars’ seven-week monopoly on Michigan online poker. As much as the new competition hurts PokerStars, it’s Michigan online poker players that may be the most negatively impacted.
Competition Isn’t Always a Good Thing
In the online gambling world, competition is seen as benefitting the customer, as it requires operators to market and innovate or risk losing customers to competitors.
But for liquidity-driven online gambling verticals in small markets, like Michigan online poker, any thinning or divisions of a player pool tends to be bad for business. And make no mistake about it, adding additional operators to a market that can barely support a single operator is going to have adverse effects.
BetMGM is likely to grow the overall online poker market in the short-term. Still, it will also cannibalize the existing operators, which in the long run will increase the overall attrition rate for all operators.
The Liquidity Problem
As noted, online poker relies on liquidity (the pool of players it draws from), and the more players a site possesses, the more appealing that site becomes to incoming players.
Some of the benefits of sites with larger player pools are more games and larger tournament prize pools. These lures attract a steady influx of new players to replace the players who drop out of the player pool for reasons ranging from poker being a passing interest to losing their initial deposit.
Sites with small player pools tend to lose customers for another reason; players can’t find games that interest them. One of two things occurs, either there is a lack of players and games don’t run or frustration and boredom set in as the player pool is tiny with games running infrequently or infested with tight players.
In the online poker universe, liquidity is all-important. In a state-level market like Michigan, its population of around ten million isn’t large enough to allow for the lures that attract new players faster than it loses them.
What Michigan Online Poker Can Expect
Early on, PokerStars Michigan saw a rapid influx of players, with cash-game traffic of over 400 players.
BetMGM will target its internal player bases and grow the market, and many serious players will have accounts and play at both sites simultaneously. Still, BetMGM will also poach some PokerStars players, adding to its attrition rate.
Worse, BetMGM is unlikely to reach a point where its new players offset the players it loses. The result is two sites that will be bleeding players, rather than a single site that could possibly tread water.
Unfortunately, every legal online poker market in the US has followed a similar trajectory. A fast start, with traffic peaking within the first 30-60 days of launch, followed by a slow but precipitous decline.
COVID-19 casino closures led to a substantial uptick in traffic (seen in the Pennsylvania numbers in the chart below), but those gains are already eroding as more and more brick-and-mortar poker rooms reopen.
An Interstate Compact Would Falsify Everything Written Above
All of the above analysis becomes moot if Michigan joins the Multi-State Internet Gaming Association (MSIGA).
MSIGA is an interstate agreement between states with legal online gambling to pool players. Meaning, like operators can combine their player pools.
The current MSIGA states are New Jersey, Nevada, and Delaware. That’s great for 888 Poker, the only operator in Nevada and Delaware. It’s not so great for PokerStars or BetMGM, at least not yet.
PokerStars is operational in New Jersey, Pennsylvania, and Michigan, which means all of its player pools are currently segregated by state. Should Pennsylvania and Michigan join the MSIGA, PokerStars would be a big beneficiary, and the presence of alternative legal sites in these states would have a much smaller impact.