Barrons: Only the house wins

[Hock_]

I think you're missing the main problem facing Party after it loses its US business: loss of the networking effect, which drove its market share to begin with. The #1 reason people played at Party was because they ALWAYS had ALL types of games going ALL the time (and the games tended to be softer than elsewhere, at least a few years ago). Once they lose 80% of their customer base, that will no longer be the case. Party's software and customer support are substandard and its rake is the highest around. It will have a major problem retaining its non-US customers, who will leave for other sites with a wider and deeper offering of games at lower rake with better software and support.

That said, I'd be surprised if there were any issue withdrawing funds from the site anytime soon.

[AlexM]

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Assuming the worst case scenario (chapter 13), the first people to get paid are the secured creditors, then the unsecured creditors, shareholders and then if anything else is left over, the players and employees (employees usually get the first crack though). Monies to the trustee are in there somewhere too. There are some wrinkles state to state, but that's more or less what would happen.

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Wow. I thought bankruptcy laws were bad enough, but I didn't realize they were nearly opposite of what they should be on payouts. Insane. Shareholders should obviously be last to get money.

[Ali shmali]

Party is not losing 80% of it's player base. It's losing that number in revenue. And I would guess it's probably less then 75% by now.

In the first 2 quarters of 06 alone, 43% of new accounts were non-U.S. For the entire 3 quarters of this year I would not be surprised if that number is closer to 50% due to the marketing of the past 4 months. They have the biggest non-U.S. player base in the industry. That part of their revenue increased 151% for the first half of 06. If only 90% of that player base is casual, I don't expect there to be a big shift once americans are shut off.

The financial forecast for the gaming industry in european markets is also very good. They could still have a 300 million dollar year in '07 with out americans. That means they will still be a big player in the gaming industry.

[Hock_]

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Party is not losing 80% of it's player base. It's losing that number in revenue. And I would guess it's probably less then 75% by now.

In the first 2 quarters of 06 alone, 43% of new accounts were non-U.S. For the entire 3 quarters of this year I would not be surprised if that number is closer to 50% due to the marketing of the past 4 months. They have the biggest non-U.S. player base in the industry. That part of their revenue increased 151% for the first half of 06. If only 90% of that player base is casual, I don't expect there to be a big shift once americans are shut off.

The financial forecast for the gaming industry in european markets is also very good. They could still have a 300 million dollar year in '07 with out americans. That means they will still be a big player in the gaming industry.

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None of this addresses my point. Revenue base = games available. WHY do you think they've been able to continue to attract new players? The main reason will disappear when they shut out the US. When Full Tilt/Stars picks up the Americans, those sites will start advertising more in Europe, and the choice between FTP/Stars (with many, many more games than currently available) and a Party (with 20% of the games it currently has, probably less when Party's non-US players follows the US players to other sites) will be really easy for anyone.

My prediction is that Party will become a very small player in the worldwide on-line poker industry, probably within 12 mos.

[Ali shmali]

revenue = stakes being played and money being wagered on casino games. It's important to note that their casiono games have skyrocketed in 06. I'm sure U.S. players are responsible for much more then 80% of that particular revenue stream and that americans are playing higher stakes on average then non-americans(thus contributing more rake per table).

I don't know if there is a way to actually look at just casino and poker revenue/players, and the ratio for americans on each. But it seems their poker player base is not going to take as big a hit as everyone is suggesting. I'm going to guess they will still have 20k players at peak euro hours after americans get shut off. That's more then several of the other sites. And again the majority of the player base is casual. I also read in another thread that party executives were re-buying stock after it plummetted and that they are looking into buying out some of the smaller sites. I don't think party is going anywhere in the next year.

[yad]

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I'm going to guess they will still have 20k players at peak euro hours after americans get shut off. That's more then several of the other sites.

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While this is true, it neglects the fact that many of the american players will not just stop playing, but will in fact move to other sites. There aren't too many major other sites for them to move to: FT, UB, and maybe stars. So while 20k players is more than several other sites right now, it may not be so in a few months.

And if party ever becomes even slightly worse than one of these other major sites in terms of game selection, they are in trouble IMO. There are really only two reasons people play there: because they advertise a lot and so casual players naturally go there first, and because informed players want the good game selection. Certainly nobody's playing there because of the good customer service, software, or rake structure. So if they lose the game selection and the market share dominance that allows them to have way more advertising than other sites, they are going to have problems.

[Leader]

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I'm going to guess they will still have 20k players at peak euro hours after americans get shut off. That's more then several of the other sites.

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While this is true, it neglects the fact that many of the american players will not just stop playing, but will in fact move to other sites. There aren't too many major other sites for them to move to: FT, UB, and maybe stars. So while 20k players is more than several other sites right now, it may not be so in a few months.

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One should also consider that the numbers of players displayed on the sites is grossly misleading, and that Party is not banning US play money players so they'll continue to be represented in the numbers.

[Asianj]

Party remains a huge short - the value of this business today is at best 25% of what it was prior to the passage of the bill. This stock is headed for single digits.

It's brand equity in the US will eveaporate quickly. Wall Street analysts do not know what we do i.e. any poker player who deals with Party knows that Stars and Full-Tilt are more customer oriented. Fish who lesve Party will not want to return.

A regulatory solution will come far too late for these folks.

Rebuilding their brand in the aftermath of their abrupt exit will be very, very expensive and Full-Tilt/Stars will have the revenue streams Party abandoned to make it even tougher.

[sbj99]

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it does not take a great deal of insight to figure out that Party will not have enough cash to pay 70% of its customers when they all try to cash out at once.

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Something doesn't make sense here...

1. Party knows that by dumping the US market, the substantial majority of gamblers will need to withdraw.
2. According to this article, said withdrawl will devestate the company.

Given 1 and 2, it would seem suicidal to deliberately "induce" a run on the bank. Seriously, it would seem the bright thing to do would be to prohibit deposits, knowing that 90% of the fish will just play on till their account hits zero.

What am I missing? People say Party is mismanaged, but to the point of deliberately wrecking the company?

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I think they're depending on the existing $500m loan agreement they have to solve any cash problems. If the banks back out of the credit facility I think there will be a problem.

[Sniper]

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I think they're depending on the existing $500m loan agreement they have to solve any cash problems. If the banks back out of the credit facility I think there will be a problem.

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Party released a statement last week that their are no issues with their credit facility...