RE-WRITING THE RULES OF CARDROOM OWNERSHIP

By Vahe Baloulian, CGI, 2007

The big question, ‘Why not’ is often the most important and most useful one to raise: by constantly asking ourselves this simple question, we’ve rewritten the rules of ownership in the online poker industry.

We asked:

Why not make cardroom ownership free?
Why not make the terms of licensing very flexible?
Why not allow full poker software ownership?


...and many other ‘why not’s.


As a poker software vendor we are set to offer a unique service in today’s online gaming market - a service not offered by anyone else, but desired by many. There are, however, several well-known yet mistaken ‘rules’ which still permeate the online poker environment. Here are a few:

 

MISTAKEN RULE 1: THE MARKET IS TOO RISKY


Despite some lingering worries and market jitters, online poker is growing and will continue to grow. Technological innovation and enthusiastic press (positive as well as negative) play their role, but it is primarily the game itself that has liberated ‘silent’ players from illegal or semi-legal cardrooms and allowed them to come out of hiding to contribute to the well-documented poker boom. Today, billions of dollars have been and are being wagered - most of them online.

It follows, then, that entering the online poker market is a smart thing to do; and the sooner you do it, the better. Not because there will be no room left for you later, but because the sooner you enter, the sooner you’ll start making money. I do not wish to give the impression that such an entrepreneurial venture carries no risk, but nothing in life is risk free.

Then what about the often-repeated and off-beam mantra that the ‘little guy’ cannot make it in this cutthroat online gaming industry? The truth is that the ‘little guys’ do make it, except not with a branded cardroom. Now, they can apply their entrepreneurial spirit to their very own, fully branded cardrooms without spending a dime up front – and not being saddled with heavy licensing fees later on. It is actually a natural progression for those who are serious about taking their success to the next level. These are hard-working people who are finally being given the chance to do what they have always dreamed of doing.

So, what are the minimum requirements? What does one need to have and to do in order to succeed?

MISTAKEN RULE 2: THE COST OF STARTING UP AND RUNNING AN ONLINE CARDROOM IS PROHIBITIVE


Enter one of this industry’s most universally accepted rules:


‘The costs associated with entry into the online poker market as a cardroom owner are high enough to exclude most people.’ Simply put, developing your own poker software from scratch will cost you anywhere from $200,000 to a million dollars multiplied by the years you need to produce it.

So isn’t it logical that anyone willing to license such software will want to recoup that investment?


Most of the ‘fat’ networks will always charge hefty fees and there will always be cardroom operators willing to pay them. In some cases it’s a status thing; in most cases it’s an imprudent anticipation of better quality for more money. Also, it is an issue of liquidity, which is important but overrated. There are many cardrooms that failed to grow even on the largest networks. This is due to the fact that, unless you are creating new players, it is going to get harder to find existing ones who have not used the same software, perhaps under a different brand, and persuade them to play in your cardroom, which essentially amounts to the same thing. The ‘fat’ networks charge more because their business model is different. Whether one small licensee is added or not will not make much difference to such networks, but for a smaller operation it might be a matter of survival.

Smaller networks are hungrier and therefore more willing to accommodate their customers. But what will happen once they grow? Will they become as inflexible and unresponsive as the ‘fat’ ones? Small networks that bring flexibility and affordability into play only as vehicles for growth will definitely change once the comfortable size is achieved. The networks that are flexible, responsive and affordable as a principle will not change, and these are the ones you should bet on. As in the game of poker, you need to be able to properly read your software provider or network operator before going ‘all in’.


We’ve brought the minimum financial condition for entry down to zero since we realise that in today’s market some with millions to spend may fail and some with certain marketing know-how may succeed in getting their names out and create enough interest with players. Money is not the only factor required to bring players to the tables. But playership does cost the big cardroom or network operators millions, and many of them are obviously doing something right. How can a small market player compete?

MISTAKEN RULE 3: THE COSTS ASSOCIATED WITH CONTINUALLY ATTRACTING AND RETAINING PLAYERS ARE TOO HIGH

At the end of the day, building and maintaining a loyal player base for your cardroom is not an easy task, but neither is it an impossible one. If you, or those who work with/for you, have any experience in marketing and advertising – online as well as offline – then you should know where to start. If, however, you have no idea at all how to find, attract or create players, then you have a very long and daunting path to possible success in front of you. Having millions to spend is helpful, of course, but it may not be your guarantee for success. Hard work and business acumen will often prove to be much more worthwhile.

