Monday, October 28, 2013

Why the World Poker Tour Failed (Part 3 of 3)

In early September of 2003, I got the call I had awaited for over a year - Steve Lipscomb, CEO and founder of the World Poker Tour opening the door to PokerStars possibly joining the WPT.

The call came completely out of the blue. I had made my monthly call to Steve a few days before, and had no reason to believe that it had any more chance of success then the 14 calls that had preceded it. I picked up the phone and heard Steve's always-ebullient voice exclaim "Dan Goldman!", as though he had just invented the name.

"Hi, Steve," I responded, puzzled and at a rare loss for words.

"I have Lyle Berman on the line with us," Steve said. I had met Berman once at a poker tournament in LA. I knew him mostly as the CEO of Lakes Entertainment, operator of several casinos in the Midwest, and as a world-class poker player (he has three World Series of Poker bracelets in three entirely different events - Limit Omaha, No Limit Hold 'em and No Limit Deuce-to-Seven Draw). Berman was the money behind the WPT, having been an original investor and ~80% stakeholder.

During our last call, I had taken a slightly different approach with Steve at the suggestion of my boss, Isai Scheinberg. I asked one key question: 

"If money were no object, how much would it take to get PokerStars on the WPT?" 

Steve said, "It's not that simple, and it's not just price." 

I responded, "Well, if I offered you $100 million, I'm pretty sure you'd take it." 

Steve laughed and said, "You're probably right."

Without missing a beat, I said, "OK, so we know what kind of girl you are. Now we're just negotiating price." This actually made Steve hysterical. "I knew where you were going, but I just had to let you finish," he said. The call ended soon after, but I had made an impression.

Back to the surprising call. "Let me help Steve cut to the chase here," Berman said. "Steve tells me that you've suggested you're willing to pay a premium to join the WPT."

"We're certainly willing to consider anything," I said cautiously. "You guys are having an impact."

Steve chimed in. "You know we really like PokerStars," he said. I didn't, but said nothing. "Everyone says you have the best software in the business, and you definitely now have a recognizable name associated with you [Chris Moneymaker]." I still said nothing.

After a somewhat uncomfortable silence, in which I imagine I was supposed to agree with him, Berman said, "We've had some discussions with the partners who we thought would object to another online partner, and we can get around it. So, we're willing to offer you a spot on the tour for 2004. The price is $XXX." 

I'm not sure if I'm still bound by confidentiality on this issue, but suffice to say that $XXX was substantially more than an order of magnitude greater than any other partner on the tour was paying. It was a staggering amount of money for what was essentially still a very small company. I had no authority to commit to that amount (it was, in fact, almost exactly equal to my marketing budget for the current year).

"You know we want to be on the tour," I said. "I need to take this back to management at PokerStars. But just so you know - I think it's the right thing to do. Give me a few days to work on it."

We exchanged the usual niceties and hung up. I sat looking at the phone, trying to figure out how to tell Isai that we'd made a bigger-than-pot-sized bet and been called. As it turned out, I was over-dramatizing the situation - PokerStars was willing to pay the WPT's extraordinary number. And this is when I began to see the seeds of the WPT's undoing, just as they were entering their most successful stage.

Before I go into any further detail, this is a good time for a few disclaimers. First, while my memory for detail about these events is pretty good, it's not flawless. Second, much of what follows is my personal opinion. I've been in marketing for 30 years, so my opinion has some heft, but it's still opinion. 

Last, and perhaps most important, I should clarify the definition of "failure." Yes, the WPT is still on the air, so I suppose by some definitions you could say that it's a success. I consider the WPT a failure because, 10 years after its first broadcast, the WPT now languishes on Fox Sports 1 (the successor to the Speed Network), sandwiched in among Pac 10 football, a few UFC fights and the NASCAR Sprint Series. Poker is played by an estimated 55-75 million Americans (according to American Gaming Association estimates), meaning that it has the biggest potential audience of actual participants of any sporting event or game. And despite these numbers, the WPT has never achieved greater than a 1.0 Nielsen rating - the current season averages about a 0.6, which translates to about 670,000 viewers per week.

This is incomprehensible to me. Here Comes Honey Boo-Boo gets 3.5 million viewers. Duck Dynasty routinely exceeds 9 million viewers. And a weekly broadcast of America's most popular game can't scratch a million viewers together? What happened?

There were a lot of factors that contributed to the WPT's downfall. I'm not doing a research paper here; I'm going to focus on the five that I consider the most egregious.

The WPT made enemies of its players
From the day the WPT shot its first episode, it treated its players with bare tolerance. The players on WPT episodes weren't invited to play on the broadcast - they paid cash out of their own pockets to play WPT-affiliated events. In many cases, the buy-ins for these events were $5,000 or $10,000. The WPT contributed nothing to the prize pools of these events. Despite this, the WPT dictated terms about WPT-affiliated events that were nearly unbelievable to players.

