Feel the rush: Inside the rise of PlaySugarHouse

An old adage states that pioneers take the arrows, settlers take the land. In essence, being first to enter new markets and territories doesn’t automatically lead to long-term domination. Stanford Graduate School of Business’ Marvin Lieberman and David Montgomery first examined the so-called ‘first-mover advantage’ in the 1980s when they published their seminal paper in which they pondered whether it was beneficial to swiftly enter a new market and plant your flag in the ground, or to deliberately hold back and allow competitors to make initial investments – and mistakes. “First movers rarely get it right immediately – clever fast followers watch the early entrants trying different things, and they figure out the right recipe,” was one of Lieberman’s observations.

In the nascent sphere of regulated US egaming, a wait-and-see stratagem seemed to be adopted by Rush Street Interactive (RSI), the online arm of Rush Street Gaming, which operates casinos in Pennsylvania, Illinois and New York. New Jersey’s regulated online gaming industry was approaching its third anniversary in September 2016 when the operator unveiled casino site PlaySugarHouse.com (PSH), utilizing one of Golden Nugget’s interactive licenses. Yet despite the late entrance into a market packed with local brands, PSH has been the Garden State’s dark horse as it rapidly gained ground on the competition and became a serious player.

“There is definitely a first-mover advantage when you enter an online gaming jurisdiction, but along with that is what I would call a high-quality factor,” RSI president Richard Schwartz divulges to EGR NA from his office at the company’s Chicago headquarters. “As a late entrant, we attribute our early success to delivering a compelling and unique experience to our players. Since we custom-developed a proprietary online gaming platform for our New Jersey casino, we have been able to add unique bells and whistles to our site. It keeps the player experience fresh and unique.”

Indeed, its standout product and interface built in house on its proprietary platform has been a key differentiator. This has also provided RSI with the agility to rapidly iterate and add new features. “Most pleasing to me in these past two years is that we’ve improved our product every single day since launching,” says Schwartz, who was hired from the interactive arm of WMS Industries in 2012 to spearhead the creation of RSI. The operator has done this by adding automation functions and innovations and then built them into new versions of the product every two weeks.

“We also instantly channel feedback from our players straight to our development organization, allowing us to discover areas that can be improved and implement changes quickly,” he continues. RSI also plowed significant resources into its mobile product, as opposed to the channel playing second fiddle to the all-singing-all-dancing desktop offering.

A year ago, around half of play was via handheld devices; today it’s approximately 70%, underscoring the need to have a stellar multi-platform product for desktop, iOS and Android. “We have a high-quality mobile platform which I think is one of our greatest strengths. We have designed our mobile product to have all the same features as our desktop version – it’s quite unique in that it’s not just a watered-down version of the website,” Schwartz affirms.

On top of this, PSH, which features over 400 games in its casino, boasts one of the finest loyalty programs in New Jersey, reinforced by the launch earlier this year of its bonus store. Even before this, though, PSH ‘gamified’ its program with scratch cards, wheel spins or even bingo games used to reveal various redeemable rewards, while a bonus meter displayed the player’s progress towards the next rewards level. PSH also rewards all of its players, not just the high-roller VIPs, while a real-time bonus engine built internally allows the marketing team to quickly roll out new promotions and offers. It all helps to make the whole package a particularly ‘sticky’ experience.

Sports betting touches down

Following PASPA’s repeal in May, it’s been all hands to the pumps as companies seek approval from New Jersey’s regulator, the Division of Gaming Enforcement (DGE), to release online sports betting ahead of the lucrative football season. And on 23 August, PSH became the third operator to launch online sports betting, following in the slipstream of DraftKings and playMGM. Yet rather than roll out a separate app like certain rivals opted to do, PSH introduced the first fully integrated sportsbook for its desktop and mobile casino products.

It means players can quickly switch between sports and casino, while the payment options and loyalty program are identical to the casino product, creating what Schwartz brands a “completely unified user experience” that expedites customer journeys and creates a smooth user experience. Moreover, this arrangement better assists with cross-selling sports bettors into slots and table games. “We believe that sports players will cross over and play casino games and so we wanted to make that experience as seamless as possible for them. From Europe, we see that often when a bettor has a good day on a sportsbook they will appreciate the opportunity to play a little casino game as well. The cross-promotion between the two presents an opportunity that we wanted to capture at launch.”

