PokerWorldNow

Signing a poker player to an online poker room sponsorship roster goes far beyond results at the table. UltimateBet understands this and has signed Joe Sebok for more reasons than his ability on the felt. Sure, Sebok has had some good results with over $1.5 million in lifetime earnings, and a steallar 2006 where he earned nearly $900,000, but he lacks major victories and big final tables. But who cares? UB doesn’t.

Sebok Signs with UltimateBet

Regardless if he has connections or not, the fact is that he has established himself, and consequently PokerRoad, as a serious brand across the socialsphere, and for this, I am sure UltimateBet sees an invaluable asset in Sebok. This is probably why they have also signed him as a media consultant.

I have argued the point that this is good for UB. Now is it good for Sebok? In reality, that comes down to how much he is getting paid, and I hope it is a lot. Sebok has established himself as a leader in online poker media (and online media itself) and this move exposes him to the risk of crossing the editorial/advertising line by using his online brand to promote a poker site. Especially a poker site that has had some negative exposure in the area unethical practices.

My suggestion for Sebok would be to come out of the gate with a casual and indirect promotional approach. Wear the UB logo at tournaments and promotional events, but be careful of pushing too hard and skuffing up that finely polished online image.

Card Player reported recently that the Frank bill will not go to committee this month — apparently the House of Representatives is working on a few other issues at the moment. The PPA is now focusing on their secondary strategy of pushing the that was introduced a while back that will delay the enforcement of the UIGEA from December 2009 until December 2010. Well, December is right around the corner, and seeing how easily the House can become gridlocked, there is no time to waste.

Come on House, Chop Chop

John Pappas stated in the Card Player article that he hopes that if there were some small changes to the bill to appease the opposition that it could get passed without going to committee. I am skeptical. The opposition to the bill is coming from Republicans and I think (as the current trend is proving) that they have no interest in passing any sort of legislation that smells liberal. In that sense, online poker is pretty stinky. The Republican party is in a struggle to regain their identity and they see the best way of doing that is putting a stake in the ground for the issues that they believe in. However, I believe that this opposition will expose more cracks in the Republican position because it is what has gotten them in trouble in the first place: too much pandering and appeasing to the religious right. Fortunately, the democrats have majority, but nearly every one will have to vote in favor for it to pass.

We are running out of time. The bill first has to pass the House cleanly with no major revisions or concessions, then has to pass the Senate and finally put in front of the President. This all has to be done in the next 2.5 months. Banks are already implementing policies that will make online poker transactions even more difficult. The  cat and mouse game between the banks and the poker rooms will intensify. The banks have billions of transactions per day that need to be monitored and have no financial incentive. The poker rooms have plenty financial incentive in that they will be out of business. My money is on the poker rooms.

PurePlay Customers May Lose the Smile with Price Hike

A few weeks ago our CFO, Pete, pointed out that the PurePlay terms and conditions had their price point for a monthly membership at $24.95 rather than the seemingly industry standard of $19.99. When I checked their home page, however, the advertised price was still $19.99. Looks like their lawyers were ahead of their marketing folk because finally 2 days ago when I checked their site the price was indeed raised. They also lowered their prize pool from $150,000 back t0 $100,000.

It is bold, and perhaps desperate, for PurePlay to raise its price at this juncture, and I am not quite sure what it means. Perhaps they believe (or hope) that there is a low elacticity and that the percent decrease in demand will be less than the percent increase in the revenue generated. There is fault in this line of thinking because there are several substitutes, and competing products, for subscription poker. Users can go to SpadeClub, or one of the other handful of subscription sites, or they can take their $24.95 and play real-money online poker. I could understand their arguement to raise the price if they offered something more than the other sites, but they don’t. In fact, they offer less than SpadeClub, which has a full-fledged user community and all sorts of member benefits and promotions.

If I can figure the above out over my morning cup of coffee, I have to give them credit that they are smart enough to do the same. So, I decided to look a little deeper and think I may have figured out why they think they can raise their prices: they have added other revenue models into their product in hopes equalizing any negative impact from the decrease in demand.

