Thursday, November 5, 2015

The end of the online poker pro?

In the beginning of online poker, there was no rakeback. There was only rake. In the days of Planet, Paradise, and Party Poker, no one thought that 5% to $3 was a great deal, but hey, it was the same or less than most brick-and-mortar rooms were charging. It didn't really matter; the games were so good. If you played poker seriously in the era where Chris Moneymaker, Greg Raymer, Joe Hachem or Jamie Gold were reigning world champions, then money was falling out of the sky and landing in your bank account.

It was, of course, the affiliate system that led to what we now know as rakeback. Poker sites wanted more players, so they turned to affiliates. Savvy affiliates said that they wanted lifetime value players, not to be played a flat CPA. Savvy players then realized that affiliates were making buckets of money from the rake they were paying, and in turn they demanded rakeback.

PokerStars was intelligent in proactively doing an end-around this process. They knew that people were hungry for rakeback and that they would circumvent the rules to get it, so they created the VIP program. And their tiered system was brilliant. The more you played, the higher your status. The higher your status, the more you earned. So you wanted to play more and more, a positive feedback loop that never seemed to end. At least, until this week. This week, Stars pulled out the rug on its highest volume players. With its announced VIP changes to 2016, PokerStars is being very obvious in what they want to do long-term. Stars no longer considers poker pros making 50k or more per year to be partners in their business. Rather the statement made is that poker pros are leeches on our games, parasites on our idyllic poker economy.

Pulling out the rug on the 2015 Supernova Elites in such a fashion is not something that sits well with me. From all indicators, these people entered into a quasi-contract with Stars that they would get an expected amount of effective rakeback for 2016. There certainly would not be the backlash that there is in the poker community right now if they announced these changes 12 months ahead of time. By announcing the changes so late in the year, they continued to make the revenue line look good for investors, keeping the stock price high. Who knows what the volume in 2015 would have looked like had they made this announcement in January? Stars is now under immense pressure from its players to pull back from their announced changes. I hope they do bow to that pressure, but don't be surprised if they don't. This isn't the Scheinberg era, folks.

In any case, the implications the new VIP program are huge. The death of the online poker pro has been predicted many times, but this one is as legit as it comes. It won't be an explosive implosion; the games will not suddenly dry up on January 1, 2016. But at least in the short term, there will be a significant contraction of the money available to win (across all limits) and the marginal pros won't survive. If you are an online poker pro, and you have not made at least 100k/year in the last two years, you should strongly consider applying for a real job somewhere. If you are an aspiring poker pro and haven't quite made the leap yet, you need to look long and hard about whether you really want to sign up for this grind. Stars' goal is to create an equilibrium where everyone is a small loser. It is an uphill battle when you are fighting against the most powerful organization in poker.

I have some further thoughts on how this will all shake down, but I'll have to save them for a Part 2. Tomorrow though I'll be talking about this more on this week's Pokercast (sponsored by the PokerStars VIP Club!) though, and hope to have that Part 2 up soon.

Edit: I want to clarify that with the exception of honouring its previously advertised 2016 commitments, I'm not taking a position on the rightness or wrongness of PokerStars devaluing their VIP program. They have the right (and responsibility) to control that program as they see fit and to maximize the long-term profits of their company. Stars does not owe poker players the right to make a living at their tables. They do, in my view, have a responsibility to deliver on the promises made to them in 2015. But aside from these commitments, I am not taking any sort of moral position on the changes.