Rather than embarking on the Herculean task of building its own sportsbook in time for football season, RSI enlisted the services of Swedish supplier Kambi, which also powers DraftKings sports betting product. “Kambi offered us an open canvas and since we have our own platform and talented in-house product development team, we felt we would be able to take advantage of the flexibility of the Kambi platform to drive innovation in the market.”

The sportsbook boasts a wide array of betting options outside the major US sports, including European soccer, tennis, golf, motorsport and even cricket, cycling and darts. And despite baseball being the only major US sport in regular season at the time, business was brisk. In fact, it turns out tennis’ US Open was immediately the third biggest sport for PSH in terms of bets, while 70% of wagers were struck in game. Straight off the bat, tennis fans were able to bet on 60 to 70 different in-game options per match, which amounted to over 20,000 live wagering options for the US Open alone.

One key reason why PSH was able to hit the ground running in New Jersey with its sportsbook was down to its preparation. In June, to coincide with the soccer World Cup, RSI became the first US-based operator to launch a regulated sportsbook in Colombia – the first South American country to legalize and regulate egaming nationwide. It was a move that certainly raised eyebrows, but one that also signaled RSI’s intentions.

“It is an appealing market with a reasonable tax rate and a strong regulatory framework,” Schwartz explains. “There are 48 million people there, a significant existing land-based casino market and a player base that really likes to gamble. Betting and sports are cultural passions in Colombia. We believe the insight gained from operating a regulated sportsbook has positioned us for other future South American markets.”

The venture into Colombia meant RSI teamed up with Kambi a good year before the New Jersey launch. That way, RSI had a head start and was “better prepared,” Schwartz notes, with a sportsbook should the US Supreme Court strike down PASPA. This groundwork could prove crucial in a bid to grab early market share in New Jersey with competition set to intensify. Indeed, since DraftKings, playMGM and PSH released sportsbooks, at the time of writing William Hill, FanDuel, Caesars and 888 have since rolled out sports wagering products.

Competition is heating up fast, with some industry observers predicting as many as 20 online sportsbooks will be live in the state by the end of the year. So PSH certainly didn’t waste any time tossing its hat into the ring – this time beating many of its rivals to the punch. “With our launch in Colombia and New Jersey, we have become a multi-national, multi-product operator. That’s been a nice evolution of our business,” Schwartz says.

Meanwhile, the rigorous vetting process carried out by the DGE was no cake walk for RSI. “I think it was a challenging a process because we were going through it at a point where really only DraftKings had been approved, so there wasn’t a lot of precedence,” Schwartz explains. “And there are a lot of differences between us and their model because they have never been in the regulated New Jersey online gaming market before, didn’t have to worry about supporting an existing casino site, and didn’t have existing payment methods supporting a casino that was now adding sportsbook.”

A force to be reckoned with

When PSH first launched two years ago, license partners Golden Nugget and Betfair were regularly racking up monthly GGR of around $3.5m and it was pretty much level pegging between the five land-based license holders. Once PSH arrived, though, Golden Nugget began to put daylight between itself and the competition, before going on to leave the others choking on its exhaust smoke. For the last five months of figures released by New Jersey’s regulator, Golden Nugget and its partners have eclipsed $8m in revenue. In fact, June saw the $9m barrier smashed, and this was followed up by revenues of $9.3m for the month of July, which is over $4m more than nearest rival, Borgata, could muster.

According to estimates from Eilers & Krejcik Gaming, PSH occupies around 8% of the New Jersey egaming market, with Golden Nugget and Betfair accounting for 18.9% and 12.1% respectively. Combined, these three brands have become a formidable force, and that’s despite Betfair and PSH having no land-based casino in Atlantic City. Plus, all three brands don’t offer online poker. Part of their market dominance is down to the fact Golden Nugget and Betfair were, until recently, the only sites to offer live casino.  Golden Nugget rolled out the product by Ezugi in 2016 and Betfair followed suit in 2017.

