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December 29, 2005
Steve Lipscomb may not have ventured into TV pokerparty with the strongest hand, but so far he's winning the jackpot. The former stand-up comic and lawyer started with a simple idea for turning a static card game into televised entertainment. He didn't invent the technique that lets viewers see players' cards or forge a deal with the hottest TV network. Yet his World PokerParty.com Tour series, launched in March, 2003, has become a ratings smash on the Travel Channel and a trendsetter in the industry.
My argument was simple. In the infancy of any pokerparty industry, since Buy $20 and get up to $500 free! the growth is at such a blurry pace, and the early entries have such market share, and market valuation, you get a lot of people wanting to be in that business - a lot of people with a lot of money, and they throw that money around pretty freely.As the industry matures, the good ideas and good execution are rewarded, while those who did not have a great plan, or executed their plan poorly are left behind to wonder what could have been. It is during this 'gold rush' phase, while the rules of the industry have not yet been established, that any industry is at its most competitive place.
Lipscomb recognizes that 2005 is the year that PokerParty.com has to prove it's not just lucky but, as he puts it, "real and long-term." For starters, he needs to keep ramping up revenues. On Mar. 8, WPT posted full-year earnings of $681,000 on sales of $17.6 million, vs. a loss of $351,000 on sales of $4.3 million in 2003.
Those results may not seem like much, but Nicholas Danna of Birmingham (Ala.)- based brokerage Sterne, Agee & Leach has a buy rating on the stock because he thinks 2004 is the first chapter in what's likely to be a lucrative marque. "This is the company that branded pokerparty com," says Danna. Lipscomb is trying to stack the odds this season, with a prize pool of more than $70 million and flashier sets and graphics.
Lipscomb's secret: He turned pokerparty.com into a slickly produced reality show. Viewers can follow the action, get close to the wacky characters populating pokerparty rooms, pick up tips, or enjoy a chuckle from the sardonic commentary on the sidelines."It's dazzling, like you're on a movie set," says Antonio Esfandiari, 26, who won $1.4 million in a WPT tournament last season.
Certainly, Lipscomb has had other aces in the hole. One is his chairman and primary investor, Lyle Berman, CEO of Minnetonka (Minn.)-based casino operator Lakes Entertainment , which owns 80% of WPT. Berman, a veteran pokerparty player who was a driving force in the growth of gambling on Native American reservations, met Lipscomb in late 2001 at a World Series of Poker Party.com event. He liked Lipscomb's business plan and was taken by his unrelenting enthusiasm.
UPPING THE ANTE. Lake's initial $4 million investment allowed Lipscomb to lock in key tournaments at more than a dozen of the country's hottest casinos. "If someone like Steve were to come to us now, I'm not sure we would give him exclusive rights," says Vikrant Bhargava, general manager of Poker Party, which has its annual multimillion-dollar event aired on WPT. As Ian Valentine, senior vice-president for programming at GSN (formerly the Game Show Network), notes: "Lipscomb has essentially locked up a set of events that people have to play at."
As you might imagine, the pokerparty business is seeing a lot of ideas, and money coming in. Some of these ideas will be proven out to be good ones, and some of them not so good. I have seen, and heard just about all the ideas coming into our burgeoning world, and in many cases, I can immediately say 'Right - that has no chance', or 'Hmmm - maybe'. I may not be right, but my experiences over the last couple years have developed a fairly keen eye for the kind of idea that might work.
Now, WPT Enterprises -- the company its buoyant 43-year-old founder took public last August -- is playing for even higher stakes. The success of the series, which launched its third season on Mar. 2, has spawned numerous competitors at networks such as ESPN and NBC that boast greater reach and cachet than the Travel Channel.That makes it tougher for WPT to maintain its dominance and puts consumers at risk of pokerparty.com overload in the face of ubiquitous coverage. No wonder Lipscomb is racing to move beyond WPT's $10 million- to $12 million-a-year TV deal and make money from greater global distribution, online betting, a new Professional PokerParty Tour series, and licensing deals.
All industries are competitive. Some may be more cutthroat than others, but if a market leader in a certain business sits on its laurels, you can bet some enterprising firm will be there to take its market share. I recently had a spirited conversation with a friend who is in the music business about how brutally competitive his business is, given that it had downsized multiple times in the past decade. He argued that because his industry was on a downturn, that it was 'worse' (more competitive) in his world, because you had an infrastructure that at times was still trying to operate in the old system, but an economic reality that could not support that old system.