• Incentive Marketing (Offer Pal): users can get play chips by submitting their email address to spammers, filling out surveys, or signing up for paid services. We tried this for a month but found that the overall cost to the customer was not worth what we were making so we removed it.
• Charge for chips: same as the above, but they can pay cold hard cash for play money chips. $20, $50, and $100 buys you 125,000, 350,000 and 800,000 in chips respectively.
• Pay-per-use of a rabbit cam: users get to see what cards would have come if the hand doesn’t go to showdown. Paid members get a certain number per month and then it is a buck per rabbit view. I gotta give it to them for the creativity on this one, but when I tried to test this product I could only use it once out of 20 hands because all of the hands went to showdown.

The expanded revenue models are analagous to the old Alaska Air commercial where passengers had to pay a quarter to recline their seat and a buck to use the rest room. In other words, PurePlay has implemented a nickel-and-dime revenue model. The first two revenue models are certainly not new to the Internet and seem to have worked well for Zynga, the Company that runs Texas Hold’em Poker on Facebook. However, there are several significant differneces between Zynga and PurePlay. First, Zynga has no other options, they don’t (and probably can’t) charge a per monthly fee. Second, users on FaceBook are accustomed to paying micro-fees or participating in incentive marketing for small rewards, like sending a friend a virtual flower, or in the case of Zynga getting 100,000 in chips. Third, Zynga has millions of monthly unique users and can therefore leverage a “freemium” model where a small percentage of the users are paying for premium type services and the rest are playing for free. From the looks of it, PurePlay gets a micro-fraction of the Zynga traffic.

As someone who runs a subscription online poker site, I understand the need to generate revenue, but I am not convinced the risk of losing customers by raising the price and adding pay-as-you-go fees will be less than the reward of increasing the bottom line. I will wait and see, but in the mean time if PurePlay customers want a better experience for a lower price, our arms are open.

Those who did a detailed analysis (not me) on the deal in which Gamynia bought the World Poker Tour may have noticed that in the associated 8-K that was filed with the SEC there was a clause in the acquisition agreement that gave the WPT an out if a better deal came along. More specifically, the WPT has the right to terminate “under certain circumstances, including a determination by the Company’s Board of Directors to accept an acquisition proposal it deems superior to the Transaction.” All the WPT has to do is pay an “I’m sorry for changing our mind” fee of $1,000,000.

The WPT is getting a pretty good deal from Gamynia, to summarize: Gamynia pay $9.1 million in cash, WPT gets to keep the $21 million in the bank and WPT receives about 5% of future revenues.Who has come over the top (I promise the last poker metaphor that will ever be used) and piqued the WPT’s interest?

Assuming that the  Gamynia deal is really just a shell company for  PlayTech as I predicted in my first blog about this transaction, then perhaps one of the big boys, and by that I mean FullTilt or PokerStars, has taken a page out of this book and opened up their cash coffers. It is strategically logical for both companies to a) expand their push for producing TV shows as way of advertising and b) act as a hedge in a U.S. regulated environment because, as I wrote in my blog about the Menendez bill, it looks likely that off-shore operators will be rejected for licenses.

Thus far the WPT execs have kept mum about the deal, but I suspect if the deal goes through it will take a couple of weeks for an official announcement. Technically the Gamynia deal will automatocally terminate on Januray 28th, 2010.

There is some great poker on TV, but for the most part it has become hum-drum and mediocre. At least with other sports (and I use that word very liberally since we are talking about poker), you know what you are going to get. If you turn on baseball you are going to see 9 innings, 9 players on the field, a batter and a standard for how it is produced on TV. Poker is all over the place. You have the WSOP and WPT that leave the actual poker playing on the cutting room floor and focus more on Norman Chad talking about his ex-wives. Then there’s Face the Ace, where you feel you are watching a game show — a boring game show. In order to reclaim some of the momentum that TV had 5 years ago, the producers of the shows need to focus on showing real poker and somehow making it exciting–some of this relies more on who is playing, but the right foundation of tournament structure and production needs to be laid.

