PartGaming (PRTY.L) to get sued bt EmpireOnline (EOL.L) - Jeremy's Thoughts

I am not surprised by the Party/Empire deal falling to peices.  Look at what has happened to EOL.L since its float in September, let alone the last week or even today.  They have been losing market value at a steady pace.  In fact I wish I would have shorted this stock back in September.

 

I agree with an analyst from the London Stock Exchange that stated EmpireOnline is misguided about the value of their company.  Some will argue that Party pulled the plug on Empire with the intention of dropping the pps in order to pick it up at a discount.  Could this be true? maybe, but it doesn't really matter.  Without the PartyGaming platform the Empire Online price per share would nose dive regardless if there were takeover or aquisition talks taking place.

 

In all honesty Empire probably shouldn't have been that dependant on the parent company in the first place.  Furthermore in my opinion they should have seen the writing on the wall and done a better job negotiating with Sportingbet (SBT.L) when they had the chance to get aquired at over 250p per share. OUCH that stings because PartyGaming's offer was only 60p and probably seen as an insult by Empire Online. You certainly can't blame PartyGaming for pulling the plug on Empire though.  The big revenue generating players at Empire were simply there because they couldn't receive rakeback at Party. In essence these people considered themselves PartyPoker players but played at Empire simply to get their rakeback from a third party affiliate.  So essentially EmpireOnline was just piggybacking on Party's success and robbing PartyPoker's players by offering a "kick back" to these players that the parent company no longer allowed.

 

This is a great opportunity for new people in the industry to realize that this is a BIG business and not just a few computer geeks running an online card room.  There are shareholders and stakeholders involved in almost all of these businesses.  It is easy from the players standpoint to look in from the outside and think your getting screwed by not getting rakeback, but you need to examine these scenarios from a business perspective.  It is no different than if I am a shareholder in a U.S. based Fortune 500 company.  I want a return on my investment, and that means cutting out the fat and maximizing profits.  Allowing Empire to poach PartyPoker players by offering rakeback is not maximizing my profits as a shareholder.

 

This is not intended to be an article knocking rakeback, because quite frankly I am indifferent on the subject and it does not really bother me when it is managed in a professional manner through the card room itself.  A great example of a rakeback program that is professional and I support is CelebPoker.com.

 

If you study up on what has transpired with Excapsa, UB, and Pokershare.........now take a look at the dynamics of what is taking place in the PartyGaming organization.  You can start to realize that we are in an industry that exploded in the course of a few short years.  The growth in the last five years has been off the charts and probably not healthy for the overall online poker industry.

 

We are now seeing the reigns getting pulled back a bit and the cosolidation is more than likely just beginning.  I look at this beginning stage in the online poker industry and compare it to the dot com bust of the 90's and early 2000's.  When I first started promoting online poker it was sooooo easy.  You could spend $1000 a week on pay per click advertising and easily get a return.  You could also put up a garbage banner farm and you WOULD get conversions.  Everyone was making money hand over fist.  Heck, you could still deposit funds via paypal and credit cards.  Then, like the dot com industry, as things matured the market began getting saturated with not only too many online poker rooms, but too many online poker information sites. 

 

This is nothing to be scared of as an affiliate however, it is merely a correction in the market.  Consolidation and aquisition is not going to start or stop with what PartyGaming is doing.  It is going to continue throughout the next few years.  This is why if your a poker affiliate is so important to diversify and never think that one room is going to be paying your bills throughout your "lifetime"  Many of these card rooms promise us "lifetime mgr", but they should actually state "for the lifetime that this card room is known as XXXXXX.com or owned by XXXXX Inc." 

 

In closing I think the takeaway from this article is to step back from being an affiliate and look at the online poker industry as a whole.  Yes we are very important to the card rooms, but probably not as important as we like to think we are. :)  Look at the business decisions that are being made and examine all the dynamics of what is taking place in our industry.  It is truly fascinating to say the least and someday we are going to look back and say we remember when...............

 

As always you can post any feedback or comments on this article in our Poker Affiliate Forums.