Maybe Stars, Full Tilt & UB Really DON'T Want Poker Legalized

[gaboonviper]

I read an interesting speculation today in one of the online poker news blogs. The writer stated that he believes that the remaining online sites(i.e. Stars, Tilt, UB, etc.) DON'T want poker to become legal in the USA. This is beacause the sites that have not pulled yet got a huge boost to their bottom line when the other sites called it quits. And also by legalizing poker in the US there would be huge competition from brick and mortar Harrahs, MGM/Mirage, etc. who would love to set up online in this country if it was legal. Also Party and the others would return giving them(i.e. Stars, Tilt, UB) even more competition. This could explain why none of the remaining sites have given anything significant to the PPA--and anyone of them could easily afford to donate millions, even now. Of course there are flaws to this argument. The primary one being that soon all the sites will be closing if some legislative miracle does not manifest. What do you think?

[djoyce003]

why isn't this guy banned yet?

[PrayingMantis]

yes it makes a lot of sense.

[Jack Bando]

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why isn't this guy banned yet?

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You almost have to try to get banned from 2+2.If posting stupidly was bannable, the internet would be vacant.

[durkahdurkah]

I-gaming sites don't donate to the PPA because it's illegal to do so directly.

and LOL that the major gaming sites wouldn't want the largest market in the world to be able to use their sites legally.

[Grasshopp3r]

The OP is wrong in his premise based upon the economics involved.

I use the pie analogy, here. If the pie grows to $10 billion and a poker site can achieve 10% market share, that is better than a $500 million pie with 30% market share.

Another analogy that I could use the the stock market or trade center model. Business value is created by being the domiant market, such as the NYSE, where everyone comes to trade. Having market dominance allows for additional value creation and synergy.

[CybrPunk]

How is it that someone whose sole purpose is to insight paranoia and hysteria is still posting here?

[Jack Bando]

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How is it that someone whose sole purpose is to insight paranoia and hysteria is still posting here?

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PM a Leg. Mod if you think it's ban worthy. But it takes a supreme amount of stupidity to get banned. It took BlackJack777 posting pictures of dead cats to get banned.

[atomicsoda]

You are right. If online poker was regulated by the US. No way party, stars or any of them would get much US business. Harrah's, Caesers, MGM, Hilton and the rest would dominate the market. It is likely that tyhe only sites licenced by US authorities to offer online poker to US residents will be the casino companies. I am sure congress and the regulators will shut out those foreign operators by making it illegal for an unlicensed entity to offer gaming to US residents. This is not a development I aould be unhappy with. No reason for US money to go to these rogue, unregulated, foreign operators.

[SplawnDarts]

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No reason for US money to go to these mob operators.

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FYP /images/graemlins/laugh.gif

[707782]

This post makes HUGE SENSE TO ME...

WHENEVER THEY LEGALIZED ONLINE POKER, 100 MORE HUGE COMPANY WILL POP OUT OF NOW WHERE FORCING PS, FTP, UB TO FOLD THEMSELF.

[atomicsoda]

The exact same reason drug dealers don't want drugs legalized. They would be pushed out of the market by those with political connections.

[Lizard King]

sure they dont want poker legalized cause they will lose most of their customer base to US sites and playing legally vs. illigaly. But it dosent matter what they want. The only thing that matters is what the fat cats in Washington want. And clearly they want poker banned and pushed to the underground.

[Unabridged]

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The exact same reason drug dealers don't want drugs legalized. They would be pushed out of the market by those with political connections.

[/ QUOTE ]

exactly. you people think legalization in the US means there will be a free for all and anyone can start a site? kind of like how any of us can easily start b&m pokerrooms/casinos. if its legalized you can count on only 3 licenses being given out. mgm, wynn, and harrahs.

[707782]

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The exact same reason drug dealers don't want drugs legalized. They would be pushed out of the market by those with political connections.

[/ QUOTE ]

exactly. you people think legalization in the US means there will be a free for all and anyone can start a site? kind of like how any of us can easily start b&m pokerrooms/casinos. if its legalized you can count on only 3 licenses being given out. mgm, wynn, and harrahs.

[/ QUOTE ]

So you don't think three BILLION DOLLARS corp. are not enough to take down all those small sites? PS might able to survive, however, their volume would go down at least 50%.

And I assured you that there will be a lot more than three.

