From Economic Boom to Economic Gloom

As the clouds darken over the global economy and some pessimistic economists predict the return of stagflation (slow economic growth, rising unemployment, and rising prices), the poker industry may be on the cusp of an unknown abyss.
After a decade of unprecedented growth in the industry, the "real world" has the potential to impact negatively on the industry for the first time.

Rising oil prices are driving up the cost of transport and energy, commodity prices are sending the cost of staple foods through the roof, and the credit crunch is restricting the availability of previously cheap credit.

Competition in the industry, at all levels, has never been so healthy, but what challenges will the global economic crisis bring? And how severely will the old industry adage that "gambling is recession proof" be tested?

The weakened dollar has arguably offset the impact of the slowdown for European players travelling to the U.S. to play, but this does not apply to American players.

While record numbers attended the European Poker Tour Grand Final in Monte Carlo earlier this year, a quick analysis of the number of players playing this year's World Series of Poker shows that for the first 18 events, the number of tournament poker players fell just over 4 percent to 15,956 from 16,654 in 2007. At best, this can be considered stagnation; at worst, it could be the consolidation of a worrying trend first witnessed with the dropoff in World Poker Tour numbers this year.

A recent survey of 19 U.S. states that operated casino or racetrack gambling showed that around half saw gross gambling revenue fall in December 2007 from the year before, and by January 2008, that number was over 60 percent, including Nevada, which saw revenues fall almost 5 percent to $1.06 billion.

Does that other old adage hold that when America sneezes the rest of the world catches a cold?

While the dollar slump in recent months has helped euro zone and pound sterling players who travel to the U.S. to play in live games, it has dismayed online players and poker rooms that operate in U.S. dollars. The dollar has fallen around 15 percent against the euro in the last year, and for players converting their online dollars to euro in the real world, this impacts significantly on their bottom line.

The fallout from this is likely to be increased consolidation within the industry, as less competitive operators see their margins squeezed and opt to fold or sell out and move on. Smart players will search for more value, including, among other things, protecting their bankrolls by playing on sites and networks that offer their own currency.

Both online and live, the price of poker is going up, but only for players who accept the status quo. Equally, online sites and tournament organisers need to adopt creative ways of satisfying their clientele at a time when the cost of goods and services is rising.

The poker world is full of people who love a challenge, and they must now step up to the plate and meet that challenge head on.