I know a lot of people assumed that with former Party Gaming CEO Mitch Garber taking the helm at Harrah’s WSOP Online division that Party was as good as owned by Harrah’s now that Party has received a clean bill of health from the US government. I was always somewhat skeptical about that line of thinking and it seems my suspicions were confirmed as it was recently announced that 888’s independent B2B division, Dragonfish, would be supplying Harrah’s with online poker and casino software, epayments, CRM systems, and customer support and VIP services. More specifically, the 888 platform would be rolled out on the World Series of Poker (WSOP) and Caesars Casino brands.
It’s unclear from the announcement but it sounds as if Harrah’s is contracting the platform only and is not joining any sort of 888 network. That would also be a very telling move if accurate. It means that Harrah’s sees their brand as being big enough to stand on its own without the assistance of a pre-existing network of liquidity.
Likewise, if Harrah’s is going it alone, it might also signal what Garber and Co. might be thinking over the next few years. While 2010 might be too soon, it’s not completely improbable that Harrah’s would only allows qualifiers from their WSOP poker site at some point in the future. With all of the hassles that are created by the .net vs. .com advertising, technically not accepting buy-ins from rooms operating in the US while those same companies have hospitality suites at hotels right across the street, etc. it might be the long-term view of Harrah’s that they want to avoid the slippery slope altogether by holding all qualifiers themselves and then enforcing their trademark on the WSOP name to make it difficult for competitors to offer any sort of WSOP satellite.
Of course, that’s all just speculation. But the decision to go with 888 does lead one to start asking what Garber’s plans are for the future and exactly how Harrah’s plans on leveraging their strong gaming brand on the internet.
@FSJ: I’ve written exactly that in the past and the CEO’s of Party and 888 both agree with my assessment.
Viva Las Vegas – Legalized Online Poker in the US
Likewise a lot of the digital ink spent on this issue insinuates that because Mitch Garber once headed Party Gaming that this is good news for Party Gaming. There’s no reason people should be assuming that Mitch won’t use his expertise in the online gaming industry to shut out competitors like Party Gaming.
I think the most likely scenario is the door gets shut very loudly on offshore online gambling sites. Harrah’s and other land based casinos will lobby very heavily to set up licensing requirements that will be very difficult for offshore operators to meet and it would also be in their interest to lobby for very aggressive measures against anyone who is operating illegally (i.e. offshore companies who have not received a license).
That would put land based operators in a great position. With all legal stigma removed and the ability to use their deep pockets to market legally in the US in addition to expanded payment processing abilities any new player looking to play online would make the natural choice to go with a well known and regulated poker room.
That would give the land-based casinos access to the US supply of the fishiest players which would lure the sharks away from today’s biggest sites where the games have become increasingly tougher to beat.
With such a huge market advantage that will also give the land-based operators an opportunity to completely rewrite the rulebook in regards to affiliates. With a brand name like Harrah’s and the ability to legally advertise they don’t need the affiliates as much as sites do today. In fact they may decide they don’t need them at all.
If they do decide to keep the affiliate model they certainly aren’t going to be held over the barrel like they are today. They’ll use this as an opportunity to update the affiliate model to better reflect the changed business environment.
MGR and lifetime payments will likely be the first casualty. If MGR even survives the shakeup then expect rates to be dramatically slashed. Also gone will be lifetime payments to affiliates with the more likely scenario being something like six or twelve months.
Another area of likely change is that land-based casinos with online operations will be in a position to decide whom they wish to keep in business. Coaching, community, and poker news sites might be seen as complimentary businesses that they wish to keep as affiliates but poker room review sites would hold little value to them and they would likely not want to get into an affiliate relationship with them.
888 and Party Gaming Agree With Me on Legalized Gaming in the US
If regulation happens US players and affiliates are probably left with one poker room to play on. The few sites/networks that still take US players may stop, as most did in 2006. If they don’t they’ll have to face up to a domestic competitor protecting its turf, which will do so more effectively than the sporadic anti-online-gambling efforts we’ve seen so far. It seems likely to me that US players and affiliates will be worse off if there’s regulation than they are now.
