pi-pa-banned

If you follow the reasoning of a couple of poker network operators these two should never be allowed to play poker again.

Phil Ivey is up $15,661,019.27 and Patrik Antonius has clocked a cool $13.7 million dollars since 2007 according to The Poker King. They are clearly sharks and they are net withdrawers.

They are bad for the site and should clearly be banned if you listen to iPoker who gave Blonde Poker three months notice to find a new network because they had too many winning players. One would have to draw the same conclusion if they listened to Bodog Network as well since they are lowering the payout to skins with winning players as a way to penalize them.

It’s obvious that Phil Ivey and Patrik Antonius bring value to Full Tilt Poker. I don’t even think that fact can be disputed. Just the recent press coverage of their battles with Tom Durrr Dwan and Isildur1 has generated tons of poker press buzz.

I’m not suggesting that iPoker and Bodog attempt to turn their big winning players into PR events but I do think it shows that this issue isn’t as black and white as some poker networks make it out to be. There are other ways these networks could exploit these winning players to their advantage if they just put their heads to it.

The big problem with recent solutions like these is that it demonstrates a rather disturbing outlook for online poker. Rather than acknowledge outright that player acquisition costs are rising and most of the skins on their network aren’t equipped to compete in this new environment many networks are pointing their fingers at the skins and complaining that they are resorting to what is essentially all they have left to keep their head above water.

In the Blonde Poker discussion forums the owners discussed the fact that after expenses on a good month they made a few thousand. On a bad month they made a few hundred. And in several months they ended up losing money due to chargeback fees.

I would say that for a well-known skin that most players would recognize, $5 million a month in gross revenues sounds like a good figure to me. Now figure in, cost of the network, affiliate payouts, chargebacks, overhead (office space, licenses, etc), staff, and other costs of doing business I think I’m being awfully generous guesstimating that they might end up with $1,000,000 in profit. To be honest, I think if you factor in retention costs (promos, loyalty programs, reloads, etc) you probably end up with far less than a million but I’m trying to be conservative.

Now, let’s say that you operate only in several European markets which let’s say for arguments sake are (in no particular order):

UK
Germany
Sweden
Norway
Denmark
Holland

That means that you would be breaking even if you spent only $166K per region per month in marketing. What’s that going to buy you; a couple of print ads?

Considering your competition, Full Tilt and PokerStars, can spend at least that a million a month (often much, much, much more) in each of your regions, what kind of chance do you really have?

And that’s for the more recognizable rooms. If you’re only doing $1,000,000 a month or even $2,000,000 a month the only chance you have is to dump as much of that money into keeping your existing customers from jumping ship.

I think it’s a fair bet to say that for many skins their cost of acquiring a new customer who the network will regard as a “fish” is higher than the lifetime value of the player. T&C’s or network rules can’t change that reality.

The cold hard truth is that the networks took on these skins without fully vetting them. They took on rooms who were underfunded. They took on rooms who were targeting a niche market. They took on rooms who had no chance of ever generating enough money to properly market to new players.

They did this knowingly. Because at one point signing up new rooms and increasing their liquidity base served their business goals. Now that they’ve noticed that certain types of skins can be a drain on their poker ecosystem they now want to change the rules and punish these rooms for doing exactly what the networks had hoped they would do when they originally signed them up.

Add to that that sports books with fishy players have grown increasingly important to networks and you can see where this attitude is coming from. Sports book William Hill has a 30% stake in iPoker and Sports book Bwin bought Ongame so now sports books are running poker networks. That’s in addition to the many sports books they’ve signed up as customers.

They are more concerned about not burning out their sports bets customers – who have a higher profit margin – in their poker rooms. They want a perfect world where their sports book customers keep spending their usual amount and they can profit off of their poker play as well. A shark who doesn’t bet sports who takes money off of a sports book customer is a leech on the system as far as they’re concerned. I guarantee you if the big winners on the poker sites were dumping their money back to the sports books nobody would give a rat’s ass about rakeback, too many profitable players, etc.

The problem right now is that everybody thinks that by imposing rules and T&C’s they can automagically change player behavior to their own benefit. Bonus whores have been around as long as there have been bonuses. Rakeback players will be around as long as someone is offering rakeback. Players are always going to migrate to where the money is. If you build a network full of fish good players are going to find one way or the other to get at those fish.

I have yet to see one successful case where a poker operator using the stick rather than the carrot has ever worked over the long term. Players have too much choice. If you’re going to start banning players for being too good or lowering the payouts to the skins to the point that they can’t offer better players any retention incentives, they’ll go elsewhere. I know that may seem like what some poker network operators want but like all ecosystems there are always unintended consequences.

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