The Black Friday Of Online Poker

There are very few events which have happened in my life that I can remember exactly where I was when it happened. Things like when the Space Shuttle Challenger blew up, “9/11″, my wedding, the day the UIGEA passed, and now Black Friday.

Even though I’ve been out of the online poker affiliate business since January 1, 2011, it’s not that unusual for me to be talking with people in the industry from time to time. After 7 years in the business I made a lot of contacts and even consider several people in the business good friends. In fact, I’m stopping to see several of them on our RV trip to Alaska.

So, when I got an IM from a friend of mine who works at an online poker site, it didn’t strike me as all that unusual at first. Here is how the conversation basically went:

Online Poker Friend: Are you in the USA right now?

Me: Yes, we’re in the middle of our RV trip, heading up to Alaska

Online Poker Friend: Oh, that’s right. Can you do me a favor?

Me: Sure

Online Poker Friend: Can you goto www.ourpokersite.com?

Me: Sure

Me: Uh, that’s not good.

Online Poker Friend: I think we may have been hacked.

Needless to say, they weren’t hacked and we were right in the middle of witnessing history. A few minutes later the same person asked me to check the other online poker rooms, which were returning the same DOJ message. I was actually on the phone talking to someone else about one of my new projects. To say the least, I became quite distracted.

When I realized what was going on I ran the gambit of emotions. Fear, anger, frustration, and finally acceptance. The reality is that there is nothing I can do about this and we just need to keep moving forward. It’s sad to see the ultimate effect this will have on the industry, but more on that later.

General feelings about the UIGEA and American politics

This whole situation is just another reason why I’m less and less proud to be an American. In my opinion, lawmakers are focused on all the wrong things in this county and the separation of church and state is becoming, well less and less separated. It’s also just becoming a giant hypocrisy. What do I mean by that? Well, the champion of the UIGEA was quoted as saying something along the lines of “Gambling is the root of all evil and tears at the fabric of our society.” The funny thing is, I can respect someone who actually believes that. I don’t agree with it, but I can respect their opinion. However, when you say that, then carve out lotteries and horse racing from the bill because those forms of gambling bring tax revenues to your state, that is the very definition of a hypocrite.

This happens over and over again in American politics. A politician will adamantly speak out about prostitution and then get caught with a hooker. They will speak out against illegal immigration and then get caught with an illegal alien cleaning their house. They will speak out against weed and then get caught smoking it. They will speak out against gays, but have a gay lover themselves. I could go on and on, but you get the idea.

I also think people, in general, have very short term memories. They are quick to blame the DOJ for this situation, when in fact they were just doing their job. You can argue that they have better things to work on, but it’s their job to enforce these laws nonetheless. The real root of the problem, in my opinion, is the lawmakers and the general policy of the USA which allowed the UIGEA to be enacted to begin with. You have a bill that could not pass on its own merits, so it had to be hidden / tacked on to / swindled into another bill.

I personally think that there shouldn’t be any additional items tacked onto any bill. If you are voting on port security, then that should be the only topic at hand. If you are voting on online gaming, that should be the only topic at hand. It would stop this escalating practice of earmarks in the USA which is contributing to our ever rising deficit. I’m not saying this because I have a dog in the fight with the UIGEA. I’ve been reading a lot about how our government works over the past several years; I believe this would be best for our country for so many reasons. I also believe in a balanced budget amendment, but that’s another story all together.

Finally, I just want to say way to go USA for making something that is legal in almost every other industrialized country in the world illegal. I also want to give you props for totally ignoring the WTO’s ruling against you. I love how the USA relies on the WTO for all kinds of stuff other countries do against us, but when the WTO rules against us we tell them to go pound sand. Talk about arrogance!

We never learn

It seems like we never learn our lesson as a country either. In the early 1900’s alcohol was banned in this country because of religious reasons. We all know how well that worked out. It didn’t stop anyone from drinking who still wanted to drink. You simply can’t stop people from doing what they want to do. It seems silly to try and stop activities that have been going on since the dawn of time. Gambling, prostitution, drugs, among others simply aren’t going to stop. Regardless if you agree with any of these activities or not, it seems like a much better choice to simply make it legal and then regulate / tax it.

Here’s breaking news: The UIGEA didn’t stop online gaming. The DOJ didn’t stop online gaming. No matter what the government does it will not stop online gaming.