Example 1: Structures and payouts. The WPT's contracts with its venues allowed it substantial influence over not just the tournament structures (blinds, antes and length of rounds) but over payouts. From the beginning, the WPT pressured its partners to adjust payouts to pay at least $1 million to first place. This resulted in highly lopsided payouts in some events, although this problem corrected itself as the Tour events grew. 

Perhaps more egregious: the WPT had the right, which it exercised at almost every event, to change the tournament structure at the final table. This was to avoid having a 6-player final table take 12 hours, which could easily have happened. But this fundamentally changed the game, something players recognized but didn't do anything about until much later in the WPT game.

Example 2: Final table deals. The WPT explicitly forbade final table money deals. Think about this for a moment - players are putting up their own money, are sometimes subjected to playing for payouts that don't reflect normal tournament payouts, and yet are not allowed to do something that has always been a part of tournament poker - negotiate at the final table to flatten payouts and minimize variance.

Example 3: No logos. The WPT barred players wearing logos of any kind for many years. In interviews on this subject, Steve Lipscomb put the blame for this on the WPT's contract with the Travel Channel. Without attempting to pass judgment on the veracity of this claim (remember that PartyPoker and UltimateBet had actual events on the WPT, with their logos on the felt), if this were the case, it was incumbent upon the WPT to negotiate a deal with a network that understood poker.

One additional note here: as poker really began to boom in 2003 and 2004, more and more players received sponsorship money from online poker sites, live poker rooms and even mainstream product lines. The ultimate benefit to these companies is having their name and logo associated with winning players. There is no question that the WPT's rules had a dampening effect on the very boom they were trying to promote.

Example 4: Attempting to own player marketing rights. The WPT required all players in their events to sign a broadcast waiver, which was intended to convey to the WPT the necessary rights they needed to put together and broadcast their shows without further compensation to players. Very few players objected to this in principle, and these waivers were required in World Series of Poker events, as well. But in 2004, the WPT added something to their waiver that caused a near-revolt in the poker community. Here's an excerpt:
[Player] grants a perpetual release for the exploitation thereof and of other audio-visual works (including, without limitation, "behind the scenes" productions and public service announcements) and any and all derivative, allied, subsidiary and/or ancillary uses related thereto (including, without limitation, merchandising, commercial tie-ins, publications, home entertainment, video games, commodities, etc.)
Translation: if you play in a WPT event, you grant them the right to use your name and image, in perpetuity, without compensation, for any purpose they choose. Remember that this was in the midst of the poker boom, when you could visit Walgreen's and find no less than five different branded poker chip sets, often on point-of-purchase displays at the register. The WPT, WSOP and many others were actively promoting their brands in video games. And here was the WPT, declaring that they had the right to player images, depriving the players of their ability to market themselves. 

As a counterpoint - I don't usually hold up Harrah's (now Caesar's) as a model of corporate responsibility, but compare the above language to the language that the WSOP used that same year:
In consideration of my being permitted to participate in said promotion, I do hereby accept and irrevocably authorize [the host casino] and its successors and assigns (including but not limited to ESPN) to print, publish, televise or otherwise utilize my photograph or any likeness of me for promotional purposes without compensation.
In some cases, the WPT waiver actually prevented (or could have prevented) players from playing in WPT events because they would have been in violation of other contracts. Chris Moneymaker is a perfect example: his contract with PokerStars explicitly prohibited him from relinquishing marketing rights to any other company in this way. In his case, and a few others, the WPT quietly agreed to remove the marketing language. 

The situation became so bad that I was faced with a player revolt at the PokerStars Caribbean Adventure event at the Atlantis Resort & Casino in January of 2006. Greg Raymer had just signed a deal allowing his image to be used in a videogame, and the WPT agreement was incompatible with it. The WPT refused to budge. Greg got other players to rally around him, and several did, in fact, boycott our event that year, including Greg.

To his credit, Steve Lipscomb did attempt to take the issue head-on in an open letter to the poker community in December 2005. Unfortunately, the letter only served to confirm players' worst fears - that they were indeed giving up marketing rights to the WPT. The full text of the letter is here. [Note: In this letter, Steve refers to an ad run by an affiliate of the WPT promoting the WPT's new online poker site. He claims that he removed it "because the players asked us to," but the reality is that I threatened legal action if it wasn't removed - Chris Moneymaker was one of the players.]

The WPT entered the market underfunded
The WPT raised $32 million in its 2004 IPO. This began what was, in my opinion, the company's most egregious mistake.

Most people watching the WPT back then speculated that they did the Travel Channel deal because they couldn't take the company public without it. The original deal was of five years' duration, and yielded negligible revenue for the WPT. But by mid-2005, the WPT's stock had risen from $8 to $18 despite continuing losses. 

Their market couldn't possibly have been hotter. What they needed to do was issue additional stock and use it to buy their way out of the Travel Channel contract (or buy it out with stock). The WPT would have done far better in this key period on one of the Big Four networks, even if it meant doing a time buy (paying the network to broadcast the show, rather than vice-versa).