[Reef]

title alone makes for OP ban.

[ClubChamp04]

I think the OP's post makes some sense. Why didn't stars ever lobby or throw some major dollars like Party poker did toward persuading congress that poker should be legal? Party clearly wanted legalization in order to retain the U.S market,they knew it would be over for them completely if the law was passed because of their duties to the stockholders. On the other hand,stars would have no legal issues b/c they are a private company and would gladly take in the extra business that party poker and others offered.It seems like party was thinking long term and figured they would still retain enough business from U.S customers to make it profitable to lobby even though competition might increase. Stars seems to be going for the short run slam it home approach that will dry the U.S market up and then move on while still retaining most of the international business. Maybe they would rather see it banned than have it legalized and have to compete with the likes of all the bigshot U.S casino's. They would not only lose the majority of american players if that were to happen, but also a substantial amount of foreign customers.

[Billman]

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title alone makes for OP ban.

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Lack of value of your post makes for you being banned.

As I've read through posts over the last several months I continue to see people constantly calling for other posters to be banned because they don't like what the person has to say.

I believe the OP is referring to a post on my blog. If you want to debate my theory I would be more than happy to provide substantial evidence to support it. My theory may or may not be true but I can fully support the basis for it.

[Billman]

[ QUOTE ]

I use the pie analogy, here. If the pie grows to $10 billion and a poker site can achieve 10% market share, that is better than a $500 million pie with 30% market share.


[/ QUOTE ]

Dude, you're so totally right. Whenever Walmart rolls into town it's encouraging to see all the mom and pop shops getting excited about the pie getting bigger. And when HomeDepot opens up down the road all of the local hardware stores throw a parade and declare a town holiday because of how much bigger the pie is going to get.

The only way your example works is having a massive, massive difference in market sizes (20x). The online gaming market is estimated to between $12 - $20 billion (depending on who you listen to - and that number includes all online gaming not just poker). In your example, the market would have to increase to $240 - $400 billion from current levels. That seems more than just a little absurd over any sort of reasonable time scale. What happens when the increases are far more modest? What happens when you're losing market share at a faster rate than the market is growing. You don't have to be a genius to figure out that your business is not better off by the pie getting bigger.

You also seem to be ignorant of basic business and economic fundamentals. Watching your market share decrease from 30% to 10% will also likely be joined by higher costs and lower margins due to increased competition. So, you could actually end up with less net profit despite higher gross revenues.

[jimmytrick]

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why isn't this guy banned yet?

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The net was invented by a Democrat (Gore) thus everyone is included. If it was invented by a Republican we wouldn't even know about it.

[jimmytrick]

Seriously, of course sites like Stars aren't going to contribute to anything that might lead to onshore gaming. Sometimes I wonder how the hell you folks ever win at poker being double [censored] an all.

[ozziepat]

Online poker can be extremely profitable for some number of competitors even if US customers are removed from the equation. It's just that the number of successful businesses will shrink. That was going to happen anyway, because from a poker player's perspective, there is little reason to have 20 different sites to choose from. Much more important are the choices on a smaller number of sites with wide offerings, lots of active tables, good bonus structures, etc. Small sites will eventually fold or specialize in some way in order to survive as niche players. It's basic economics.

The leading online sites have all made what they believe to be the business decisions that are in their best interests. If I were Stars, for example, I might very well prefer to be the leader in a non-US market than an also-ran in a market that included major US sites. No business wants competition that might directly, negatively affect the size of its customer base. One of the interesting contradictions in laissez faire capitalism is that it theoretically allows any ambitious business enterprise to become a monopoly. And in many market segments, that will actually occur unless there are laws or regulations to prevent it (which we have in the US). Witness the AT&T breakup, or the problems Microsoft currently has.

Would there arise a US-based poker mega-site, or at the very least an oligopolistic situation dominated by US sites, if the market were fully opened to US business? Who knows? But I'm guessing current successful providers would just as soon not take the risk.

[fatshaft]

[ QUOTE ]
I-gaming sites don't donate to the PPA because it's illegal to do so directly.

and LOL that the major gaming sites wouldn't want the largest market in the world to be able to use their sites legally.

