Online gambling a bad bet for state?

Revenue from the first fiscal year of Delaware’s online gaming venture fell well short of its anticipated $5 million target, raking in little cash for the state and none at all for its three casinos.

Online gaming brought in roughly $1.2 million since the long-awaited platform, the first in the nation to include video lottery and table games, rolled out in November. But the state’s return, after startup costs and vendor fees, came in at roughly $318,000, according to state finance secretary Tom Cook.

The disappointing return for the first state’s first foray into online gaming – poker, slots and table games – is due to a variety of reasons, casino and state officials say: low gaming population, unfamiliar brands, technology issues and delays in a mobile platform.

“We never picked this as being something to balance the budget,” Cook said. “This is another tool in the toolbox and to stay competitive.”

The projection for fiscal year 2015, which started July 1, isn’t looking much better. The first full year of online gaming is anticipated to bring in around $3.3 million, still not enough for casinos to make money, Cook said.

That’s because the state collects 100 percent of the first $3.75 million of online revenue in a given year. There have been previous concerns that that number is too high and could prevent casinos from even wanting to market online gaming.

“If I’m going to work hard and promote to get money out of it, but get no money out of it, why promote it at all,” Cook said.

Officials are set to discuss lowering that number when the Lottery and Gaming Study Commission reconvenes later this year to consider future financial relief for the casino’s brick and mortar operations, Cook said. Lawmakers recently passed a $9.9 million aid package for casinos.

Despite the lagging start, officials are still optimistic about online gaming’s future in Delaware. The projections for online gaming revenue in Delaware weren’t nearly as off the mark as in other states offering the service.

“We are patient. We’ll wait as long as we have to,” said Ed Sutor, president of Dover Downs Hotel & Casino. “It’s a brand-new product coming to a brand-new country, but I see a light at the end of the tunnel.”

Through the end of the fiscal year, June 30, some encouraging trends emerged, like a steady increase in amount played. Roughly $9.8 million was played by users in May, compared with $5.9 million in April and $5.4 million in March.

Numbers showed that users were winning, too, which is good for business in the long-term, said state lottery director Vernon Kirk.

The state’s video lottery and tabling gaming offerings, like blackjack and roulette, have done increasingly well, but poker has struggled. Delaware’s small population has made it difficult for poker to take off, said Frank Fantini, publisher of Dover-based gaming publication Fantini Research.

Officials point to the recently signed agreement between Delaware and Nevada that allows the state to share online poker player pools as the start of a potential remedy.

Online gambling, especially poker, is still in its “embryonic” stages, Kirk said. It’s hard to say what the next few years will look like, he added.

“I don’t know what’s going to happen three years, five years, 10 years from now, but I do think whatever it is, it will be happening on the Internet, and this gives Delaware the opportunity to create an infrastructure that no matter what happens it will be well placed to take advantage of,” Kirk said.

Many of the technological glitches plaguing online gaming’s launch in the state are close to being fixed. A geolocation problem that pinged Delaware residents living near the Pennsylvania and Maryland state lines as being over the border, barring them from access, has been mostly fixed. Macintosh users can finally bet online after upgrades to the platform last month.

Officials also point to several enhancements they hope will boost online play.

The state is working with its vendor to add recognizable, branded games – The Wizard of Oz and Wheel of Fortune – and a mobile platform is expected by early 2015, despite promises of it being available by the start of this year.

There also are hopes that some financial institutions will begin to process online gaming transactions. Banks have been apprehensive, partly because they believe federal laws are unclear on whether such transactions are legal.

Fantini said he still thinks online gaming will be a viable business for the state, but not the knockout people had touted it as.

“Five years from now online gaming will be an integral part of the gaming landscape in the United States. It’s going to be a viable business, not that huge magical phenomenon that some people had earlier suspected,” he said. “You say ‘Internet’ and everyone lights up and thinks of Amazon, but I don’t think it’s going to happen.”

Contact Jon Offredo at (302) 678-4271 or at joffredo@delawareonline.com.