Poker Perambulation

I did a quick article on the disruption going on in online poker””which is part and parcel of the gambling industry. An addendum in one of my blogs was about the new dealerless tables. It has become an era of disruptive change.

Just after the turn of the century, Henry Ford initiated disruptive change. Suddenly, a twenty mile trip to visit family in another town could be a nice day trip instead of a difficult journey with horse and wagon. Very nice, if you aren’t the local wheelwright, buggy whip maker, harness maker, or  wagon builder. These were often small business that could only compete in a small market and they were already feeling the pinch from the disruptive Sears mail order sales””the Walmart of that era.

By the 1950, the unions were riding the back of union busting Henry Ford. The demand for automobiles gave them clout in the steel and automobile area. They were able to force great contracts down the throats of then highly profitable industries. As the market changed, profits dwindled and unions lost the clout. This lead us to the bankruptcy arena for some and looks to soon do so for others. And union workers lost some of the benefits they’d fought for. Disruptive changes often leads to unknown future changes that are equally disruptive.

Steve Wynn kicked off disruptive change in Los Vegas and it is still playing out and may for the hundred years of disruption that the auto produced. He was financed by the Milken junk bonds and that brought Wall Street and its financing into the industry. Vegas went on a huge growth kick and all of a sudden the town had a new group of citizens””the MBAs. They set up their production lines just like Henry Ford did at the turn of the last century. The idea was to maximize profits through expansion, advertising, customer experience in way that brought the vacationing gamblers to the scene. This is all still playing out. A comparable timeline to the automobile might be that ability to visit the town 20 miles away with ease.

The MBAs love profit center accounting. The slots are one. Blackjack, keno, poker and so on all have their individual cost and profits accumulated as a seperate part of the whole. Slots are profitable so you put in more slots. And along comes the WPT craze and the lousy return on the poker profit center forces the MBA to rip out some slots and build or enlarge the poker area. They didn’t do it for the rake; a Blackjack table playing black chips can make a profit off a couple of bad player in minutes that it takes a poker table an hour to generate. Poker is there to attact its gamblers to other areas. If that didn’t happen it wouldn’t be there””regardless of the WPT. Or they might find a spot for it in the basement.

The attractive part of the poker craze happened online. If the casinos didn’t recognize that potential, Party’s move to an IPO beat them over the head with the money that is out there. These MBAs want that profit center and they will play as dirty as it takes to get it.

Can you guess what disruptive change this now leads us to?

Yup, we’ve arrived at today and the ‘online gambling bill’ –  slash — The Unlawful Internet Gambling Enforcement Act of 2005 ”” slash — UIGEA — slash — the Bill Frist Presidential Campaign–slash ”” the MBAs move to control online gambling. Lot of all of the above in this answer to my question.

The online early implementor made a ton of money off a relatively modest investment. A week ago, those that still owned the stock saw that money more than halved on the London exchange. Some of the smart ones got out early. PokerRoom saw its original owners leave and it changed hands before the bloodbath. Others might have found a sucker for their private interest. The MBA are salivating over the damaged assets laying out there. Aquisitions are now a whole lot easier. A Harrah [NYSE: HET] can buy instead of build an online franchise at discount prices.

In the private area our knowledge grows murky. It is certain that any number of these entities are highly leveraged. Bank loans seek to be the primary paper that is satisfied first in a bankruptcy. These loans also have requirements that when dramatic change occurs can place the borrower in default. If that happens and the loan amount exceeds the asset value they own the operation. This played out a few years ago for many midwest farmers. And, the bank has its MBA who know there is a profit to be made when they see and know what is appealing to big cash cows like our friends at Harrah’s. This is not small potatoes.

This is all still playing out and will keep doing so until the congress acts again–as it must. Who will be the winners and losers? Nobody can say for sure. The WTO might torpedo those MBA’s power play. Party could come back stronger than ever and make their entry into the market more difficult than before. The old Stardust is turning into Echelon Place or is it Project City Center (You can’t tell the players without a score card and don’t get me started on corporate naming stupidity.) and PokerStars could someday turn into Echelon Online. All we poker players can do is stay tuned; we will just have to wait and see.

History is loaded with disruptive change. The steam engine; electricity, telephone ”” a near endless list of things that disrupted the marketplace while enhancing our lives along the way all-the-while crushing others. You don’t make an omlet without cracking eggs. And there is a lot of egg cracking going on around our poker tables.

Meanwhile, do you need any buggy whips? I am a bit overstocked.

ADDENDUM:

Let’s add some fun to this dismal poker scene!

I’ve previously given brief mentions of the Life’s A Bluff gang. It is a comic strip about poker and the unusual characters that populate the tables. The thing about humor is that it is often an ultimate truth. And they often nail it with those obvious situations that go over our heads in their obviousness. (I have got to get a thesaurus and the previous sentence makes that obvious/clear.) Anyway, when his runner-runner hits and you are in despair, that bookmark will bring you back to the reality and the joy of poker. It is better and cheaper than a half-hour on the shrink’s couch. But, watch out; it might actually be a mirror.

This entry was posted on Saturday, October 21st, 2006 at 5:00 am and is filed under Journal, Poker Other, poker legislation. Responses are currently closed, but you can trackback from your own site.