Friday, July 18, 2014

How Caesars saved the World Series of Poker (Part 1 of 2)

[Author's note: I have received many emails, tweets and texts about my last post, which excoriated Caesars for its management of the World Series of Poker. One thing that I need to make crystal clear: I no longer work for PokerStars, and have no dog in this hunt. My reactions to Caesars' WSOP issues is partly personal (as a player) and partly professional (as a marketer). As I left PokerStars many years ago - in 2007 - none of my comments are biased by my position as a competitor. In fact, since I would have had no credibility, I would never have written any of this during my tenure at PokerStars.]

A few weeks ago, I posted a story entitled "Six ways Caesars screwed up the World Series of Poker," which has become the second most popular post on this blog (after "Armadillo Tim and the Threat of Death," which has now had almost 50,000 60,000 page views). I've gotten more emails about this story than any other. The story came mostly out of my frustration with Caesars' lack of understanding of their players. I have no problem with the blatant commercialism of the WSOP, as some have suggested; it's not a religion, it's a game. Commercialize it all you want, Caesars - just remember who brung you to the dance.

There are two sides to most stories, and there are two sides to this one, as well. This time around, I want to give Caesars (then Harrah's) credit for rescuing a storied franchise from what might have been obscurity.

The WSOP has been around since 1970, although arguably it really started in 1971 - the 1970 WSOP consisted of seven players, who played cash games and then voted Johnny Moss as the champion. It was the brainchild of Benny Binion, legendary gambler, entrepreneur and convicted murderer, who never lacked clever and creative ways to draw attention to Binion's Horseshoe. Prior to the WSOP, Binion's primary claims to fame were its display of $1 million in cash (a hundred $10,000 bills, at the time the largest private collection of the rare bills) and Benny's willingness to take a bet of almost any size.

[Historical note: before you email me to suggest that the famous heads-up match between Johnny Moss and Nick "The Greek" Dandalos was the third notable event at Binion's - most historical accounts agree that the match probably took place in 1949, two years prior to the opening of Binion's Horseshoe. It was most likely played at the Las Vegas Club, in which Benny Binion had a significant interest.]

The WSOP began as an event for the world's elite poker players. The $10,000 buy-in Main Event grew very gradually from its inception in 1971 through 1983, when Eric Drache, cardroom manager at Binion's and tournament director for the WSOP, came up with the ground-breaking concept of satellite tournaments, in which players could play for much smaller amounts, as low as $200, and win entries into the Main Event. This boosted WSOP Main Event entries in a big way - from 1983 to 2002, entries in this prestigious event grew from 108 to 631.

2003 saw a huge jump in registrations, owing almost entirely to online poker sites like PokerStars and PartyPoker contributing substantial numbers of entrants. When cards went in the air for the 2003 Main Event, 839 players had registered, nearly eight times the total number of players in 1983.

The 2003 World Series of Poker kicked off the poker boom in earnest. I won't retell that story here; if you've been under a rock for the last eleven years, you can Google "2003 WSOP" for more information. You can also find a number of my stories from that year in these prior posts:

Dancing with Moneymaker
How Olof Thorson broke my heart, and made history
2003 WSOP: The last lap to the final table
Poker's tipping point: the 2003 WSOP final table
How the Moneymaker Effect almost didn't happen

By January 2004, poker rooms all over the world were operating beyond capacity. Casinos in Las Vegas that had shuttered their (largely unprofitable) rooms years ago reopened. The World Poker Tour and the World Series of Poker TV broadcasts were returning astounding numbers. It was a unique time to be in the poker business...unless you were Binion's Horseshoe.

For years, Binion's had been in trouble with the IRS and the Nevada Gaming Commission for a wide variety of offenses, including non-payment of taxes, non-payment of pension and insurance benefits, allowing barred individuals on property (including Nick Behnen, the husband of Becky Binion Behnen) and failure to maintain regulatory minimum cash balances. So it was disturbing but not shocking when, on January 9, 2004, a joint task force composed of IRS agents, federal marshals and representatives of the NGC stormed Binion's and shut down the casino and hotel.

Everyone wondered if this was the end of the storied World Series of Poker, but we only had to wait two days to learn that the legendary tournament would, in fact, survive. On January 12, Harrah's Entertainment, Inc. (the predecessor of what is now known as Caesars Entertainment) announced that it had acquired Binion's, would take full responsibility for its debts, would reopen the casino and would conduct the 2004 WSOP. 

Uneasy weeks passed with Binion's remaining shuttered. Harrah's made reassuring statements, but it was unclear what the impact would be on the WSOP and the Binion's property. As Harrah's delved more deeply into the assets of the troubled property, they made a shocking discovery: not only did Binion's not own the land on which the Horseshoe resided, portions of it were owned by nearly 100 separate entities, some individuals and some corporations. These entities has all signed 100-year leases which were now called into question as a result of the raid and subsequent acquisition.

Harrah's never intended to maintain ownership of Binion's. Within days of the January 12 deal, rumors circulated that Harrah's intended to sell the casino to MTR Gaming Group, owners of the Speedway Casino in North Las Vegas as well as two out-of-state racetracks. On February 20, details of the mess with land leases emerged, as did more information about Harrah's plans - they had agreed to operate the casino for MTR for one year, with two one-year extensions, and would keep the WSOP downtown until 2005, the year of Las Vegas' Centennial. 

Some light peeked through the end of the tunnel on March 4, when the Nevada Gaming Control Board and the Nevada Gaming Commission, who had worked with unprecedented haste, approved the sale of Binion's to Harrah's and MTR. The land issues still hadn't been worked out, though, and Binion's remained closed. The land problem appeared to be getting worse, though, with rumors (later found to be true) circulating that a single landowner holdout was demanding a massive payout.

And just as suddenly as Binion's closure, the logjam broke. Details are hard to come by, but on March 28, just weeks before the 2004 WSOP, the sale closed, and three days later (yes, on April 1), Binion's reopened for business. The 2004 WSOP would, in fact, happen, and its growth from 2003 would stun the industry, and perhaps Harrah's most of all.

Next: Harrah's turns the WSOP into a franchise

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