Poker Site Wants Card Sharks to Fold So the Rest of Us Can Win

  • PokerStars revamping rewards, rules to attract casual players
  • Online poker lost steam since U.S. outlawed operators in 2011

Fresh off a name change and in the midst of a turnaround, Canadian online gaming company The Stars Group is looking for M&A opportunities. The company formerly known as Amaya is eyeing an entry into the sports betting business. In his first TV interview since taking over as CEO, Rafi Ashkenazi explains his approach to making deals in the space. He speaks on 'Bloomberg Markets Canada.' (Source: Bloomberg)

PokerStars has a stern, and unusual, message for some of its most passionate clients: Quit winning so much.

PokerStars says these gamblers -- semi-professional types who play hand after hand day and night -- became a problem after they grew too numerous and have taken advantage of the thousands of novice bettors who account for the lion’s share of all wagers made on the world’s largest poker website.

Sick of being dominated, the amateurs cut back on the hands they play. So for the owners of PokerStars -- Canadian company The Stars Group Inc., which ponied up $4.9 billion for the site in 2014 -- driving out the sharks is a crucial step in their effort to jumpstart growth in a business that has been sputtering.

Regular players just “want to enjoy the game as a fun entertainment experience that offers many winning moments and the dream of the big payout,” said Rafi Ashkenazi, Stars Group chief executive officer.

To encourage Joe Poker to keep ponying up, the gaming site has started to cut perks and incentives for high-volume players who typically prey on beginners. In July, the company ended a loyalty program that rewarded a select group that had as many as 24 poker matches going on at once. They would receive credits on the house take, or rake, which they could redeem for cash and merchandise or use for tournament entry fees.

PokerStars website

Photographer: Wayne Parry/AP Photo

VIP Status

Stars Group first began rolling out the changes about 18 months after buying PokerStars. Only a small number of players enjoyed the VIP status that returned them a high percentage of the rake. Still, they were winning at such a prolific rate, they were driving off the amateurs.

“We were starting to have too many professional players for what we could maintain for a good, healthy eco system,” said Severin Rasset, Stars Group’s director of operations and innovation.

Now the race is on to get online visitors excited again about poker. The card game accounts for about two-thirds of the company’s $1.2 billion in annual sales. Poker revenue, though, has flattened, while new growth has come from Stars Group’s casino and sports sites. So the company has signed up celebrities such as comedian Kevin Hart and Olympic gold medal winner Usain Bolt to promote the game. It’s reallocated tournament money so more players win prizes, albeit smaller ones, and realigned perks to give more wins to less-frequent players.

New Loyalty Program

In comments to analysts on Aug. 9, Ashkenazi said the site is getting a good response from players to the new loyalty program and expects it to boost poker revenue in coming months after a drop in the first half of the year.

“We see exactly what we wanted to see: a higher degree of engagement of our players," he said.

Shares are up 41 percent since Ashkenazi took over last year. Top shareholders include Wall Street asset managers Blackstone Group LP and BlackRock Inc., while Sydney-based Caledonia Private Investments built up a 19 percent stake, according to Bloomberg data.

Skeptics, however, aren’t convinced. “People still like poker, but it’s no longer trendy,” said Dimitry Khmelnitsky, an analyst at Veritas Investment Research Corp. in Toronto. “The volumes of play on PokerStars are declining, less players enter the tournaments. That should not bode well for revenue.”

No doubt online poker is at a crossroads. The business started booming in 2003, when an accountant from Tennessee named Chris Moneymaker became a millionaire overnight after winning the World Series of Poker Main Event, which he had entered through a satellite tournament on PokerStars for $39. Eight years later, the U.S. government poured cold water on the craze with a surprise decision to outlaw online-gaming companies.

Legal Wagering

The market never fully recovered. According to consultant H2 Gambling Capital, online poker will generate $2.5 billion this year, or 5.5 percent of global interactive gambling, down from a peak of $3.3 billion in 2010. Three U.S. states have since made the wagering legal and more are discussing it, leaving the door open for a future uptick.

With 113 million registered players, including 2 million who played poker last quarter, Stars Group estimates it has 70 percent of the global market. 888poker and Party Poker rank as distant competitors.

With a new loyalty program in effect this month, the company says it is fully focused on its amateur players. Customers clinch points on any of their three sites, said Rasset, who notes the recent changes also are intended to accommodate the gaming habits of a new generation of younger players who compete entirely on smart phones. That includes adding video-game-like features to poker, such as magic cards that enable a player to see cards before they’re dealt.

“I love video games,” Rasset said. “I want to infuse some of this into the poker world.”

— With assistance by Scott Soshnick

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