Tuesday, May 6, 2014

Trouble in Paradise (Part 2)

[NOTE: Congratulations to Tim S. for busting me. If you don't already know, I award a $100 charitable contribution on behalf of the first reader who points out that it's been more than seven days since my last post.]

While I have the great benefit of hindsight, I still find it very hard to believe that either PartyPoker or PokerStars was able to make a dent in Paradise Poker's market share. In 2002, the year PokerStars started (well, technically it was late December 2001), Paradise was just too big to fail. They appeared, for all intents, to be invulnerable.

In those days, it was not unusual to find upwards of 1,500 players on Paradise Poker. We often gawked jealously - we were happy when we had 200 players. Somewhere, I have an email from Isai talking about 'someday, when we regularly have over 1,000 players like Paradise.' I believed we would get there, but I also believed that we would be part of a rising tide. Barring some earth-shaking, unforeseen event, I saw no chance that Paradise wouldn't continue to be on top.

Having said that, Paradise did very little to act like the market leader. The biggest and most obvious mistake they made: they thought, as I did, that they were invincible. As an example, they did almost nothing from 2002-2004 to update their software (which was frankly pretty decent, but was rapidly being eclipsed by PokerStars and others). 

The best example of this was their lack of multi-table tournaments. To this day, it's inconceivable to me that Paradise Poker allowed PokerStars, PartyPoker and Full Tilt Poker to overtake them by neglecting this obviously popular and lucrative element of online poker. While we were developing and testing software to handle massively large tournaments, Paradise Poker was apparently willing to cede this part of the market, and we were more than willing to take it on.

At the same time, Paradise was adding features that had us all shaking our heads. For example, just before we did a major upgrade in 2003 that allowed PokerStars to conduct tournaments with as many as 10,000 players, Paradise launched an upgrade that increased the selection of snacks, cigars and drinks that players could 'order' at the table. These appeared on little round tables next to each player, as you can see on this link from the Wayback Machine (scroll down a little).

To be clear, developing multi-table poker tournament software was far from trivial. But it also wasn't rocket science. In addition to PokerStars, UltimateBet and PartyPoker (all reasonably well-funded startups), there were dozens of other sites that were already in the market with well-attended MTTs, including America's Cardroom, TruePoker and PokerRoom (all of which were small operations with limited resources). 

Paradise Poker seemed completely oblivious to this, the single mistake that cost them their empire. They certainly had the financial resources - our best guess back then was that they were grossing as much as $100,000 a day. And had they launched competitive MTTs before the day of reckoning (the day Chris Moneymaker won the World Series of Poker), the online poker world could have been completely different.

Remember, too, that this didn't exactly sneak up on Paradise. For example, we launched the World Championship of Online Poker (WCOOP) in July of 2002, and attracted fields that stunned everyone, including us. We guaranteed $200,000 over eight events, including a $1,050 Main Event with a $100,000 guarantee that saw a field of 238 players and a first prize of over $65,000. (More on this event in a future post.) Even a casual observer had to realize that MTTs were the future of online poker. And by the time they finally launched MTTs in the fall of 2003, the train had left the station.

I have often been asked the question "What brought about the poker boom?" My answer has always been the same: online poker, poker on TV and Chris Moneymaker winning the 2003 WSOP. The question I've been asked far less often is "How did PokerStars and PartyPoker catch Paradise Poker?" My uncharitable answer to this question is, "Paradise Poker made the classic mistake of believing they were untouchable."

In January of 2003, Paradise Poker still maintained their stranglehold on the online poker market. Over the next eight months, three key events happened that caused an upheaval in the online poker market that saw Paradise plummet from first to fourth place.

The first of these took place on March 30, 2003 - the first episode of the World Poker Tour on the Travel Channel. Until 2002, poker on TV was an incredibly dull event. The only regularly broadcast event was the World Series of Poker, and until 2002 it was broadcast without hole card cameras. For the 2002 WSOP, ESPN employed very limited card cameras that were a huge burden on dealers. There was a single camera, mounted under the table to the left of the dealer, and a glass surface on which the dealer could place the cards. Not every hand was recorded in this way, only 'key' hands.

