My thoughts on the PartyGaming (PRTY.L) pullout of the U.S. market

Throughout the past few weeks I have been reading all the message boards and talking with several poker affiliates and poker affiliate managers about PartyPoker.com pulling out of the U.S. market.  I have known many of the people at PartyGaming for years and I can assure you there is a lot of talent within that company.  With that said it doesn't seem feasible that Party would simply just lose 70% of their daily revenue share and completely forget about the U.S. market for eternity.

However as easy as it is to pass judgment on Party Gaming for pulling out of the U.S. market, you must understand why they did it.  I don't work for PartyGaming but I do understand business and how publicly traded companies work.  If Party, 888, or Sportingbet were to take the stance that all these private companies have taken, this would go over even worse on the London Exchange, as well as to their investors around the globe.  Think of it this way, Let's say a country like China bans all internet pornography.  If you're a publicly traded company in the U.S., and the main part of your business is internet porn, wouldn't it make sense to your investors throughout the world to honor international law and not accept new accounts from Chinese visitors, regardless of the revenue loss?

Even considering how many millions of dollars PartyGaming is losing on a daily basis, pulling out of the U.S. market still makes more sense than turning your nose at international law right in front of your global investment community.

Now with all that said, once again PartyGaming is filled with some of the most brilliant people in this industry.  I have to believe that they are looking at this situation as a short term (massive loss) for a long term monopoly on the market.  Did I just say that??? Hell yes I did, and maybe I am way off here.  But when looking at this business overall folks, it's still generally in it's infancy.  The odds of there being some sort of legalization with regulation in the U.S. during the next 5-10  years (if not less) is very good.  And unless you're crazy, you have to believe when this day does come that the Las Vegas casinos will have their fingers in the pot and will be the people that drive this regulation through our legislative system.  The PPA is great and I support them 100%, but compared to the lobbyists, capital, and relationships these casinos have, the PPA can't hold a torch.

So if I am Mitch Garber or any of the big shots at PartyGaming, here is what I do.  Number one I hire a business person like Jeremy Enke as our U.S. consultant and "quasi sales person" on this issue, just kidding (well maybe not actually), but in all seriousness I would have someone here in the U.S., almost like a lobbyist or an industry expert making contacts and setting up meetings with not only the large gaming organizations, but also our legislative friends on the issue like North Dakota Representative Jim Kasper.

You see, PartyGaming by themselves will have absolutely no pull with the U.S. government when trying to get online poker legalized and regulated, nor will just Jim Kasper.  I am confident that people like Steve Wynn or any Las Vegas CEO would be intrigued by being the first legalized online gaming company in the states, but at the same time they are already making billions, they don't quite understand the online market, and furthermore just like PartyGaming, they can't tell their investors that they are diving into this tremendously grayish/black area.

But imagine this, what if PartyGaming and Harrahs opened up a dialogue with each other and included Representatives like Jim Kasper in the meetings?  The three of these entity's have the brains, the capital, and the power to make this happen.  The current problem with regulation and the U.S. government is that everyone keeps talking about it but nobody has presented a logical plan on how to do it properly.  All the companies we are talking about here have the capital to at least look into this, wouldn't you agree?  Now from PartyGaming's perspective, let's say this did come to fruition.  They already have the lion share by owning the largest database of U.S. gamblers in the world.  Plus unlike the land based casino's they know about the infrastructure of online gaming  and how to manage it.  The U.S. casinos already have the brand and  trustworthiness from American citizens and government, talk about a match made in heaven.  Two companies coming together like this and gaining support through regulation of U.S. law would catapult them right back to being a market leader in no time.

A partnership like this and the pull through with the U.S. government would be a battle no doubt, but I have to believe IT IS POSSIBLE.  So PartyGaming can fall into the background for the time being and lose millions of dollars per day, that's fine.  But if they do something like I have outlined above within the next few years, they will no doubt be back and 100% OWN the U.S. online gaming market.  All the private companies that are salivating right now will without question make their millions over the next few years, but in the end they will be crushed by this and PartyGaming along with one of the U.S. publicly traded gaming companies will have the last laugh.

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