[/ QUOTE ]John Anderson, CEO of Pacific/888 said exactly this at a public conference in December 2005, "why would we want to legalise [officially obviously]online gaming in the USA? We would then have Microsoft, ESPN, Harrahs etc as competitors, we are quite happy with the staus quo"

Now this is paraphrased and not word for word, but I can assure you that's how he put it. There is no LOL about it.

Now, the market has changed, he'd be happy to get back in for a small part of a pie he no longer gets anything from, but at that time.......

[Orlando Salazar]

They would just incorporate ashore. Their sofware platforms and brands are well developed. Its stupid to think harrahs would see competing with them as +EV. Too much marketing $ to do this, they'd rather just affiliate and get a cut or make an acquisition.

[fatshaft]

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They would just incorporate ashore. Their sofware platforms and brands are well developed. Its stupid to think harrahs would see competing with them as +EV. Too much marketing $ to do this, they'd rather just affiliate and get a cut or make an acquisition.

[/ QUOTE ]Do you think that the future US Online Gaming Commission (or whatever it will/may be) will be falling over themselves to license a company that thumbed its nose at the UIGEA?

Or do you think they will go like this

1st to be considered for licenses - Completely new operators/Operators who have never accepted US players

2nd to be considered for licenses - Companies who were taking US players but stopped when the UIGEA was passed

3rd/never to be considered for licenses - companies who continued to accept play after UIGEA

[Billman]

[ QUOTE ]
They would just incorporate ashore. Their sofware platforms and brands are well developed. Its stupid to think harrahs would see competing with them as +EV. Too much marketing $ to do this, they'd rather just affiliate and get a cut or make an acquisition.

[/ QUOTE ]

Not sure what planet you live on but a company like Harrah's would eat Stars alive. Do you really think Poker Stars is a bigger brand than say . . . MGM? Someone like Harrah's or MGM would lower rake to almost nothing, give out bonuses like they were water, and would bleed the profitability out of the market until they lowered the valuation of Stars' assets to the point where they could pick them up for next to nothing.

It's a proven model that has worked time and time again across a nearly every industry.

Plus, that still doesn't address the fact that Stars would never get a license to legally offer gaming in the US. Do you really believe that their brand is soooooooooooo strong that when the average American is offered a choice of sending their money to MGM or to some offshore company operating without a US gaming license . . . who do you think they're going to go with? And the pros will follow the fish and as long as the big casinos can deliver fish the pros will play there.

[Grasshopp3r]

[ QUOTE ]

Dude, you're so totally right.


You also seem to be ignorant of basic business and economic fundamentals. Watching your market share decrease from 30% to 10% will also likely be joined by higher costs and lower margins due to increased competition. So, you could actually end up with less net profit despite higher gross revenues.

[/ QUOTE ]

Wow, you are stupid or ignorant or both. First, you confuse competition with market size. Then, you ignore the pent up demand of gaming. You are also confusing the marketplace or trade center theory with a commodity business. The new competition has to take players away from established sites. Why did Party grow and other smaller sites languish? The reason is that Party held the dominant market position and it became the market center. The same dynamic is now occurring at Stars. What happened when the Indian gaming expansion occurred in the US? Total market SIZE increased. Go do some research and perhaps educate yourself instead of spewing gibberish.

[Billman]

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Wow, you are stupid or ignorant or both. First, you confuse competition with market size. Then, you ignore the pent up demand of gaming. You are also confusing the marketplace or trade center theory with a commodity business. The new competition has to take players away from established sites. Why did Party grow and other smaller sites languish? The reason is that Party held the dominant market position and it became the market center. The same dynamic is now occurring at Stars. What happened when the Indian gaming expansion occurred in the US? Total market SIZE increased. Go do some research and perhaps educate yourself instead of spewing gibberish.

[/ QUOTE ]

Actually, since Stars has been losing both market share and players over the last 30 - 45 days you are the one who seems to have no clue about where the market is at. So the same dynamic is not happening. In fact, even before Dec, the market was shrinking but was spread out over fewer players. Go spend 10 minutes with Excel and PokerSiteScout. You are poorly, poorly mistaken about the online poker market.

Also, the comparison you make to the Indian reservations is not very accurate. If I live 20 minutes from an Indian reservation the money I spend on gaming there is not very likely to have made it to Vegas anyway. Driving 20 minutes to my local Indian casino and getting on a plane to Las Vegas are two different things. Online one simply makes a choice of which URL to type into his browser in terms of picking a site to play at.