The WPT saw something shiny
The WPT took their eye off the ball at several key points in the crucial years of 2004 and 2005. Perhaps the worst of these was their ill-fated entry into the online poker market. The company realized that there was substantial risk in pursuing this market in the US, so they launched a WPT-branded site in Europe, as well as a subscription-based service in the US. This put the WPT in direct competition with its online partners, and angered its land-based partners.

They also attempted to launch a poker tour specifically for professional poker players. Called the Professional Poker Tour (PPT), this new event had potential, but it was a money drain when the company couldn't afford it - they conducted and filmed five PPT events at a total cost of almost $5 million (including prize pools) without a network commitment to broadcast them. The PPT events were filmed in 2004 (I played in one of them - the Bay 101 event), but didn't show up on TV until almost two years later. By the time they were broadcast, they were dated and garnered very little interest.

The WPT erroneously believed that the WSOP was their competition
In 2004, poker was booming in ways that are almost impossible to describe. Poker books started to crack the top 100 on Amazon. Bookstores (remember those?) like Borders and Barnes & Noble had free-standing displays dedicated solely to poker paraphernalia like chip sets and cards, as well as books. Poker players were recognized on the street, elevated to the level of rock and movie stars.

Back then, there were two major forces in poker on TV: the World Poker Tour and the World Series of Poker. There were many minor players, as well - Celebrity Poker Showdown (truly awful poker, narrated in horror by pros), the Heartland Poker Tour, Poker Royale and about a dozen more.

The WSOP, to their credit, quickly realized that they were swept up in a national frenzy. Lon McEachern and Norman Chad, hosts of the WSOP broadcasts, freely referred to the WPT, even pointing out WPT champions at televised WSOP tables.

The WPT did exactly the opposite. When Chris Moneymaker appeared at the final table of the WPT Bay 101 Shooting Stars event, ultimately finishing second to Phil Gordon, the caption below his name read "Major Poker Championship Winner."

The WPT and the WSOP were far from competitors, especially during the key boom years of 2004-2006. No one had to choose between them - the shows appeared on different nights. And they were fundamentally different shows - the WSOP was a sports broadcast with cards, the WPT was a game show with cards. Had either the WPT or Harrah's had the guts to try to work together, even in the most general and benign of ways, the result could have been an even greater poker frenzy. Imagine an event pitting the last six players in the WSOP against the final table of the WPT Championship as the simplest of examples.

The WPT didn't focus on corporate sponsorships
One of the greatest irritants to players was the fact that they put up their own money but had to submit to the often-arcane WPT rules (as described above). Perhaps the smartest play the WPT could have made in its early days would have been to bring on corporate sponsors who were responsible for putting up prize pools. 

They started down this path with the Professional Poker Tour, but missed the mark by creating a speculative event rather than focusing on the key sponsors that could have put up big money. We discussed this with Steve Lipscomb on more than one occasion, but at the time (well prior to the UIGEA, which may have been the final straw on the overburdened WPT's back) the WPT believed in its model and was unwilling to relinquish the degree of control required for a corporate-sponsored event. It would have taken considerably less than the rumored $5 million a year that Jack Link's pays Caesar's for WSOP sponsorship, and could easily have started a stampede of corporate-sponsored televised poker events.

As a reminder, everything that I have said in this series is personal opinion and/or speculation on my part. I probably have given them less credit than they deserve for their role in the poker boom, and have likely been critical in hindsight in a way I couldn't have been in real time. But I can't help thinking that a huge opportunity was squandered because of a handful of mistakes that seem obvious in retrospect. And although the original principals (particularly Steve Lipscomb) are no longer involved, I still wish them success. It can only be good for the game I love.


  1. Excellent observation. Always liked you Mr. Goldman


  2. I stopped watching in 2005 when Shana Hiatt was forced out. Put that on the list of mistakes.

    Great article. Thanks for taking the time to write it.

  3. I am surprised there is no commentary on the actual product. Predictable editing, dumbed-down analysis, and terrible color commentary. Vince Van Patten - Juiced in through some kind of Hollywood Nepotism? Why was he ever on the show? I don't know a single person in the world that refers to pocket kings as "Kokomos".

  4. I didn't comment on the "actual product" because I in fact think the "actual product" was exactly what the market was looking for in 2003. You're thinking about this as a poker player looking for a poker show; that was never what the WPT was intended to be. It was intended to be part reality show and part game show. And in that context, the editing and analysis make sense. I also think that Vince was a reasonable foil for Mike Sexton, who is one of the most knowledgeable people in poker. He is to Mike as Norman Chad is to Lon McEachern, minus some shrillness.

  5. I feel like some of these are actually symptoms rather than causes. For example, anyone dumb or petty enough decide that Chris Moneymaker in 2004 should be captioned as "Major Event Winner" or some similar crap probably isn't going to have anything resembling long-term vision.