This month, the PocketFives Podcastfeatures an in-depth look at the online poker industry courtesy of former PokerStarsVIP Manager Scotty Yeates (pictured). He started with PokerStars in August 2005 and helped create the original VIP program at the world’s largest site. He’s witnessed a complete upheaval in the industry and sat down with us to recap the PokerStars VIP program’s origins, the site’s reaction to the Unlawful Internet Gambling Enforcement Act (UIGEA), funds frozen on Full Tilt, and more.

How did the PokerStars VIP program come about and what were the site’s inspirations? Yeates told us, “One of the big models we tried to base it on were the airline programs. The airline program has VIP programs where your rewards keep increasing the longer you stay with that customer. The other reason we stayed with that was because if a businessman flies American, he always flies American, so we wanted to achieve that same thing in online poker.”

Team PokerStars Online pro George Jorj95 Lind (pictured) was one of the first people to take advantage of the newly created VIP program: “One of the first memorable stories was Jorj95, who came out of the blue. We had a double VPP month and all of a sudden, this guy comes out of nowhere and earns 500,000 VPPs.”

Since he began with PokerStars six years ago, there have been many changes in the industry. Yeates, for one, no longer works for PokerStars, and sites that existed a half-decade ago are no longer in operation. Yeates shared, “The players have far fewer choices because of this consolidation, but that’s true of any business, whether it’s computers or software or anything. The dominant players are going to take over and dominate the business, as we see today.”

When the UIGEA hit in 2006, Yeates noted, “It was about as bad as it gets” at the PokerStars offices in the Isle of Man. “We didn’t know what the future was going to be. We didn’t know which direction we were going to be. We had to get information from lawyers on how we were going to proceed. It was just a really dark time in PokerStars’ path.”

Unlike publicly traded companies like PartyPokerand 888, PokerStars chose not to abandon the U.S. market following the UIGEA’s passage. Why? Yeates recalled, “The lawyer opinions we received were positive on continuing because we were not offering gambling. We were offering a skill game much to the effect of backgammon today in the United States. You can play backgammon for money in the U.S.”

Four months ago, Black Friday shook the online poker industry in the United States to its knees, as companies like PokerStars and Full Tilt Poker stopped taking U.S. players. The latter promptly had its gaming license revoked, leading Yeates to remark, “It was the end of an era. The unregulated dot-com market went for years, it was profitable for many players and profitable for the sites, and now we’re entering a new era in online poker, which is going to be the regulated market. I don’t know when the U.S. is going to regulate it.”

What’s next for PokerStars? Even though he’s no longer with the site, Yeates explained, “PokerStars is looking to settle with the DOJ. They want to be on the white list when the U.S. goes regulated. As we’re seeing with the world market, the U.S. market is going to be dominated by three players. I don’t know who those three players are going to be, but PokerStars wants to be one of them.”

Many in the industry have speculated that Caesars and MGM would be two of the biggest beneficiaries of pro-online poker legislation in the United States. Yeates, however, mentioned two other companies when asked who a few of the big players could be: “I would be worried about the Microsoftsand Zyngasof the world because they have the internet down. Caesars – they have the World Series of Poker, but they’re going to have to partner up with the right person because they don’t know the internet world… All of these companies that are doing it have a huge start, a huge lead on the companies that aren’t in the internet world.”

Finally, plenty of PocketFives.com members have funds frozen in the depths of Full Tilt. A hearing in Alderney in late July ended in no respite for players, leaving Yeates to guess, “The DOJ seized money, so in theory they have the money to pay U.S. players off. But anything involving the government takes forever, so I’m guessing the players would hope something else will happen. People like Chris Ferguson are very high quality people. If he came out of Full Tilt with something like $20 million or $30 million, maybe he feels obligated to pay U.S. players back.”

Listen to the rest of this week’s PocketFives.com Poker Podcast.