Change is a Comin'

In the August issue of Card Player, I discussed how the global economic downturn might affect the poker market and predicted that the industry would have to meet the challenge head on, with consolidation in online poker a looming probability. I also noted that online sites and tournament organisers would "need to adopt creative ways of satisfying their clientele."

Three short months later, it seems this period of industry-level activity has come to pass. Soon after Ladbrokes Poker announced it was opening up its high stakes tables to the Microgaming network so that players would have access to greater liquidity, Party Poker said it was "determined that we refocus on our core asset, our customer base."

With the upcoming relaunch of its poker client and the announcement that it was going to open up its poker software to 'white labels' - effectively turning it into a network - it is clear that the industry, at least in Europe, is entering a phase of strategic change.

The competition out there is fierce. You only have to glance at the financial reports of the big operators to see that they are experiencing slower growth, and in some cases, stagnation or worse, and most lay the blame at the door of competition.

This is good news for players in two ways: 1) the competition means players can seek better 'bang for their buck' by moving around online sites, and 2) it means the bigger operators have to get pro-active to attract and retain players. This creates a virtuous value circle for players, but it also presents opportunity for online operators.

Liquidity is Key

Both the iPoker and Entraction networks recently announced more-than-respectable year-on-year growth rates. Revenue at the former was up a staggering 109 percent in the first six months of 2008, while the latter was up 29 percent. With growth such as this, it isn't difficult to see why the big 'closed network' players in Europe are looking to network expansion as a way to bolster revenue growth.

In its August 2008 Gambling Sector Report (see Industry News), investment banking firm Daniel Stewart & Co. noted, "The issue of poker site liquidity has emerged rapidly over the past 12 months. Given the desire for greater liquidity among several key and well-established operators, we would expect several groups to be in discussions with regards combining liquidity."

This would, by definition, reduce the choice of sites and networks for poker players to play on, but conversely, increase the number of ready-to-go games available to them as liquidity is enhanced. It is too early to tell how this will play out for players, but one thing is certain - the change is a comin' and both the online and live poker landscape over the next 18 months will shift considerably.

New operators continue to enter the market at a steady clip, hoping to find a niche and build their operation from there. Existing operators have clearly taken note and are starting to go on the offensive to protect themselves.

All this is happening within the framework of a European Union that largely regulates, or plans to regulate in the near future, poker and gaming. Now imagine what would happen if the Unlawful Internet Gambling Enforcement Act in the U.S. were to be dismantled and European online poker sites could re-enter that market!