@FSJ: Well, I disagree about the “if” part. I think eventually it will be. Public opinion and lawmakers are leaning in that direction. This year? Probably not. Maybe next or the year after.
And if it is broken up by state my personal view is that would only last a year or two until the states figured out that liquidity begets more liquidity. Once they get a taste of that sweet, sweet tax revenue they’ll promote it like they promote the lottery.
I have no doubt that they did this planning on a regulated US market, and that they’ll now become a powerful force lobbying for online poker in the US. But you say “when the US market is regulated:” I don’t think it’s a given that it’ll happen yet, and even if it does it might be split up by states, which wouldn’t allow for a large market.
@FSJ: Good points but I think I disagree with some of your assumptions. I think a good part of where we disagree (or don’t) is that I wrote this from the position of when the US market is regulated. It would be stupid for them to try to have a monopoly on sats if they only had a presence in Europe. But if the US market were opened to them and they could shut out Stars and Tilt then having a monopoly on online qualifiers is a major advantage and huge selling point for them. So, when you read this don’t read it as what might happen today but what they’re planning over the next several years as the regulatory situation changes.
I’ve worked with Mitch Garber at Party and I’m fairly sure he didn’t take over the WSOP’s online brand just to be a minor player in Europe. I’m confident that Harrah’s recruitment of Garber was a signal that their plans for their online business are on a grand scale.
Special interests always want protection from competition. I want a free market, however, and it’s best for the general (as opposed to special) interest. I doubt it would be in their best interest to be segregated from the Pacific network however: they’re just not that big. Ladbrokes is one of the few that’s successful with that model, but they still share mid-high stakes games with the Microgaming network… and Harrah’s isn’t Ladbrokes outside of the US. I think they’ll be a minor player if they go it alone (until/unless the US regulates).
Unfortunately, it seems likely that any US regulatory scheme will be protectionist. Just how protectionist remains to be seen. It’s entirely possible that a regulatory scheme will be worse for players than the current lack of regulation. That’s why I have mixed feelings about the PPA’s push for regulation. They see government as the solution. I see it as the problem. A relatively open regulatory scheme like in the UK would be fine, but seems unlikely. Obama just increased tariffs on Chinese tires, and the US pulled out of their WTO gambling commitments a while ago. Free markets aren’t looking like a winner lately.
PokerStars is a lot bigger than Harrah’s is likely to be online. If the US regulated, the balance might shift, cutting off a lot of the traffic to US-friendly sites and boosting domestic competitors. But for now Harrah’s is just limiting revenue of the WSOP if they have a monopoly on online sats. I don’t know if we disagree on that (I noted that you say “at some point” they’ll want to consolidate the brand).
FSJ: That seems like a very poor business strategy. Why would they want less-protectionism in the US? They want to protect the US market from other rooms from competing with them when/if poker becomes legalized in the US. You bet your ass they’ll be pushing for very stringent licensing criteria which all but guarantees that most current online poker rooms will not qualify. And they’ll do it under the umbrella of trying to protect the players. When they draft the licensing laws they’ll be sure to point at UB, Absolute, cashout problems at Full Tilt and Stars as examples of what they have to protect players from.
And restricting satellites to their own brand makes perfect sense over time. Stars has effectively done something very similar by requiring sites running qualifiers to EPT, LAPT, APPT, etc events that they must call the qualifier the PokerStars.com EPT blah, blah, blah. Many rooms have opted not to advertise their competition and have dropped out of running qualifiers yet all of those events draw larger and larger crowds.
Like I said, 2010 is probably too early for the WSOP but at some point Harrah’s will definitely be looking at consolidating their brand and leveraging it by being the only online poker site where you can qualify for the WSOP. When Harrah’s gets into the US market they’re not going to be some newbie room starting off. They have the Harrah’s name. They have the WSOP. Basically, they have the trust of US players. I don’t think they’ll have a hard time ramping up their numbers very quickly.
Not joining the network and not allowing others to run online sats both sound like bad ideas. I think both would hurt their revenue. In particular, I hope they join the Pacific Poker network, because then they have a motivation to add US players to that if the US regulates. And therefore to lobby for a less-protectionist regulatory scheme, where current overseas competitors are allowed to compete.