Analysis of Alleged Full Tilt Buyout by PokerStars

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For months and months, poker players everywhere have been frustrated by numerous news bits about the possible impending sale of Full Tilt Poker. With hundreds of millions in player balances dangling in the wind, the anxiety over this story has clearly been justified. Today, it appears we have received some real news: PokerStars is apparently purchasing Full Tilt Poker for $750 million and will pay back all player balances worldwide.

So what does all this mean, and what incentive did PokerStars have to make this deal?

The reasons for PokerStars seem obvious to me. They had an opportunity to do three things, all of which are of huge value to their company.

First, they can make good with the DOJ. It’s generally assumed that this deal is directly related to PokerStars having come to terms with the DOJ in regard to the charges that were levied on Black Friday. PokerStars covering US player balances is a big part of this. The DOJ can avoid public backlash from US citizens without cost to taxpayers. That’s a big win for the DOJ. By making this deal, it’s possible that PokerStars will have an opportunity at some point to legally reenter the US market. Even if not, though, ending their squabbles with the DOJ has major value to them.

Second, they’re avoiding once again having to contend with the biggest competitor they’ve had in the last 5+ years. Nobody really knows if Full Tilt would be a force once again under new ownership, but PokerStars spent many millions of dollars trying to outflank them over the years. Now, they can rest peacefully knowing that their market dominance will remain intact for the time being. Instead of finding ways to counter Full Tilt’s advantages, such as their software and the Rush Poker concept, those valuable advantages will now belong exclusively to PokerStars.

Third, PokerStars looks like a hero to poker players everywhere. It’s a huge win for them from a PR perspective. For any current or prospective customers who ever doubted their commitment to protecting player balances, doubt no more. Their (and Full Tilt’s) former US customers will also remember this well if PokerStars is someday back in the US market. PokerStars will forever be the company that swooped in out of nowhere and saved thousands of poker players from getting shorted immensely on their payouts.

As far as what’s going to happen with some of the nitty-gritty issues that players and industry people will be concerned about, I have a few guesses.

My first guess is a big one, and probably one a lot of people will disagree with. I think that PokerStars will either close the Full Tilt brand or make it a “skin” of PokerStars. I’m aware that the sources today have stated that there will be two separate sites. PokerStars has some incentive to keep it that way, as there are a number of users who prefer each of the two types of software and have loyalties for one reason or another to a particular brand.

But, there is a lot of baggage associated with the Full Tilt brand. It will always remind people of Howard Lederer and Chris Ferguson, if nothing else. Both FTP and Stars require millions of dollars per year in software development and maintenance costs. FTP has some enormous liabilities in the form of bad affiliate deals that were costing them hundreds of millions per year prior to their shutdown. It’d be easier for PokerStars to simply hit the reset button on all the mistakes Full Tilt has made than to try and dig their way out of Full Tilt’s problems.

Regarding rakeback, I previously considered it 5% at best that a new owner would honor existing rakeback deals for players on Full Tilt. That number has gone down to 0% as of today. Whether or not they continue to operate the Full Tilt Poker brand, PokerStars is well aware of the many problems generated by the rakeback scheme. The last thing they want is people trading around and selling accounts based on those accounts having special privileges. I assume they will stick a knife in it on day one and replace it with a loyalty program for all customers, just as they have on PokerStars.

Similarly, revenue sharing affiliates should not expect their deals to be honored. There’s some possibility that PokerStars offers a few large affiliates some sort of buyout in order to establish a good relationship with them going forward. I lean toward very few affiliates getting anything at all for prior sign-ups.

I’m sure there will be all kinds of speculation about this posted today, and I’m looking forward to hearing the opinions of many others in the industry. It looks like the path is cleared for players everywhere to get their Full Tilt money back. And no matter where else this takes us, that has to be a good thing.

24 COMMENTS

    • ummm…no deal has been announced

      That is definitely true. The article’s title does say “alleged”.

    • That is definitely true. The article’s title does say “alleged”.

      Not sure how credible this source is but they say the deal is done.

      link

    • so if this does go down does that mean when i log onto my PS acct that I currently cant use for real money play will have money in it that i can w/d?

    • so if this does go down does that mean when i log onto my PS acct that I currently cant use for real money play will have money in it that i can w/d?

      Nobody knows that kind of details – I’m sure they’ll all be very clear if and when the deal is completed though

    • “Whether or not they continue to operate the Full Tilt Poker brand, PokerStars is well aware of the many problems generated by the rakeback scheme. The last thing they want is people trading around and selling accounts based on those accounts having special privileges.”