“Golden Nugget and Betfair were the first and second operators in the market to offer live dealer, so some of their recent success has likely been attributed to having live dealer before the rest of the market,” Schwartz acknowledges. In August, however, PSH doubled down on live casino by also adding it to its online product suite. But rather than plumping for Ezugi, PSH bosses kept their powder dry, patiently waiting for Stockholm-listed live dealer specialist Evolution Gaming to finally build a live dealer studio and infrastructure in New Jersey. PSH’s offering features Evolution’s obligatory blackjack and roulette tables, as well as exclusive games to New Jersey, including Three Card Poker and Ultimate Texas Hold’em Poker.

Although it was still early days when EGR NA spoke to Schwartz, he was “really pleased with the early performance.” As for eschewing Ezugi, he says: “We considered all the options, but we had been admiring Evolution’s products for a long time.” Live casino has really taken off in 2018 as a clutch of operators, including 888, Resorts, PartyCasino and Ocean Resort, have decided to offer it. So, was it a case of PSH needing to roll the dice now or face losing market share to rival operators. “I think we were less concerned with what the competition was doing and more looking at the opportunity of how best to grow our business. We view live dealer as a complimentary product to both our existing casino site and to sportsbook.”

Market expectations

New Jersey’s online gaming sector achieved just shy of $26m in revenue for July – a record month since going live in late 2013. When PSH launched, the industry was averaging around $16m to $17m a month in revenue. Despite sustained growth, there are question marks over whether New Jersey is close to hitting its ceiling, especially with two new brands – Hard Rock and Ocean Resort – recently entering an online arena now comprising of 17 casino sites. It remains to be seen whether these new players will help to grow the market or cannibalize revenue from other operators.

With New Jersey maturing, attention is turning to neighboring Pennsylvania. Although Schwartz categorically refuses to discuss the Keystone State’s potential or RSI’s plans at this stage, the parent company’s two land-based casinos, Rivers Casino in Pittsburgh and SugarHouse Casino in Philadelphia, are sure to be at the forefront of the online market once it gets underway. Indeed, both properties, which combined are estimated to occupy roughly 20% of the state’s brick-and-mortar gambling market, have applied for three-category licenses (table games, slots and poker), costing $10m. Having two well-known casinos in Pennsylvania’s two largest cities in terms of population will be beneficial for brand awareness and user acquisition efforts when online players are choosing where to deposit and play.

Furthermore, Rush Street Gaming also has Illinois’ Rivers Casino Des Plaines near O’Hare International Airport on the outskirts of Chicago and Rivers Casino & Resort Schenectady in New York. Both casinos will provide clear access to egaming and online sports betting in the future for Illinois and New York. And on the back of the traction gained in New Jersey, RSI is also engaged in discussions to provide turnkey managed services involving PSH and Kambi in other markets if and when they come online, Schwartz reveals.

“What has pleasantly surprised us is that because of the reputation of our product and success in the New Jersey market, we are being approached by operators in other markets who are asking us if we’d be interested in partnering with them, including licensing our platform and providing managed services to help operate their online casino and sportsbooks in their markets. Since we have a market-proven platform and an experienced operations team, we are open to having these discussions.”

When pressed to reflect on PSH’s impact in New Jersey as the site marks its second anniversary, Schwartz says: “We came into the market late, so certainly it would have been advantageous to be in the market a little bit earlier, but with all the media attention on the New Jersey market we wanted to do it right.” He adds: “We are pleased that in the two years since we launched PlaySugarHouse.com we have continued to grow market share, including a record month in July.”

So, RSI, winner of best marketing campaign at the EGR North America Awards 2018, has probably surprised a few people over the past two years with PSH’s innovative desktop and mobile products, combined with a strong loyalty program and a compelling user experience. All of which has been a key differentiator that has certainly separated the operator from other ‘me too’ offerings. Moreover, RSI has clearly demonstrated that first-mover advantage, whilst desirable in egaming, isn’t the be-all and end-all when it comes to making a splash and grabbing a healthy slice of the market.