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December-04-2007,
Poker's Downfall Has Been Almost as Meteoric as its Rise...By Jay Graziani

The rise in poker's popularity through the first part of this decade was surprisingly rapid. The World Series of Poker's main event saw 393 entrants in 1999. By 2006, that number had risen to nearly 9000. While the surge of interest in poker is largely attributed to the invention of the "hole-card camera", just as important was the increasing popularity of poker among recreational players, fueled by the explosive growth of the online poker industry.

Just over a year later, the atmosphere has changed dramatically. The 2007 WSOP main event saw almost 2400 fewer participants than in 2006, the first time the field has shrunk since 1993 and a pretty embarrassing blow for Harrah's, who had prepared to accommodate 10,000 players. The event was also largely ignored by the public. How many people in your average sports bar can tell you that Jerry Yang was the winner this year? In years past, Chris Moneymaker and Greg Raymer rose from complete obscurity to become near-household names due to their luck in the main event. Now, an unknown who takes home the big bracelet still remains relatively unknown, certainly nowhere near the celebrity status enjoyed by less recent winners. Overall, the public interest in the professional poker circuit has dropped precipitously in the past year.

Of course, you have to wonder how a pastime that was supposedly rising so fast is still stuck with Milwaukee's Best Light as their main sponsor. Nothing associated with "Beast" Light can be classified as a serious competition, except maybe a frat-house beer pong tourney. The deluge of poker TV programming has also subsided, as the innovative "hole-card cam" quickly lost its novelty among the masses.

Many pundits declared poker a passing fad, the turn-of-the-century recreational counterpart to hula hoops or swing dancing. And perhaps that is one contributor to poker's downturn. But another significant factor, perhaps the dominant one, is the Unlawful Internet Gambling Enforcement Act, and the subsequent panic that crashed through the online gambling industry. Just as online gambling fueled the poker craze, the abrupt changes in the offshore arena have had an impact back onshore.

The most recent interim financial results from Party Gaming, once the juggernaut of online poker, indicate that total revenue was down 68% despite strong growth in Europe and Asia. Party once sported a market capitalization of over 12 billion USD. That number has now fallen to under 2.5 billion, resulting in the company's demotion from the FTSE 100 to the FTSE 250.

A lot of dead money got pulled off the table when Party Poker et al. abandoned the American gambling scene due to threat of federal prosecution, drastically effecting the economics of the game. The loss of the small fish impacts the entire food chain, making life suddenly much more difficult for the semi-pro, mid-level players who were sharp enough to beat up weak opponents, but suddenly saw their profits shrink when the overall poker field tightened up. Poker is a zero-sum game, and when the losers disappear, some previously successful players suddenly find themselves as the weak players at the table.

Novice players have it the worst, and this poses a big barrier for attracting fresh money to the games. Overlooking the tremendous hassle involved in just getting an account funded, new players are also usually jumping headfirst into a shark tank when they begin playing online. With a lot of loose money gone, games are generally tougher, making overlays smaller and less likely. The experience level of the average online player has risen dramatically, meaning newcomers are far behind on the learning curve.

On top of that, most low-traffic online card rooms are filled with proposition players (props) who "play for the house" by filling table games in return for a rebate of a portion of their rake. These players are generally more experienced and have a large bankroll relative to non-prop opponents, making them very tough for novices to crack. At some sites, props make up a huge percentage of the active player pool at any given time. Seeing 6 or 7 props "teamed up" against 1 or 2 unsuspecting players is not uncommon at smaller online poker rooms. Since prop lists are closely guarded, the average player has no idea whether he is playing against a bunch of regular joes or experienced semi-pro players. For a new player giving online poker a small try, watching your bankroll get split between six guys who play 10 hours per day is no fun and quickly discouraging.

All of this has resulted in less new money to the games and the gradual withdrawal of the weak money that has managed to stick around. And as the online game has faltered, so too have the recreational home games and poker interest in general. There is some hope on the horizon for poker supporters, in the form of the handful of legislative efforts to legalize and regulate online poker. Unfortunately, the passage of substantial legislation seems increasingly unlikely. Again, this comes down to an issue of public interest. As popularity in poker wanes, legislation seemingly carries less and less support, dooming the chances of this becoming a bona fide legislative issue.

Poker supporters may have well dropped the ball by waiting to act. If the recent attempts at legislation had been pushed harder during the Moneymaker-Raymer years, lobbying and petitioning efforts likely would have carried much more support, and the popularity of poker may well have made this a winnable issue. As it is, the online gambling industry may have lost this battle, on both the legal and popular fronts.

12-04-07
Jay Graziani
MajorWager.com
graziani@majorwager.com

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