Tuesday, May 03, 2005

World Poker Tour Enterprise Goes All In

Let’s face it. Either you or someone you know has been afflicted by the latest craze: poker. The card game has become one of the hottest trends in the U.S., with an estimated 50 million Americans sitting at the tables putting on their best bluff. There appears to be no foreseeable end to this phenomenon, which is exactly what the World Poker Tour Enterprise is betting on. Its weekly TV series World Poker Tour (WPT) helped invigorate enthusiasm for the once fading card game ever since it first aired on the Travel Channel on March 30, 2003. As a result, most credit WPT for single-handedly reviving poker. WPT Enterprise has simultaneously built a brand name around the show and capitalized on the rising popularity of poker. With total annual revenues ending January 2, 2005 at $17.6 million, compared to $4.3 million in 2003, and about 900,000 viewers per show, it appears that WPT Enterprise is on the right track to becoming THE international poker brand. Can WPT Enterprise’s branding strategy survive, especially with the recent inundation of other poker television shows vying with its WPT series?

Once other networks noticed the Travel Channel’s instant success with the low production cost WPT, they wasted little time to jump on the bandwagon. Several shows now compete with the WPT, including Bravo’s Celebrity Poker Showdown, Game Show Network’s Poker Royale: Battle of the Sexes, and ESPN’s World Series of Poker Most of these poker shows focus more on the players rather than the game itself, with the exception of the World Series of Poker. For those who just cannot get enough on regular TV channels, there is now a 24-hour digital cable and satellite channel dedicated to gaming, Casino & Gaming Television.

WPT Enterprise’s competitive advantage lies in the brand name recognition gained by being the first-mover in airing the poker television series. Despite the onslaught of competitors, WPT remains recognized as an innovative leader with strong staying power. WPT Enterprise has exclusive rights to most of the major poker events, with exception to the World Series of Poker tournament, giving it a distinct advantage over other competitors. WPT Enterprise established its successful business model with the understanding that innovative solutions are necessary to attract viewers to its show. It understood that playing poker well requires a learning curve spurred them to include expert commentary with the use of the “WPT Cam,” which allows viewers to see players’ face-down cards.

Because of its name recognition, the WPT have not only affected poker aficionados, but also the professional players. In its first three seasons, the WPT has made 22 of the players into millionaires and has crossed the $100 million threshold in prize money. Steve Lipscomb, President and founder of WPT Enterprises, proudly proclaimed that it took the PGA more than 30 years to reach the $100 million in prize money, while it only took the WPT a couple of years. Network externalities are at work here – the amount of prize money that WPT is able to offer attracts more players who are willing to pay up to $25,000 to enter the competition, which in turn increases WPT Enterprise’s profit margin and allows WPT to increase the prize money. As a result, in a business where the marginal cost slopes down as the number of players increases, WPT has a distinct advantage in gaining a sizeable profit margin at the expense of other competitors that are not able to attract as many players. The threat of entry may be high because of low production costs, but WPT’s brand recognition is likely to give it the sustaining power to endure the heavy competition.

WPT Enterprise has expanded from WPT into other businesses by utilizing its brand name. Its image has enabled the company to generate revenue from licensing broadcast rights to over 60 countries, sell WPT-branded products, and sell corporate sponsorships to companies such as Anheuser-Busch, Michelob, and AmberBock for WPT events. In addition, WPT Enterprise has made a goal of educating poker enthusiasts, which increases viewer loyalty and broadens the fan base. To expand their revenue streams and further assist players in improving their poker skills, WPT published a new line of books, created a 60-second radio and audio internet feature called "WPT Poker Corner," developed a series of weekend instructional clinics called WPT Boot Camp, and released DVD collections of each season's WPT shows. It has also launched satellite tournaments, which allow poker fans an opportunity to experience playing in a WPT event at a more affordable rate than the regular WPT.

WPT Enterprise also plans to enter the highly competitive online gaming scene. They believe that they can combine the synergy of television with the internet by using international broadcasts of the TV series to promote its new online gaming Web site, WPTonline.com. WPT Enterprise has collaborated with an offshore company, Wagerworks, since it is illegal to gamble online in the U.S. WPT Enterprise is clearly betting the house that they can continue their exceptional growth online, but it is not clear that WPT’s success can be repeated. WPT Enterprise faces a substantial challenge since there are currently over 200 internet gambling sites and PartyPoker.com already has about half of the worldwide market share. Also, WPT Enterprise is relying on international customers for the success of its online operations, but its brand name is not as strong worldwide.

WPT Enterprise should target segments within the poker market that others have ignored. For example, it should take advantage of the strong interest among women. WPT Enterprise must also be wary of poker’s substitutes. The popularity of WPT has not only raised the awareness of poker, but also other table games. In addition, poker may not have much staying power – the viewers may get tired of poker and move onto another game. While it makes sense to take advantage of the poker craze as much as possible, WPT Enterprise should be ready to leverage its brand name to expand into other games.

Written by Tana Barton, Jee Ku, and Christina Sung


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