While some new operators come from businesses entirely unrelated to online gaming, bringing with them a fresh approach and therefore a big advantage, the rest of the ‘start-ups’ will usually have a great deal of experience in this industry. These could be affiliates who have been working the cardrooms, tournaments and forums for years, building up their affiliate network through personal relationships, special deals or innovative, dynamic approaches – all with no competitive marketing budget to speak of. Such operators constantly educate themselves and relentlessly discover new ways of bringing players to their door. It’s been said that education is learning what you didn’t even know you didn’t know. The moment you decide that you know everything about poker marketing, that’s the moment you should sell your business before it goes bankrupt.

There are many ways to grow. Creating players, for example, is one of them. You can hardly find anyone in today’s world who does not know that poker is a game which is tricky and glamorous all at the same time. The tricky aspect is what scares many from giving poker a try, while glamorous celebrities and poker pros being constantly paraded across the TV screen aren’t making it easier for a poker layman to overcome psychological barriers. You can use different approaches to reach out to these potential players, to give them the confidence to start. Do it and you’ll become successful sooner than you know it.

If you don’t have money to burn, then find and use an innovative approach to build your player base. That having been done, as a new cardroom owner you can also be confident in the fact that you can leave the worrying about payment issues, customer service and risk management (fraud) to specialised companies whose job it is to manage e-gaming properties. These are professionals who take care of the player, make sure he comes back and sticks around. They are therefore in the position to carefully manage every aspect of your cardroom operation – so you can concentrate on getting more players.

MISTAKEN RULE 4: LAND-BASED CASINOS ARE STILL OUT OF THE ONLINE GAME

The increased entry of land-based casinos into the online fray is another interesting and overdue development. They started to realise how beneficial online gaming can be. A great deal of interest from land-based casino operators is prompted by their unwillingness to continue to lose money and players to the big online cardrooms. Having their own fully managed, branded online cardroom up and running within 3-4 weeks, all without cutting into their already tightly balanced budgets, is something that makes a lot of sense to casinos and cardrooms these days. These multi-sphere operators have the unique advantage of using their position to keep player traffic circulating within the same family of gaming properties, online and land-based. One such player retention strategy is to make it more beneficial for the players to use their land-based casino account to deposit and withdraw their winnings.

There is a potential dilemma, however. Many casinos earn a big chunk of their revenue via event sponsorships provided by their online competitors. There is a concern that once the casinos go online with their own cardroom, these sponsorships may dry up - especially if they do it as a ‘skin’ of a well-known cardroom or a big network, who are often the major sponsors.

Will the profits generated online outpace the money earned from sponsorships? Well, that depends on how much effort is put into building and growing the online extension of the casino. If the current virtual operators can earn enough to sponsor multiple events in multiple venues, there is no reason why land-based casinos cannot earn enough online to pay for their own events. Also, as WSOP’s non-gaming sponsorship has shown, with so many players flocking to the land-based events, sponsorship does not have to depend on online operators alone. In the end, though, the hard-nosed attitude which has kept most land-based properties in business will remain the most prudent. Sooner or later all casinos will go online, which means that the current online gaming sponsors will eventually have no choice but to continue their sponsorships since they will always need land-based venues for their events.

MISTAKEN RULE 5: YOU CAN’T MAKE REAL MONEY WITH PLAY MONEY


Finally, there are some organisations that decide not to operate cash games or tournaments online due to their gaming licenses or jurisdictional restrictions. These can also become multi-sphere operators by benefiting from ‘Play Money’ versions of online cardrooms.

Aside from market positioning and building a database of customers for the upgrade to real money when legislative change happens, land-based operators of ‘Play Money’ cardrooms will keep players competing online for prizes which can be given out at the physical casino - thus bringing them back over and over again. Free offers are more effective in bringing players back to the casino when the players feel that they have earned them, and that’s just the feeling they get when they’re given the chance to exchange the points they ‘earned’ in the casino’s online cardroom for benefits with real cash value, such as free chips, buffet, hotel room and branded items at the landbased property. The possibilities here are endless and the effort is minimal.

The bottom line is that, with today’s possibility of speedy, ‘no-cost’ entry, there is no good reason to let online gaming profits flow into other operators’ pockets.

http://vahebaloulian.brandyourself.com/