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Jun 7th

Full Tilt Poker’s last out

Posted by with 9 Comments

The blog’s been quiet for a while. Mostly because I’ve been working myself silly on some assignments. Partly because I have been on a week’s vacation.  But also because these are trying times for the poker industry. And in trying times one should be careful.  So to avoid saying too much on matters still unresolved, I’ve retorted to updating my twitter. If you’re still not a follower of @infiniteedgekim I recommend it. Obviously.

But, the time of silence, for now, is over. I feel the time is right for me to offer my view on the still developing FTP situation. Partly grounded in facts, partly grounded in speculation. The fact that I during recent months have managed to nail some pretty wild guesses has lead people to believe I sit on a lot of insider information. I don’t sit on a lot of insider information. I sit on some. But most of what I write is speculation based on what is publically known. I want to share my personal thoughts and reflections. I don’t want to spread rumors.

Here’s my take on FTP boiled down to a couple of sentences:

Full Tilt Poker’s problem is not paying the players they owe money. Their problem is doing  so while also remaining competitive afterwards. If Bitar and Co give up on this pursuit and exercise their last out, players will get paid, and there will be enough left over for some lawyers and some “Russ Hamilton, no longer the most hated man in poker” t-shirts.

That is the conclusion I draw based on the information leaking out of from the company from past and present FTP associates.  Players’ money is being held hostage while FTP is trying to figure out how to pay and still stay in business. Bitar and Co seem to think that FTP still has a future. And I think one reason for believing so is that UB/AP has already proven that poker players are a very forgiving lot.
Personally, I think Full Tilt Poker only has one out left. And if they take it, FTP will end exactly where I’ve always believed (probably incorrectly) FTP would end up – just following a very different path. And players will get paid.

Your funds are currently tied up in one of our schemes, please hold.

First some reflections:

1. When Black Friday came along I was immediately told that FTP had their hands elbow deep in the forbidden jar of player funds. I’ve been in the industry since 2004 and have witnessed and been told about all sort of unethical shenanigans. But claims that FTP would mix players’ money with their own I brushed off as ridiculous. You don’t do that. Ever. 
I’ve already apologized on twitter for my disbelief. I’ll gladly do it again.  While I don’t know for sure that this unforgivable act is true, it’s difficult to think otherwise. I hope they have at least been licking their fingers.

2. Another thing that has stunned me is how little management over at FTP seems to have understood about the fundamental flaws of the rake model that this blog was initially launched to discuss.  Maybe, like many others, it’s because they’ve believed that these flaws mostly hurt networks and don’t apply to stand alone rooms. They do.
FTP management does not seem to have grasped the true nature of rake as a “pot retrieval cost\” nor do they seem to have understood how to properly dole out rewards (read comments).  When you have an online poker room where players can exploit your rake model’s inbuilt flaws by optimizing the use of 100% Rakeback accounts (by trading them), your margins will plummet. Badly. While, as explained in this post, the Pareto principle is deceptive when applied to online poker room economies, 20% of the players do stand for 80% of the rake in many cases. And with the above system in place, where the most active players have access to 100% RB accounts, a substantial piece of 80% of the rake turns at the door.
And it took FTP many years to stop the 30% automatically offered to the rest of us.

3. My admiration of FTP’s execution of the “learn chat and play with the pros” angle is one I have expressed repeatedly.  Like here. There are elements of it that I think they have left out for no good reason, but in essence I have always said that they were the only site that found a way to exploit it… profitably. 
It appears that assessment wasn’t as good as I thought. But the position in the market as such is still a golden one.
I just don’t think Full Tilt can hold on to it anymore. With Phil Ivey, the most important player on their roster and the epitome of poker professionalism, leaving and the reputation of many of the other players of the older generation tainted, perhaps for life, it all falls to pieces. And even if they can piece it all back together again,  they now have to do keep it together without all the financial doping that has greased their high stakes games. The David Benyamine case has been known for years so I guess we we’ve all been very naïve to think that was an isolated incident

4. Another thing I doubt Full Tilt will be able to hang on to, is their gaming license. It’s now been almost a month since the Alderney Gambling Control Comission issued a statement claiming that they saw no reason to believe that FTP players’ funds were fundamentally threatened by Black Friday events.
A very interesting statement in a Kahnawakean kind of way. But Legislative developments in Europe have come much further than in the US. Rogue companies are already hunted in certain markets and a license from a rogue jurisdiction is not worth much. I honestly can’t see Alderney doing anything other than either kicking Full Tilt Poker to the curve or do nothing and find themselves black listed. Given the AGCC’s list of substantial clients, like PKR and Net Entertainment to mention two of them, they are in a precarious spot.