The future of online poker

I think the future of online poker in the United States at this point is pretty glum. For awhile I thought the chances of legislation happening where looking pretty good. All the dominions were lining up perfectly. a) It was an all Democratic system – House, Senate, and White House. b) The US Treasury was looking for any possible way to get money because of the financial crisis. c) There were high powered politicians including Harry Reid and Barney Frank who were advocating for online poker.

However, I think online gaming is going to be as dangerous to talk about for politicians at this point as Social Security or Medicare. Online poker went from something easy to talk about to something politicians are going to want to distance themselves from as much as possible. Harry Reid is already having to explain why he accepted a quarter million dollars from online poker organizations that are now under federal indictment.

Without Poker Stars and Full Tilt Poker in the United States the playing field is now leveled in the European market. Stars and Tilt will no longer have the US pool of players on their site and they won’t have the advertising budget they once did. While I think Stars and Tilt are both liquid, make no mistake about it – this was a major blow to them. They had millions of dollars seized and legal bills just became their number one expense. I think you will see a gradual slide towards Party Poker becoming the number one site in the world again. I also think Party Poker is now best positioned to enter the USA market once that does open up (who knows when).

In regards to the USA market, that’s totally up in the air. After Black Friday I think payment processing is going to become much more difficult for the remaining rooms such as Bodog, Cake, and Carbon. I know enough about the inter-workings of these poker rooms to know that if processing costs continue to climb it just doesn’t make sense to even take the players from the USA any longer. For online casinos it’s different, but remember that poker rooms can only take up to $3.00 per pot. Don’t forget that the vast majority of hands on an online poker room don’t even come close to taking a $3.00 rake.

The consequences of Black Friday

The consequences of Black Friday mean that tens of thousands of people are going to be out of a job, maybe even hundreds of thousands. Here are a few examples of this:

  • The obvious is the 1000’s of employees Poker Stars, Full Tilt Poker, Absolute Poker, and Ultimate Bet are going to lay off.
  • There are the 1000’s of online poker players who made their living off online poker; I’m good friends with several of them. While many of them are discussing moving to Canada (or another free country), the reality is that many of them are going to have to change their lives completely.
  • There are 100’s of companies that the online poker rooms spent money with for advertising. The biggest example is the television programming / contracts. These include the World Series of Poker on ESPN, Poker After Dark, The PokerStars Big Game, High Stakes Poker, etc. All these shows are going to disappear, cutting 100’s of really high paying production jobs.
  • I expect the World Series of Poker to be 1/4 – 1/3 the size of last year. This is 100’s of jobs that will disappear including dealers, food vendors, and all the other support staff in Las Vegas surrounding the events including the Las Vegas hotels.
  • News organizations such as Card Player and Bluff Magazine will almost certainly be laying off the majority of their staff, if not closing shop completely.
  • Online poker affiliate sites will take a crushing blow. Speaking just for our organization, we’ve had to lay off almost 50 people from the height of online poker to post Black Friday.
  • The trickle down effect from all these lost jobs will mean less money for these individuals to spend, resulting in more lost jobs. It will also results in millions and millions in less tax revenues to the IRS.

Final Word

This has already become the longest post I’ve written on this blog. While I could go on about this for hours, I find the need to wrap this up.

I encourage everyone who was directly effected by this to keep your head up. The only thing constant in this world is change; the people who react to and / or accept change the quickest are the most successful in life. If you are one of the many employees that were laid off either directly or indirectly by this, or you are an online poker player yourself, you need to accept the new reality. People close to me know what I’m about to say next. In these situations I always recommend reading Who Moved My Cheese?. It’s a short, silly book that will open your eyes to how much humans tend to fight change.

15 Comments

  1. MIke,

    I have just finished reading you latest blog article around “Black Friday” and couldnt agree more with your numerous points.

    As you mentioned, I would like to class myself as one of your friends that was made due to Online gambling and without it, we would have never of met on several occasions accross the globe.

    the effects this is going to have on tens of thousands of people, is eye opening and in all honesty, i really dont think the US governement cares.

    Not only is there going to be thousands of jobs lost, there is also tens of thousands of players that are now thinking about a new carreer move as we both know not everyone will be moving to another country.