So, let's take that a step further and say that the US market for poker increases. Maybe many people who never trusted sending their money offshore now trust MGM to deal a fair game. Notice tha Stars is still not MGM. So much of that market expansion will be to very well known US gaming companies. And where to professional players go? They follow the fish who are now schooling at the large US gaming companies. Momentum.

And you still didn't address the fact that that previous bs example only works when the market moves up 20x. If the market increases at a more normal and moderate rate of 20% - 30% a year then do the math. If you had 30% of a $500,000,000 market you would be making $150 million. If you had 10% of the market 2 years later at a less jackasstical 20% a year growth rate you would have a market valued at $720 million. Your 10% market share is only $72 million.

Add to that the fact that MGM, Harrah's, etc who have multi-billion dollar valuations could use their huge cash reserves to fight an all-out battle and your profit margins are going to get smeared.

[Grasshopp3r]

We will see what happens. I am trying to come up with a prop bet to see who is correct, so perhaps you have some ideas?

Personally, I think that legalization and a series of takeovers of the poker sites by the MGM and Harrah's of the world is more likely at this point.

Las Vegas casinos feared exactly what you described, however, the indian casinos actually have the effect of developing more gamblers who then make the trip to vegas after they tire of the meager local offerings.

There are huge, untapped markets in the world such as China and the rest of Asia that will drive the next gaming expansion. I sure hope that I can play when those markets open up.

[Billman]

[ QUOTE ]
We will see what happens. I am trying to come up with a prop bet to see who is correct, so perhaps you have some ideas?

Personally, I think that legalization and a series of takeovers of the poker sites by the MGM and Harrah's of the world is more likely at this point.

Las Vegas casinos feared exactly what you described, however, the indian casinos actually have the effect of developing more gamblers who then make the trip to vegas after they tire of the meager local offerings.

There are huge, untapped markets in the world such as China and the rest of Asia that will drive the next gaming expansion. I sure hope that I can play when those markets open up.

[/ QUOTE ]

Please don't read this as being dickish but you're starting to sound like you agree with what I said. Of course there will be consolidation. When Stars can't get a license to operate in the US they'll sell their customer list to MGM for pennies on the dollar. Depending on how strong or weak their non-US business is someone like MGM might be interested in making them a flat offer for the entire business. But, I can guarantee you it's not going to be for the kinds of valuations that Stars thought they were going to get by going public 10 months ago.

Also, I think you misread my statements. Sure Vegas feared Indian casinos. Any time you're forced to change your business model on terms other than you're own, you're going to fight it. And while the amount wagered in the US increased Vegas found different ways to stand out from the Indian casinos and actually profit from the new gamblers they created. Online is different though. Whether I play poker at Stars or MGM tonight (assuming online gaming was legal and MGM had an online casino) has nothing to do with proximity. It has to do with who provides a safer experience while at the same time providing me with what I want (fish). MGM can deliver fish and MGM can be trusted. Even if the pie gets bigger the momentum is going to drive players towards MGM over Stars.

I think the better question to you is for you to describe how Stars can profit from the new players that MGM creates. MGM will create new players. Stars will have to offer something to entice them to play at Stars over MGM. I don't think that's going to happen which means that as MGM creates more and more fish players who currently play on Stars would have more of an incentive to leave Stars to go to MGM.

Think of it this way, Stars is more likely to become the next Paradise than they are the next Party if MGM, Harrah's or any other major casinos can legally offer online gaming.

[fatshaft]

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[ QUOTE ]



Wow, you are stupid or ignorant or both. First, you confuse competition with market size. Then, you ignore the pent up demand of gaming. You are also confusing the marketplace or trade center theory with a commodity business. The new competition has to take players away from established sites. Why did Party grow and other smaller sites languish? The reason is that Party held the dominant market position and it became the market center. The same dynamic is now occurring at Stars. What happened when the Indian gaming expansion occurred in the US? Total market SIZE increased. Go do some research and perhaps educate yourself instead of spewing gibberish.

[/ QUOTE ] Actually Paradise held the dominant market position, Party came in, held tournaments (big inovation there) and marketed the hell out of their product, and became huge.

[mbpoker]

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Why didn't stars ever lobby or throw some major dollars like Party poker

[/ QUOTE ]

And you know that from which sources?