Isn’t it odd that the same people who ridicule fortune tellers watch weather forecasts and listen to economists?
— Anonymous

A provocative cover story by writer Richard Florida in current issue of The Atlantic magazine entitled, “How the Crash will Reshape America,” got me thinking about how the global economic mess could affect the poker industry.  The trouble is few experts are qualified to offer any credible opinions.  Prognosticators in the mainstream media know next to nothing about the gambling industry.  Financiers and business forecasters have proven to be utterly worthless in predicting economic chaos or prescribing a solution.  Even those decorated with academic credentials lack any real understanding of our unique subculture.

Accordingly, in order to foresee what might be ahead for many of us, I sought the opinions of individuals who possess real world experience combined with substantial knowledge about the poker industry.  I wanted to learn what they predict will happen to global economic markets, the U.S. economy, the gambling sector, and the poker industry.  That’s an ambitious agenda for a poker column and a lot of territory to cover.

The assembled panel consisted of variety of successful people, each with unique insights, including an attorney, a former management consultant turned author, a tax accountant, a psychologist, a high-tech consultant, a computer programmer, a college professor, a former online poker executive, and a casino industry observer.  Some of these names will be known to you; others will not.  All who responded have strong opinions, which sometimes conflict.  Their only common trait is that each expert has been playing poker for many years and follows the poker industry closely.  This is a two-part series.

Ken Adams is a Washington, DC-based attorney.  He has litigated several high-profile legal cases.  Adams once represented Watergate convict Charles Colson and was on the legal team that won the largest punitive damages settlement in U.S. history in the Exxon-Valdez lawsuit.  Adams is an avid poker player.  He previously served on the governing Board of the World Poker Association and writes about poker for CBS Online.

There is no question that the next few years are going to be very difficult for many people in both the U.S. and abroad.   I think people who are in the worst position for the next few years are those whose livelihoods depend on working for companies – large and small – that are in financial trouble.  Any business that depends on discretionary consumer spending is in trouble, whether it is a manufacturer or a service business.  I expect there will be large numbers of business failures.  In each sector, a few will survive and will actually strengthen as they pick up market share from those who go bust.  For example, I would expect that department stores will be in trouble, but Wal-Mart will do fine as people with less money to spend drop down from Macy’s to Wal-Mart.

A guy I sat next to yesterday at the poker table owns a dozen grocery stores.  He said profits are way down, though traffic is not.  People are still buying food, he said.  But they are buying cheaper, low-profit store brands and specials rather than the premium (higher profit) brands and items.

Conversely, I think the people who are in the best position to ride out the storm are (A) those working in government, the only sector where spending will increase; (B) those working in sectors where the government is going to be injecting massive spending (e.g. infrastructure construction); and (C) people who have low overhead and are not dependent on a single large employer for a regular paycheck.

Gaming revenue and tourism will be down in Las Vegas and elsewhere, but Sin City draws from the entire world.  There will always be plenty of people drawn to the city and gambling.  A few marginal properties that overbuilt during the boom times may fall by the wayside, but there will still be a decent global market for gambling.  Las Vegas is still an international attraction and the stronger casino operators will survive and do just fine.

On a larger scale, I don’t believe we will see a “depression” of the sort that America experienced in the 1930s.  The Federal Government will be more pro-active.   The people who are likely to take the worst of it, as usual, are the old, the sick, and the poor. People whose survival depends on charitable and other non-profit programs for support are in trouble. People who have been depending on pension funds and 401K accounts to boost their retirement are in serious trouble.

One piece of good news in this economic apocalypse is that we have the right kind of President in the White House.  Barack Obama has the capacity to inspire people to look beyond their own problems, to recognize that we are all in this together, and to help one another get through it.  He will give people comfort that those in charge understand and care about their suffering, even though they cannot fix it quickly.  People forget that it took FDR several years to make a difference in terms of turning the economy around.  However, what he did immediately, which mattered a lot, was give people hope.  I believe Obama can and will do the same.

In the end, I expect America will emerge stronger at the end of the process in terms of its national character.  I don’t relish in the pain many will feel over the next few years, but I look forward to the end of a disgusting two decades of “me first” selfish materialism and the possible rebirth of a national spirit of community and cooperation.  Maybe we will finally insist on an end to the politics of division and special interests that have neutered effective government and replace it with an era of cooperation and compromise in the interests of doing what must be done for all the people.
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Nick Christenson has been a fixture in the information technology field for over 15 years.  He has written over 250 reviews of gambling books, many of which have been published in Poker Player Magazine.  Over a decade ago, Christenson founded and continues to oversee one of the most fascinating websites on Las Vegas and the gambling industry, the “Las Vegas Casino Death Watch.”  He also co-wrote “Winning Strategies for No-Limit Hold’em.”  Christenson lives in Las Vegas.

I have been tracking Las Vegas casino openings and closings for over a decade.  Generally, Las Vegas sees a greater number of casino closings during good times than bad.  Casinos close more often when someone wants to replace them with something better.  Even in really poor economic conditions, a Las Vegas casino will usually make enough money to justify keeping it operating.