So what is this last out that guarantees that players can get their funds? Software. Plus some.

I still rank Full Tilt Software a clear first in terms of entertainment value and playability. From what I can gather it’s fairly agile and while FTP’s fully regulated business France is very small, its existence proves the FTP poker platform’s ability to be cloned and be compliant with stand alone, fully regulated market requirements. Based on what for example IGT ponied up for the entire Entraction operation and given some other price tags out there on other available platforms, I can definitely see someone paying the $150,000,000 Ivey claims FTP owes players (to my embarrassment I have no information that says otherwise) for FTP even if it is left floating with no gaming license, a tainted brand and a collapsed business.

Now, I am well aware that software superiority has not proven to be the edge I constantl y claim it can be. But as online poker companies are now finally coming to terms with how flawed the entire industry is and are finallybeginning to open up to ideas on how to revive not just the game itself but also their bottom lines, things like software, gamification, game development and  user experience will become key to winning markets.
And acquiring Full Tilt technology sounds like a very safe way to get right to the front lines.

Why Tony G would value FTP at some kind of fire sale at $30,000,000 is beyond me. Probably a sign of Tony G playing his usual multi-level business games. Surely he realizes that MGM can’t build better tech than that for thirty million.

Will it happen then?

A couple of months back I predicted that Full Tilt Poker’s management, once the hassles of having to adapt to stand alone markets would increase dramatically in Europe and the large gaming giants in the US started pushing for regulation on their side of the Atlantic, would make a graceful exit, be applauded for a good run and go on to do other things not wanting to risk ending up fighting a losing battle.
Boy did I underestimate their ambitions. Or, if you prefer the slanderous version, their egos.

Full Tilt Poker don’t seem to want to go anywhere. And until it is decided otherwise, neither is the $150,000,000 owed to players.

You simply don’t release the hostages until you’re safely in the helicopter.

  1. Shizzmoney
    June 8, 2011 at 1:15 am

    How bodog hasn’t bought/stolen the software has yet to amaze me.

    The site would BLOW UP if it did so; maybe that’s the reason. Their sports betting operation is just too much to give up in exchange for increased poker traffic (can could tip off an already ears pinned DOJ).

  2. Ben
    June 8, 2011 at 3:51 am

    Very informative post, thanks. Could I trouble you to provide cliffs notes or a link about the FTP/Benyamine scandal or other previous improprieties for those of us who were busy multitabling then.

  3. moshe D
    June 8, 2011 at 8:59 am

    funny how what seemed a super resilient company that can survive a potential US shotdown, suddenly appears so fragile…
    anyone dares to give an over/under til a massive blow up causes them to shrink to insignificnes? i say 4 months.

  4. Kim
    June 8, 2011 at 9:09 am

    –> Ben

    I only really have cliffnotes to pass on. Because I don’t remember the details.

    Benyamine busted his bankroll. Continued playing high stakes backed by FTP itself or, at least, key people within FTP.
    So he was playing on FTP with FTP money.
    Eventually ended up paying it back I believe.

    Whether it was one-off incident or the tip of an iceberg I leave for others to comment.

    I don’t think the fact that FTP claims that the likes of Ivy owes them money is necessarily related to borrowed funds used in high-stakes action.

  5. Fonzi
    June 13, 2011 at 3:14 pm

    The Benyamine case is not an isolated incident, it’s no secret that FTP has been keeping Mike Matasow afloat for years. It’s also probably the main reason he’s been talking shit about Ivey the last couple of weeks.

    The FTP mess runs way deeper than any of us know about. At this point, I just want players to be paid and have the company go belly up.

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