In 2014, economic analysts Econsult Solutions presented a thorough forecast of online gaming’s potential impact in Pennsylvania.
A year later, Online Poker Report’s Robert DellaFave offered an update to the predictions made by Econsult, adjusted to reflect the state’s current regulatory climate.
Updated PA online gambling revenue estimates
In its report, Econsult predicted the state would see $187 million in first-year online gaming revenue, with up to $307 million annually once the market reached maturity.
Over a five year period, DellaFave’s analysis produced a best-case estimate of $210.7 million in online gaming revenue for the state, a worst-case figure of $149.2 million, and a base estimate of $175.6 million.
But despite rigorous attention to detail from both DellaFave and Econsult, several variables remain for Pennsylvania which could potentially render obsolete even the most meticulously outlined predictions.
Question marks remain
Tax rates, a longstanding point of contention for online gaming in Pennsylvania, will continue to serve as a sticking point in negotiations, and could impact the overall performance of online gaming.
Casinos, of course, would favor lower tax rates, and generally appear to support the rate of 15 percent proposed in Representative John Payne’s HB 649. This bill is the basis upon which DellaFave’s analysis was calibrated.
While HB 649 appears to be a frontrunner among both lawmakers and casino brass, support is not unanimous. Payne’s online gaming bill is one of five currently circulating in Harrisburg, and other lawmakers have balked at the proposed 15 percent rate.
Senator Sean Wiley, who plans to introduce online gaming legislation of his own, will seek to tax virtual casinos at a rate of 36 percent.
SB 900, introduced last week and sponsored by Senator Kim Ward, would tax online casinos at a rate of 54 percent. Ward has said, however, that SB 900’s original language was merely a jumping-off point, portions of which have already been amended. Much of the bill remains subject to change, potentially including the proposed tax figure.
At a committee hearing in Harrisburg last week, Senator Robert Tomlinson voiced concerns about taxing online casinos at a lower rate than their brick and mortar counterparts, calling it a “scary point.”
If higher profit margins were to be found online, Tomlinson said, casinos in the state would be pushed to divest from live establishments.
Difficult to compare PA and NJ
Revenue figures from New Jersey, which has offered regulated online gaming for about a year and half, would seem to be an obvious comparison. But while New Jersey’s online gaming data are the best real-world tool available for Pennsylvania forecasters, one-to-one comparisons between the states are largely unreliable.
Precluding this comparison, in part, are a number of key demographic differences.
Pennsylvania’s unemployment rate, at 5.3 percent, is solidly below New Jersey’s 6.5 percent rate, and even below the national average of 5.5 percent.
However, per capita income in New Jersey, the second-highest in the nation as of 2013, is significantly above that of Pennsylvania.
Further frustrating possible comparisons between the states is an age disparity. Online gaming appeals more strongly to younger audiences, but median age in Pennsylvania is higher than that of New Jersey, which could translate to comparatively lower revenues for the former.
For Pennsylvania casinos hoping to maximize value in the digital market, the spectre of ubiquitous online gaming opponent Sheldon Adelson looms.
Notably absent from the New Jersey casino industry, Adelson and his Sands Bethlehem are poised to contest regulation in Pennsylvania however possible. While even Adelson may not be able to stop legalization entirely, Sands’ lobbying efforts could still delay the process, and possibly even influence language contained in future bills.