Of course, we have already seen Black Gaming essentially close down the Oasis Casino in Mesquite, Nevada.  We’ve also seen a fair number of casinos close in Reno over the last eight years.  We could easily see more closings in these and similar markets that have and will be especially hard-hit by the economic downturn.  If times wind up being really difficult, we may see a closing or two in downtown Las Vegas; a Strip property throwing in the towel is not beyond the realm of possibilities, either, but I don’t expect wholesale closings in Las Vegas.

This doesn’t mean that it will be smooth sailing for casino owners.  I’d set the line on the number of corporate bankruptcies by companies with a Las Vegas presence at three.  In most cases, though, I don’t expect this to cause casino closings, although as with nearly every other corporate sector, several rounds of “belt tightening” are all but certain.

How will this affect the Las Vegas poker scene?  During the poker boom of the early part of this decade, there was a mad rush for casinos to add poker rooms as quickly as possible.  Since the poker wave has crested, we’ve already seen the beginnings of a consolidation in Las Vegas.  I expect this trend to continue, with several, perhaps many, of the smaller rooms closing over the next few years.  Still though, even if the economic downturn turns into a serious depression, I’d still don’t expect the number of poker tables in Las Vegas to drop below the numbers that existed 10 years ago.

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Dr. Arthur S. Reber was a Professor of Psychology at Brooklyn College in New York for 35 years.  He wrote “Implicit Learning and Tacit Knowledge: An Essay on the Cognitive Unconscious.”  He also wrote “The New Gambler’s Bible: How to Beat the Casinos, the Track, Your Bookie, and Your Buddies.”  Reber has written many poker articles in the past decade, including his regular weekly column on the psychology of poker which can be found at PokerListings.  He is now semi-retired and lives on a remote peninsula in Washington State.

The economic woes are going to have far-reaching effects.  They will swamp some people and merely trickle trouble into the lives of others, but there won’t be many who will be unaffected.  It’s virtually certain that the casino business will be hit and, by extension, so will poker.  My guess is that the impact on poker will be smaller than other casino games because it is often played with discretionary income.  Slots, which tend to be played by those with lower incomes, are likely to see a fairly steep drop-off in revenues.  Table games, particularly those which derive a substantial piece of the action from high rollers, probably won’t be hit quite so hard
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If revenues decline, I worry that card rooms may respond by raising the rake.  They might see this as “sensible” business practice and it might produce a small revenue increase in the short run, but over time, such an adjustment will likely have the opposite effect.  A similar pattern occurred in horse racing.  When revenues began to fall off several decades ago (for very different reasons), states responded by increasing the “take out.”  When revenues continued to decline, they reacted with another increase.  Those were not wise decisions.

However, as a scientist, I always like to see the data.  There are two obvious sources: (A) The number of buy-ins at annual poker tournaments, that is, those run every year in the same casino on roughly the same dates, and (B) The traffic at Internet poker sites.

We already have data on (A) and so far there doesn’t appear to be any discernable drop off, but no one has carried out proper statistical analyses.   I’ve not seen any efforts to look at (B) and, in fact, I don’t know how one would go about doing this.  However, I bet it would be revealing and likely provide the best window into what is going on in poker worldwide.

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Perry Friedman is an online gaming programmer, World Series of Poker bracelet winner, and self-described “raconteur.”  He is also a sponsored pro at Full Tilt Poker.  Friedman is a graduate of Stanford University and now lives in Las Vegas.

Living in Las Vegas, I have seen the effects of the current downturn firsthand.  Casinos have been hit pretty hard.  Several of the major casinos are in danger of bankruptcy or restructuring.  Some casino projects have stalled, while others have been completely abandoned.  You can’t read the newspaper or watch local news without more bad news being reported about the casino industry.  People are still coming to Vegas, but they aren’t spending as much while they’re here as before.

On the bright side, gambling in general tends to be pretty resilient when it comes to economic downturns.  There is always the “lottery effect,” where gambling is a way out for people who perceive themselves as having no other alternatives.  However, those people aren’t about to head to Las Vegas to gamble — they will instead play locally (whether it’s the lottery, horse betting, online gambling, or whatever is available to them).

As far as poker goes, live poker is seeing the same downturn.  The recreational poker player now has less expendable income and cash game poker doesn’t have that same “lottery effect.”  On the flip side, tournament poker does have that big reward potential.  I believe tournaments will suffer less than cash games.  Tournament poker was already seeing a slight decline prior to the economic downturn, mostly due to the huge peak it hit in the post-Moneymaker era.  I expect this year’s World Series of Poker to do about the same numbers as it did last year.  I think that as the economy rebounds, the poker industry will begin to rise again.  There is also hope with the new Administration in place that the regulatory environment may change for online poker, which could lead to a new resurgence in live poker as well.

(Note:  More opinions are coming in Part II)

2 Comments

  1. tck says:

    The depression of the 30’s lasted throgh a decade of FDR policies. Looks like we are heding down that road again !

  2. i need 2 pee says:

    any changes coming ?

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