I recently was honored with the privilege to speak on a panel (along with my colleague Robert DellaFave) at the C5 US Online Gaming Conference that took place in New York City on May 13 and 14.
With just the two of us on the panel, we decided to involve the audience from the outset and have an informal discussion about the state of online poker in the United States.
The questions posed were wide-ranging and touched on a number of different issues. Here are the five topics I found to be the most important.
Topic 1a: Good games trump good rewards
One of the topics that was continually revisited throughout the discussion was the ongoing existence and appeal of unregulated sites, and the main reason why is pretty simple: A lot of these offshore sites have better games.
A points I made sure to hammer home was that despite their constant objections to reduced rewards or higher rake, at the end of the day seasoned poker players will always choose the most profitable game.
What a lot of these players don’t understand is reducing the amount they receive in comps is more than made up for when the games become juicier.
As an example of the lengths players will go to find a good game, when I was a full time player (before and during the poker boom) I would head to Foxwoods after midnight.
While this was extremely inconvenient, it was the time of the day when the games were the juiciest. There were other games at more convenient times, but the late-night shift offered the chance at the most profit.
Furthermore, as a player, it didn’t matter what the rake was. I would gladly pay $5 in rake instead of $4 if the game was that much better. Or if I received $1 per hour or $2 per hour in rewards, I wanted to play in the most profitable game, because that is where a poker player’s money is made.
Despite the fact they never offered rakeback, PokerStars was always a well-trafficked site.
If you’re making your money away from the tables (through rewards), poker may not be the right profession for you…because eventually this high-reward model will go the way of poker sponsorships.
Basically, if I can beat a $1/$2 No limit Holdem game at PokerSiteX.com for $5 an hour and receive an additional $5 an hour in rewards, or play at PokerSiteY.com and beat the game for $12 an hour while receiving no rewards, I will choose PokerSiteY.com every time.
There are several reasons for this:
- The higher my win rate is the lower my variance will be.
- These games are simply more fun to play.
- The easier the game is to beat, the less work I will have to put in away from the tables in order to stay ahead of the curve, which means I can devote more time to playing instead of studying.
Topic 1b: There is a delta between safe and good games
That being said, I wouldn’t drive to a shady underground casino to play in a slightly better game, and I would sacrifice some profitability to play on a regulated online poker site where I know my money is 100% safe and protected.
This delta is different for everyone, but regulated sites don’t necessarily have to possess the liquidity of an unregulated operator to compete with them.
But, they do have to make potential customers aware that even though they have fewer games, players are receiving a major bonus – a completely safe environment (more on this a little later).
Topic 1c: Extending the shelf life of new players is important
In order for games to be juicy, an online poker site must be stocked with casual and new players.
As regulated operators have found in New Jersey, attrition rates at the online poker tables are significant and player acquisitions costs quickly add up.
This means operators need to be innovative.
At C5, I made the point that the shelf life of new players needs to be extended, and volunteered the idea of trimming back on the upper tiers of rakeback reward programs (or perhaps increasing the rake cap), and replacing them with lossback programs for entry level players.
Other ideas tossed about were eliminating third-party software tools that seasoned players routinely use to exploit bad players.
Topic 2: Online poker has been available uninterrupted for 17 years
A second point I really wanted to crystallize was the false narrative of online poker returning to the United States.
Fact: Online poker never left the U.S.
The sites may have changed but the availability hasn’t.
From my home in Massachusetts, I’m just as capable of opening an account at an unregulated online poker site today as I was in 2011, 2009, 2005, 2001, or 1998.
What we have is the emergence of regulated online poker in the U.S.
Topic 3: The flaw in the cannibalization argument
The idea that online poker cannibalizes live poker has been pretty much debunked, and several speakers on other panels reiterated this point. But there is a second part to the cannibalization argument that receives less attention that I was able to mention.
This is the fact that brick and mortar casinos are being cannibalized by the lack of regulation.
Cannibalization occurs when online poker is prohibited, as it drives potential customers – who currently have no intention of visiting a land-based casino – to offshore sites, which are the competitors of such properties.
If online poker is legalized and the brick and mortar gaming industry is permitted to operate these sites instead, these online poker players suddenly become the casino’s customer.
Topic 4: Differentiation is still needed
Another point I made was the similarity between regulated and unregulated online poker sites, and the need for better differentiation between the two. One example of this, as noted above, the fact that at regulated sites player funds are 100% segregated by law.
Part of the problem is the unregulated industry’s stronger affiliate presence (which helps them when it comes to search engine results) and use of terms like 100% legal while touting their license from some fly-by-night regulatory body in a banana republic.
A larger part of the problem is that it’s difficult for an uninformed player to differentiate between a regulated and an unregulated site in a side-by-side comparison.
Topic 5: Social poker is to real money poker as…
Towards the end of the panel, Thomas Winter, the Vice President of Online Gambling of Golden Nugget, asked an interesting question about the role of social poker in the space that deserved far more time than it received.
Unfortunately, when Winter asked his question we were basically out of time and I was only able to offer up the following condensed thought on the matter, “Social and real money poker players are as different as online and live gamblers.”
I wish I had thought to add one more sentence, “There is some crossover, and social players can be converted to real-money players, but casinos would be better served by using their social sites in other ways.”