VIP players get cold shoulder from poker site

Firm slashes perks, rejiggers prizes to encourage novices

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

PokerStars says these gamblers — semiprofessional 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 sharps is a crucial step in their effort to jump-start 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.

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 that they were driving off the amateurs.

“We were starting to have too many professional players for what we could maintain for a good, healthy ecosystem,” 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 has reallocated tournament money so more players win prizes, albeit smaller ones.

In comments to analysts on Wednesday, 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 Sydneybased 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.

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 gambling habits of a new generation of younger players who compete entirely on smartphones.