      Can you elaborate on this? What was so onerous about the old FTPs rakeback scheme that makes it unworkable?

    • What effect though will this have on regulation actually being passed in the US though? I don’t think those casinos in the US applying for licenses will be too thrilled with this?

    • HUSS?

      Re-enter us? sheeeit…Im ready, got assload of bills, bring it..I’ll get me that pokertracker5 with the Binford 9000 drivers in it and I’ll be slayin some stacks!! (do table selectors filter by country?)

    • “Whether or not they continue to operate the Full Tilt Poker brand, PokerStars is well aware of the many problems generated by the rakeback scheme. The last thing they want is people trading around and selling accounts based on those accounts having special privileges.”

      Can you elaborate on this? What was so onerous about the old FTPs rakeback scheme that makes it unworkable?

      Sure. The disaster of it is having multiple “classes” of accounts that are a) impossible to convert to other classes and b) based not on customer merit/value but rather something arbitrary like the method by which a customer first registered, possibly years ago.

      This also creates a black market of account exchange where people go to great lengths to trade or purchase “better” accounts or work around rules to create new accounts.

      Finally, because of the rakeback system going through affiliates, many affiliates simply positioned themselves as middle men for customers wanting rakeback. Instead of actually doing their job (generating new leads for poker sites), affiliates were intercepting already generated leads and taking a cut. This does double damage to rooms because it not only costs them money but also discourages some actually valuable affiliates (those who generate true leads) from participating

    • This is amazing news.

      Yes, Amazing news. I hope those SCUMBAGS who cheated and own FTP go to jail until they pay what they owe. If any of those SCUMBAGS are allowed to play and/or seen at the WSOP, until they pay up, they
      should be thrown out immediately.

    • Could this just be a marketing spoof… When everyone is talking about Full Tilt coming back Pokerstars suddenly has this announcement ‘leaked’. So now everyone is talking about PokerStars? – Thoughts?

    • Could this just be a marketing spoof… When everyone is talking about Full Tilt coming back Pokerstars suddenly has this announcement ‘leaked’. So now everyone is talking about PokerStars? – Thoughts?

      Farfetched to me. Doesn’t mean it’s happening, but I don’t see how this could be a spoof

    • The reasons offered are reasonable reasons. However, 750m (if correct) is still a lot – and frankly as the number 1, I think they could do without FTP quite easily.The main reason (if they are negotiating intelligently) is that somehow this is part of a package – that involved in the whole deal will – settle the criminal charges ( I would hope the the attorneys proscecuting the crimnial and civil suits would be willing to settle) – a return to legal- licensed US operations (the humungous prize – and the only thing worth playing for) If I were them – I’d offer the DOJ – pay the big fines – payoff all FTP players – institute practices for corporate and personal tax collection (the government has never asked me what I earn online) – keep it away from minors and problem gamblers – not compete with casinos for other gambling gamesThe government gets the fines, the players get their dough, the IRS gets taxes going forward of gaming enterprises and players – and PS gets a get out of jail free card.If I were the DOJ and criminal attorneys – I’d be happy with that. And if I were Stars I’d be happy with that.But if I were Stars, no WAY in HELL, would I fork over 750m to be a nice guy – which possibly huge, unsettled, criminal and civil liabilities outstanding. No WAY. You’d never do that, when there was a possible 2bn fine down the road and two years jail. No WAY. And I’d never settle generously (as this seems) with the outstanding issue of trading in my biggest market is unsettled.So if this is true – I expect a complete settlement.But I expect the dotting Is etc to take weeks…And they are going to have to make some big software and security changes. Still I reckon – super optimistically – that we could be playing by September – Jan 1 latest.and of course all of this speculation!!!!!

    • Sure. The disaster of it is having multiple “classes” of accounts that are a) impossible to convert to other classes and b) based not on customer merit/value but rather something arbitrary like the method by which a customer first registered, possibly years ago.

      This also creates a black market of account exchange where people go to great lengths to trade or purchase “better” accounts or work around rules to create new accounts.

      Finally, because of the rakeback system going through affiliates, many affiliates simply positioned themselves as middle men for customers wanting rakeback. Instead of actually doing their job (generating new leads for poker sites), affiliates were intercepting already generated leads and taking a cut. This does double damage to rooms because it not only costs them money but also discourages some actually valuable affiliates (those who generate true leads) from participating

      Why didnt the sites just contact all their best regs and offer them something directly? I always thought they would close that loophole and just take it for themselves.

      Am i missing something here?