World poker bonanza deals business a hand to savour

Financial Times
July 15, 2005
Casino tables are booming but the game’s real value lies in its marketability

The loud buzz inside the cavernous room at the Rio Hotel and Casino in Las Vegas has been audible for weeks. The insistent sound is of poker chips in the fingers of thousands of gamblers who have converged on the Nevada city for the 36th annual World Series of Poker (WSOP), the game’s premier event.

Only nine players will advance to the final table today to vie for a Dollars 7.5m (Pounds 4.3m) jackpot, but the excitement surrounding poker will linger on when ESPN, the US cable sports network, airs the events in a series starting next week.

Along with the world series, programmes such as the World Poker Tour (WPT) – which pioneered reality-TV-style poker in 2002 – have stoked interest in the game, spawning even more shows based on skill and luck and fuelling the growth of internet poker websites.

Poker is now the third most watched sport on US cable TV behind car racing and American football.

Its booming popularity has raised the prospect of sponsorship deals.

An estimated 29,000 poker enthusiasts from 45 countries have entered the latest world series and are chasing total prize money of Dollars 103m, well above last year’s Dollars 45m.

But the bigger jackpot is being chased by US business. A host of casinos, online gambling groups and media companies are intent on cashing in on the craze.

They are looking at marketing poker cards and video games, charging advertisers for displaying logos on the green felt of the championship tables and co-branding products such as deodorant.

For Harrah’s Entertainment, the world’s largest gaming company after its acquisition of Caesars Entertainment for Dollars 9bn last month, poker’s popularity is of strategic importance.

Last year Harrah’s bought Binion’s Horseshoe, the iconic Las Vegas casino, in order to acquire the rights to the WSOP which has been held at the gambling hall for decades.

It has since re-sold the property to MTR Gaming Group but is now exploring how to make the most of the WSOP brand.

Tim Wilmott, chief operating officer of Harrah’s, admits the company did not realise how the popularity of poker would explode when it bought Binion’s Horseshoe for about Dollars 50m.

It is currently negotiating broadcasting fees with ESPN, which used to pay Binion’s Horseshoe just Dollars 55,000 a year for the right to air the tournament.

Harrah’s is now looking at licensing the WSOP brand and has signed one deal with the makers of Levitra to advertise the male erectile dysfunction drug on the championship table.

Not surprisingly, US casinos have seen their markets grow and broaden as more players are lured to the poker tables.

Foxwoods casino in Connecticut, which has one of the largest poker rooms in the US, has even removed lucrative slot machines to install more tables.

But poker is not as profitable for the casinos as slot machines or blackjack where the odds are stacked in favour of the house.

In poker, players compete against each other and not the house. Casinos make money by taking a “rake”, or a fee of about Dollars 3 per hand.

But poker’s real value lies in its marketability. Poker is far from the “gangbuster” game in a casino, says Kathy Raymond, director of poker operations at Foxwoods. “But it offers marketing and PR capability that has brought in thousands of new, younger players.”

Steve Lipscomb, chief executive of WPT, agrees that poker’s accessibility is one of the reasons for its popularity. He created the World Poker Tour in the 1990s after filming a documentary on the world series. He realised then that anyone could play poker – and potentially win.

Today the bulk of WPT’s revenue comes from licensing its television show to cable’s Travel Channel.

But the company is busy developing other revenue streams, including licensing its brand for instruction camps, equipment, clothes, video games and slot machines.

Last month WPT also launched a gambling website amid the much-publicised flotation of in London, which valued the Gibraltar-based site at about Pounds 5.6bn.

Unlike its online gaming rivals based overseas, WPT blocks bets from Americans in order not to jeopardise its operations in the US where internet betting is illegal.

Paradoxically, the US is the biggest market for the online gaming industry which expects to generate Dollars 18bn in revenues by 2008, according to Dresdner Kleinwort Wasserstein, the investment bank.

For now, WPT is banking on international business for supporting its website.

“If it works, even modestly, it will eclipse all of the company’s other revenue streams,” says Mr Lipscomb. It is a bet that is only adding to the buzz surrounding poker’s world series.

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