    Your blogs are something i have been and will continue to recommend to all my collegues and friends and wish you a good road trip to alaska!

    regards,

    Colin

    Reply
    • Colin,

      Agreed, it’s been a pleasure knowing you. I think I’m going to have to write a part 2 on this post, because I wanted to write a lot about what online poker has done for my life. One of the biggest positives is the eyeopening experience of traveling to, and living in other countries. In my travels I’ve met 1000’s of people from all walks of life and it’s been an amazing experience.

      Mike

      Reply
  2. nice ending

    Reply
    • Thanks Sergio. I hope you’re doing ok down there in Costa Rica.

      Reply
  3. Mike,

    Call it hope, but I think that for more than one poker room (established already or to be established) this is the bigger opportunity ever.

    My experience have thought me exactly what you pointed out about “we never learn”. People won’t stop playing poker on-line, even if the poker room charges then 10% for processing fees in every deposit.

    Please don’t take me wrong, I have nothing against the change, I even told you on your last visit to Costa Rica that I want out the industry. But, for 11 years I’ve witnessed how your government closes big gambling companies only to feed the small ones. And for me this is just the cycle starting all over again.

    Joe

    PS: I love that book too. I recommend it very often ;-)

    Reply
    • Joe, glad you like the book, but we’ll have to agree to disagree about the poker. I think large profitable poker companies are done in the USA until a new law passes.

      Reply
  4. Mike,

    I have used Who Moved My Cheese with many of my clients over the years. It’s a great way to explore what most people are petrified of – change. Great post!

    Jeff

    Reply
    • Yeah, it’s one of my favorite books to use as a motivational tool.

      Reply
  5. Absolutely true from beginning to end.. Thanks for your words Mike!

    Reply
  6. Great post! My only hope is that this moves us one step closer to real regulation. I have a lot of friends being devastated by this and its just a shame. Looking forward to part 2

    Drive safe

    Reply
  7. I’ve never played poker before, How do I get started Mike.

    Reply
  8. Hi Michael,

    I love your excellent articles and applaud your success!

    However, there’s omething strange you said, “separation of church and state”.

    How about separation of blacks and state or separation f women and state or separation of physically challenged and state? How can you or anyone else apparently condone separating any group of people from their states rights??

    Everyone has the right to petition our government because of whatever grievance they may have and for whatever reason. Period. (First Amendment) If anything, the UIGEA, however unfortunate it may be, is simply the American system of government at work. Now, all you have to do is petition the government to reverse it. That’s just the way it works. And, maybe we can get a balanced budget amendment along with it! :)

    Reply
    • I don’t even know how to respond to this. If you are fine with ONE PERSON having the power to shove something down our throats – in a bill that had to pass before Congress adjourned – then we are going to just have to agree to disagree.

      Reply
      • Mike, I agree there is lots of corruption. You could start an organization to stop the corruption. That’ not what my post was about.

        All I was questioning was your mention of “separation of church and state”. How can you or anyone else apparently condone separating any group of people from their states rights?? …

        Thomas Jefferson said to a Baptist church: ‘I contemplate with sovereign reverence that act of the whole American people [the First Amendment] which declared that their legislature should “make no law respecting an establishment of religion, or prohibiting the free exercise thereof,” thus building a wall of separation between Church & State. Adhering to this expression of the supreme will of the nation in behalf of the rights of conscience,’ — Jan. 1. 1802

        The apparent propaganda currently regarding “separation of church and state” cuts out the last sentence of Jefferson’s letter, that I included above. Jefferson seems to be saying that the purpose of the “wall of separation” is “…in behalf of the rights of conscience,” not for the elimination of religious conscience from government but, in fact, the opposite… to protect any particular religion or point of view from exclusion by government. The First Amendment establishment clause was to prevent government from exluding freedom of conscience by erecting a wall to hold back government from establishing a church, or a narrow point of view, like catholicism or atheism, etc. There are atheist groups trying to exclude any reference or expression of religion from government, when in fact the governent should encourage the free expression of all points of view.

        The “wall of separation” is not to prevent atheists or catholics, etc., or any other group from influencing government policy according to their free consciences, but the opposite, to protect them from being excluded by a governent established point of view. For example, children in public school should be encouraged to share their point of view, be it atheist or religious, etc., instead of being afraid about offending someone.

        Free government is for the purpose of allowing others to be offended!

        See what I’m saying? There’s apparently a lot of propaganda and brain-washing out there that seems intended to reverse what Jefferson really meant by quote mining, etc.

        Anyway, keep up the great work! I’ll be checking in periodically to see more of your great progress and excellent tutorials.

        Reply

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