Is this where poker on TV is going?

Elements of a bad poker show:

1. Not enough focus on real poker. The World Poker Tour was arguably the first poker show that really broke through to the main stream. For this reason, what they created became the standard, and unfortunately, because it is over produced and whittled down to the “big pot” hands it has encouraged others to do the same. The other side to this is that some of the best poker shows on today  have responded to consumer demand to see more “real” hands and have created a nice little niche, specifically Poker After Dark.
2. Too much focus on bad poker. Tournaments with ridiculous structures make for bad poker and consequently bad TV. An example of this is all too fresh in my mind: Ante Up for Africa. First, let me say, that I think ESPN made the right move this year by televising only 4 events, all no-limit hold ‘em, from the 2009 WSOP. The wrong move was to televise Ante Up for Africa. I understand the concept of celebrities helping ratings, but please don’t ruin poker because of it. The structure of this tournament was so ridiculous that it would have been more exciting watching a celebrity slot machine tournament. When the final table started the chip leader had 10 big blinds. When it was heads up (probably a few hands later) there was a total of 4 big blinds on the table. This isn’t interesting for the hardcore poker players or the casual fan. It is just bad TV.
3. No named players. I am kind of torn with this one because the beauty of poker–and the reason it has become so popular–is anyone can win. The Chris Moneymaker effect was huge, but is it dead? The casual fan can only remember so many new hot players. At some point, and that point has come, the no names become irrelevant. Caveat: unless it is the WSOP main event.
4. Bad casting. Well really I am thinking of one show in particular, Face the Ace. I haven’t  watched the show, but from reading blogs and talking to those who have, I hear that the players that actually won their way on to the show are horrible. It is my opinion, that if you are going to create a game show around poker, which Face the Ace invariably is, you better cast for it. Jeopardy doesn’t let you on just because you did well on the test.

I don’t think reality poker shows, such as Two Months Two Million, even deserve to be mentioned until at least one becomes moderately relevant.

Norm

The two shows that have combined elements of excitement and real poker play are Poker After Dark and High Stakes Poker (and that’s not just because SpadeClub advertises on those shows). However, these shows aim to serve the hard core poker enthusiats–poker players are the only ones still awake when Poker After Dark airs. As far as the shows that aim to reach the masses, the World Series of Poker is by far the most important broadcast; it gives life to all the other poker show by keeping poker relevant. It serves its purpose and is produced well for the masses in spite of (or maybe because of) what seems to be a discussion between  Norman Chad and his therapist.

So what does the future of poker on TV hold? Will producers continue to take the equity that has been created by the best most relevant shows and continue to make junk?

Freaks and Geeks

Thank you G4 for rejecting our SpadeClub.com advertising. I watched the first episode of Two Months Two Million last night and can honestly say it ranks as one of the worst poker shows and one of the worst reality shows that I have ever seen. It’s Real World meets Freaks and Geeks, but unlike these shows, it lacks any sort of interesting premise. At least in the Real World you are guaranteed to see some debauchery or a good old fashion girl fight. The only thing these guy do is prove that if you spend your life in a cave on a computer you are going to be awkward in all imaginable social situations, for example watching Emil try to hit on girls (who were most likely hired as props) in a bar via debating the color of his sweater. Peach or salmon?

I also have a pretty major poker gripe as well: the four members of the show play online poker side-by-side and on least one occasion in last night’s show there was an inference that more than one person was playing a single hand. There is also the problem of collusion, or the perception of collusion. The whole premise, and title of the show, imply that they are working as a team; they are attempting to win $2 million in two months as a group. And if this isn’t bad enough, they all sit in the same room as they play. I am not saying that there is definitely collusion, but it sure comes across like that. They should have at least written in something that explains that they are never playing in the same games.

