A Star Less Bright

6 November 2008

Poker is not likely to disappear from anyone's radar any time soon. It boomed eight years ago and is not showing any real signs of losing popularity among players. But in places where the market has matured the industry faces real threats from competition, regulation and economic constraints.

As co-keynotes at the recent World Poker Congress in Budapest, Hungary, Steve Lipscomb, founder and chief executive of World Poker Tour Enterprises Inc., and Hendrik Knopp, head of poker marketing and marketing development for Bwin, the Austrian operator, offeredd two unique perspective on the niche industry.

"The poker industry did not exist eight years ago," Mr. Lipscomb said. "There were online sites out there, but they were nothing like they are today."

And looking back to 2002, when the World Poker Tour was established, there was virtually no poker on television, according to Mr. Lipscomb, who as co-keynote of the conference offered a glimpse into poker's recent past, including his own company's contribution to the boom.

The United Kingdom produced an ill-fated program called Late Night Poker, which ended in 2002. But poker in the United States had no broadcast venue, he said.

In 2003, the World Poker Tour began broadcasting, creating a brand new format for poker in both the online and land-based sectors. While it wasn't the first program to show players' hole cards -- Late Night Poker, in fact, was the first -- it did set the standard for poker television programming and in bringing the sectors together through online sponsors.

In the WPT's first season, two events were sponsored by online poker sites: the PartyPoker Millions and the UltimateBet Aruba Poker Classic. Those two events helped catapult both companies to the top of the poker charts, surpassing then market leader Paradise Poker.

Today, poker monikers can be seen on amateur and professional players' clothing and table felts at tournaments across the world. Everest Poker this year beat out PartyPoker for a multi-year sponsorship deal for the World Series of Poker.

Mr. Lipscomb, whose company this week revealed third-quarter revenues down $2.8 million, said traditionally, poker was viewed as the ugly stepchild. It was seen as the game that casinos had no room for because it did not make as much money as the slot machines.

"But it has truly emerged into the greatest marketing tool that exists in the entire gaming space," he said, and offered his stage partner's company, Bwin Interactive Entertainment A.G., as an example.

"What Bwin does, with poker being about 20 percent of its business, is use poker as a marketing tool to bring in new customers to move its business forward," he said.

On the other hand, Mr. Knopp gave a grimmer perspective on the industry as it stands today in Europe. He said poker has already peaked there and that the next year will be quite challenging for his company.

"When we look at the market, it took eight years to make poker popular in the United States, but only two to bring it to a peak in Europe," Mr. Knopp said. "Why is it peaking and not growing?"

Comparing it to American football's arrival in Europe a few years ago, he said it failed to make a huge local invasion.

Mr. Knopp also acknowledged that the global financial crisis will have an impact on the gambling industry.

According to recently released numbers, consumer confidence fell 40 percent across the United States, France and Germany and people will likely feel the impact of the crisis in the first and second quarters of 2009, Mr. Knopp said.

"This means people will either stay at home to play poker online or they will stay at home trying to save money," he said. "So, it will be a challenge to get them to Bwin's products."

But what Bwin is facing in terms of competition is the fact that it is primarily a sports betting company. In selling their sports betting product, they are simply selling bets on the content that other people create, Mr. Knopp said.

"We offer bets on whatever happens in sporting events," he said. "But in offering poker, we have to be creative to attract people to our business model."

Finally, operators in Europe may be faced with banks interfering with transactions, also a result of the financial crisis. According to Mr. Knopp, European banks are nationalizing, governments could gain control over the payments to and from online gaming sites.

This, he believes, is going to be the biggest impact of the financial crisis.

The banks may not all nationalize, but the signs are not looking good, he said.

Emily Swoboda is the senior staff writer at IGamingNews. She lives in St. Louis, Mo.