You have just bought two cows at the price of four and now you have to force them to produce the milk of four cows. What will you do if one cow drops dead?
For the last week or so, Amaya Gaming through its top product PokerStars has been delivering blow after blow to the online poker community.
The first one was delivered a week ago when the poker room announced the implementation of a FOREX margin to the deposit and withdrawal operations. The new margin is applicable to all major currency pairs and already many regulars and Supernova Elite users have publicly criticized the move made by PS, including Hall of Famer and online recordman Mike ‘Meleab’ Brooks.
Yesterday, Head of PR Michael Josem brought another sad news to the online grinders: starting from November, there will be a significant rake increase in most games, from the cash tables to the Sit & Go’s, Spin & Go’s and knockout tournaments. Atop of it all, the popular Battle of the Planets promotion will go extinct.
Of course, the community saw this decision as an act of war against all the online poker regulars – it basically is. Some of them are even preaching to massively ditch the games and flee in search of other opportunities. This may be exactly what Amaya wants BUT this may NOT be what Amaya is currently looking for.
Can Online Poker Move Forward Without the Regs?
The amateurs and recreational players are rubbing their hands together in anticipation as they can possibly enjoy softer games on PS IF the regulars stop playing. The grinders on the other side are crying out loud that online poker will actually die without them. Who holds the truth?
In fact, the truth is somewhere in the middle. NO, the online poker environment won’t be in any danger of extinction if the VPP collectors stop playing. NO, PokerStars won’t go bankrupt if the regulars aren’t raking any more. Life will go on as it always has been. People will continue gambling and will continue to play poker with or without the grinders. As a result, PS will continue to rake and profit from the human being’s mental flaws. The problem is how much they will earn…
YES, the market will survive but that doesn’t mean PS will become the land of milk and honey; not by a long shot. If the regulars disappear, the market will shrink considerably. The recreational players will have to choose from a much smaller variety of games; the tables will be fewer and some games will eventually die because of the inexistent traffic. PS will earn less and less and this would mean no more promotions, bonuses for any of its customers. This can also mean less investments in the software, in researching new games and so on. And from a top product, there is a possibility for PS to become simply mediocre in terms of traffic, software, games, marketing, etc. Is this what Amaya wants? No, of course not.
Amaya Gaming first and foremost wants the $4.9 billion investment in acquiring Rational Group to pay off. The corporation is slowly realizing that they may have overvalued its investment and now they are trying to milk the PS cow as much as they can. The problem is that the cow may soon run out of milk.
It is like in the famous Cow Economics online meme. According to it, being an American Corporation means the following (this is a simplistic version of how things work in different economies using the cow analogy):
You have two cows. You force the two cows to produce the milk of four cows. You are surprised when one cow drops dead. You spin an announcement to the analysts stating you have down sized and are reducing expenses. Your stock goes up.
What Amaya Gaming – a Canadian company – has done is somewhere different. The corporation bought the two cows at the price of four thinking that it could have hit jackpot. Now they are learning that their initial estimations are way off – the market isn’t as big and as profitable as they have initially thought. Entering the US market turned out to be impossible (SO FAR although some opportunities have arisen there) and the grey markets are causing everybody a headache.
The investment is in danger so Amaya is currently trying to force the two cows to produce the milk of four. And adding a FX margin plus increasing the rake may be just the beginning. Unfortunately, this recipe can cause casualties and most of them are (and will be) the grinders and online poker professionals, the ones who ‘prepare’ the tables for the recreational players. They DO sustain the market to some degree and without them millions of dollars in rake are lost. If this cow dies, Amaya will continue to be in business BUT only with a single cow, one that cannot offer $4.9 billion. The corporation may still profit but it may never recover the money invested initially…
Let’s face it, the online poker bubble has been over for years and the market will never return to the good old days, with or without the US players. The profits made during that period (by the professionals and operators alike) are history; there is a new environment now with fewer players, savvier gamblers and small margins. This is the reality both the poker community and Amaya have to face as soon as possible before the new cold war goes too far.