Next, I wanted to follow up on my original blog about the show where I discussed the fact that G4 didn’t take our advertising. I concluded that because they were going to show real online poker as content within the show, that they must have some sort of exclusive deal. I was on the right track, but it ended up not being the case. Instead, they are not taking any online poker advertising at all and do not have any exclusive deal to show one poker room. In fact, they edit out all the logos. G4 is undoubtedly trying to draw a clear line within the show of what is content and want is paid advertisement. I do not think they want to muddy this line. Fair enough.

Things are getting pretty serious. Back in June the United States Attorney of  the Southern District of New York announced that they were seizing $30 million in online poker funds. Yesterday, the same folks sent a press release to Card Player Media announcing that the stakes have gotten even higher. With the FBI, they have now announced the official indictment Douglas Rennick (frighteningly close to my name, but no relation), a Canadian citizen, who has allegedly been acting as the financial clearinghouse for poker and other gambling sites from “at least 2007.

Points of interest and opinion:

• The indictment also seeks the forfeiture of over $565,000,000 dollars which “represents the amount of proceeds obtained as a result of the illegal gambling and bank fraud conspiracies.” That’s a bunch of money. And, three fifths of it has already been paid out.
• Probably by no coincidence Mr. Rennick started this cloak and dagger operation only a few months after the UIGEA passed. If memory serves me right, many of the sites that remained in the U.S. were having payment processing issues until January 2007. This fits.
• Will the indictment blossom into more indictments accusing Rennick’s clients of wrongdoing? If so, this could have major implications for future licensing for the accused online poker rooms in a U.S.-regulated environment.

It surprises me that it took the feds and the banks this long to catch on. If it took them over 2 years to track down the single source that processed the majority of online poker and gambling payments, imagine what would happen if the UIGEA was actually enforced. Are they really going to stop a $10 deposit into a PokerStars account?

Senator Menendez is Our Hero?

As reported by CardPlayer.com Senator Robert Menendez (NJ-D) introduced a bill in the senate to regulate and tax online poker, or more accurately Internet games of skill. The major difference between this bill and Barney Frank’s bill is that this bill focuses on online poker specifically while Frank’s bill is more general to different forms of online gaming. Both bills oppose sports betting.

The Menendez bill (full-text, yawn) aims to:

• Regulate and license Internet games of skill
• Define poker as a game of skill
• Define who is and isn’t suitable for licensing, and make it illegal to operate without a license. The bill outlines the specific qualifications an applicant must posses and discusses. Under the “unsuitable for licensing” it does not list current operators of online poker in the U.S., but does list any business that has taken sports wagers. Good for Full Tilt and PokerStars and others who have operated in the U.S., not so good for Bodog. <Update: upon further reading and research, I discovered  there is a protectionist clause that states that companies who have failed to pay taxes in jurisdictions in which those companies have operated will be rejected. Sorry Full Tilt, PokerStars, PartyPoker, 888, Titan, and so on.>
• Protect against underage gambling
• Define tax code and collect tax revenue
• Further define the wire act (a throw in for the NFL lobby?)

As far as how much a license will cost: it will be based on the cost of setup and administration of each licensee. Seems fair.

While I share the Poker Players Alliance optimism in the fact that it appears that regulation of online poker is picking up some serious momentum, there are some inherent problems with the Menendez Bill:

• Focus on poker. Since the Menendez bill focuses on poker there isn’t too much room for politicking. It seems like a take-it-or-leave-it affair. While the Frank bill has a lot of room for concessions, such as taking out some of the generic online gambling proposals and leaving it for another discussion.
• Defining poker as a game of skill. Of course I agree with this statement, but it is one that has two diametrically opposed sides. Typically the people that play poker understand that it is a game of skill, but people that don’t (or tend to lean to the righter shade of red) see it has having about as much skill as a slot machine. Menedez should not open this debate. It will drag down the bill in an unresolvable argument.

All this being said, I can’t claim that I am and expert in the legislative process, so someone who is might argue that this is a strategy to build momentum for the movement regardless of the bill that gets passed. Since Frank’s bill is a house bill and this is a senate bill, perhaps they will coalesce into some form of consensus.