The World Poker Tour licensed some technology originally developed by Henry Orenstein, an inventor and poker player who went on to produce the Poker SuperStars Invitational Tournament and High Stakes Poker. (Henry is an interesting character with a pretty amazing history - he was a Holocaust survivor who was also the inventor of Transformer toys and held over 100 patents; he also won a WSOP bracelet in 1996.) Unlike Orenstein's original invention, the WPT used lipstick cameras - tiny cameras mounted at each player's seat that allowed 100% of the action at TV tables to be captured.

The WPT launched its first season with events at 9 casinos (the Bellagio had two events) and a special event for PartyPoker (on a cruise ship). The hosts of the WPT were (and still are) Mike Sexton and Vince van Patten; Sexton performed double duty as the online and live host for PartyPoker. PartyPoker initiated the second key event in Paradise's downfall - they took a substantial risk by becoming the first online poker site to advertise on television. So during the first WPT broadcast, viewers saw Mike Sexton doing WPT commentary during the show, and then saw PartyPoker ads featuring Sexton during commercial breaks.

(Interesting side note: PartyPoker's event in 2003, won by Kathy Liebert, was the only limit hold 'em event ever broadcast on the WPT.)

The effect was almost instantaneous. In the period from March to July, PartyPoker took off and left Paradise in the dust. PokerStars benefited from this early boom, as did UltimateBet, because we all offered massive MTTs that gave players a shot at big money for a very small investment. By the time the smoke cleared a few months later, PartyPoker was #1, UltimateBet was #2 and PokerStars was #3, although both UB and PokerStars were far behind PartyPoker. Paradise was #4 and sinking.


Then the real boom happened. Chris Moneymaker won the WSOP in May 2003, but the TV broadcast wasn't until August - back then, ESPN took their time in post-production, unlike today, when the WSOP Main Event broadcast starts just a few days after play is suspended for the November Nine. By that time, I had realized that PokerStars needed to be advertising on TV, as well (my biggest mistake at PokerStars was not doing this earlier). We crammed a four-commercial shoot into three days, producing perhaps the world's worst TV spots, and starting running them on both the World Poker Tour and the WSOP.

The combined effect of our TV ads, plus Moneymaker's win (and not incidentally, the massive exposure we got when Moneymaker eliminated Humberto Brenes and accidentally danced the PokerStars logo in front of the cameras), was immediate and huge. We were suddenly in a virtual tie for second place, swapping with UltimateBet on a regular basis. And this was the third nail in Paradise's coffin.

Around this time, Paradise finally woke up and decided that there must be something to the multi-table tournament craze. But by that time, less than six months after relinquishing their lead, Paradise was an also-ran. Every online poker site out there had MTTs. PokerStars and UB were focusing on improving the player experience, adding features and improving the software's stability and resilience. PartyPoker was plagued with software issues as a result of their unexpected and sudden success, but their sheer numbers were enough to make players willing to put up with frequent freezes and crashes. 

Paradise was forced to dedicate major resources to developing MTTs rather than improving their software, and had to do this in what was, for them, a shrinking market. Their fall from grace was nothing short of astounding, even for those of us who watched it happen in real time. 

Behemoths like Paradise don't typically go down easily, but in the blink of an eye, they went from 80% market share to an estimated 10% from March 2003 to September 2003. This set the stage for a series of epic battles among the new giants that had PartyPoker on top until the stunning passage events of the fall of 2006, which once again shook the top of the online poker tree.

2 comments:

  1. very good blog, and nice to hear about the past in poker.
    but I guess you are one day late with next blog

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    1. Hey Dan, I love your writing and your stories. Just a quick note... Kathy Liebert won the PartyPoker Million in 2002. And it was not broadcast by the WPT. And the WPT actually aired two limit hold em events. Howard Lederer won the first - the PartyPoker Million in '03 and Erick Lindgren won it in 2004.

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