For over 2 years I have watched the World Poker Tour stock (WPTE) hover in the  40 to 50 cent range, bottoming out at 25cents in January of 2009. Then in June something amazing happening. The stock went crazy and was up nearly 7X from its bottom. Someone somewhere knew something and it wasn’t me. A few days later rumors came out that PartyPoker was making a bid and then another rumor surfaced that Bwin was the suitor. Finally, on August 3rd it was announced that WPT was bought by Gamynia Limited.

Who?

No one has ever heard of (or, can pronounce) this company. Ok then, time to Google…

Google returned 461 listings and every single one (I didn’t look at every one, but at least the first 100) had to do with the aforementioned acquisition. This leaves us with two possible scenarios: 1) a couple of moneybags decided that it would be fun to run a struggling televised poker tour with negative returns, created a shell company and away they went or 2) a company that saw a strong strategic fit despite large losses created a shell company and away they went.

I am going with number 2. The press release also gave it away by saying “Gamynia has secured the services of an industry leading online gaming marketing company Hardway Investments Ltd. which will seek to exploit and develop the WPT brands with the goal of maximizing future revenue opportunities.” Ok, online gaming marketing company probably means there is some sort of online gaming plan. So, who is this Hardway company anyway? Time to Google.

Unlike Gamynia the mystery company, Hardway actually has a website. From the looks of it they seem be the holding company for Titan Poker and a couple of online casinos, all of which are on the PlayTech network. They also operate EuroPartners, the official affiliate network operator of PlayTech.

To me this is all starting to seem like a PlayTech-backed play to position a WPT online poker brand in the U.S. once regulation occurs. It makes perfect sense. The WPT doesn’t have the cash or know-how to compete with the big boys, whomever they will be in the future. MGM Mirage? Harrahs? Full Tilt? The Mashantucket Pequot Tribe?  Playtech and Hardway have the cash resources and the know-how to build and market a U.S.-based online poker room. They have done it in the past. Gamynia was simply created as a shell to distance Titan, and other skins that have raked in the U.S., from this deal. That’s my theory and I am sticking with it.

Since the acquisition the stock has dropped back down to about a buck, but someone made some money somewhere…

I am on my way to L.A. for the SpadeClub commercial shoot and have a little extra time as I wait around for my flight. Instead of listening to the couple next to me fight, I am going to put on the headphones and give a brief review of a book on leadership by Seth Godin called Tribes. The book is definitely not your run-of-the-mill leadership book that you read in business school. Rather, it is a fresh look at what it takes to be a leader in the 21st century. Godin’s book is straight-forward, to the point and surprisingly inspiring.

Here is what I got from the book:

• Complaceny will kill you. Ok, that’s a little extreme and I don’t represents that Godin made that claim, but the strongest theme throughout the book is that the status quo is stifling, inhibits innovation and is basically the antitheses of good leadership. The status quo is programmed into us from years of education and corporate structure where we are taught there is a “right way” to do things and that way is usually to not go against the grain. The poker world is always changing–from  local, federal and international law to shifts in consumer behaviour to technological advances–and will reward leaders and innovators who are not afraid to disrupt things and go against the grain.
• There is no recipe for leadership. Godin argues that there is no archetype or specific personality traits that make a leader. We all have the ability. And, for this reason he does not provide a methodology to become a leader. Rather, he speaks of a general philosophy and tells inspiring  stories of individuals who have created tribes that change the world. The poker world is relatively new and there could be individuals hidinig behing the executive assistant’s desk, in the mail room or in the customer support center. Leadership and innovation is indifferent of titles. And to that point;
• Management is not leadership. Managing a team or a project does not automatically qualify that person as a leader. Godin states quite the opposite; allowing others to take control is more of a sign of a leader. This relates to the poker world as it relates to every organization from a ma-and-pa shop with 3 employees to Microsoft.

Tribes  is the first book I have read by Godin and it is a very fast read (not only because it is short) and thought-provoking. I am looking forward to reading his other books in the future.

Here is another, more detailed review of the book.