Poker Tour Ups the Ante

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By DAN COX


Staff Reporter

WPT Enterprises has struck a $1.3 million deal with Silicon Valley’s CyberArts to upgrade its Internet poker site.


The agreement keeps the Los Angeles-based WPT in the game; it had explored a sale earlier this year, in the game. And it ups the ante.


CyberArts has created a top-to-bottom redesign that will enable the WPTE to re-launch its World Poker Tour online gaming business and will make it available in more than 150 countries and territories worldwide.


“This relationship will make it possible for us to get to the market faster with a superior product,” said Steve Lipscomb, founder and chief executive of WPTE.


WPTE considered a sale after suffering through $5 million in losses in 2005. Lipscomb said that the company is still retaining investment bankers Thomas Weisel Partners LLC, but the focus is now on potential partnerships or acquisitions.


In addition to the increased capacity, Lipscomb sees the enhanced ability to control the site as critical.


The new site’s look and capabilities reflect WPTE leadership’s vision more than the one created by British online gaming system operator WagerWorks IGT, which previously handled the site. WPTE executives said the technology was outdated and would crash too frequently on the old site.


“We will be able to build a unique offering and control our own destiny,” Lipscomb said. The terms of the deal include an option to buy out CyberArts’ administration of the overhauled site for $2.7 million.


CyberArts Licensing LLC co-founder Ken Arnold says the reworking will enable WPTE to provide multi-language, multi-currency functionality around the globe. The foreign capabilities are crucial for the firm because that’s where revenue from the online gaming site is generated. In the U.S., where online betting is prohibited, visitors to the site play for free.



Good market bet?


Despite some volatility, some analysts think WPTE is a good bet. The firm saw bountiful first quarter earnings of $6.5 million, up 57 percent compared to a year earlier. Prospects look good for the coming quarter, as well. The online poker and casino had revenues of $911,000 in the first quarter this year, up from $700,000 in the same quarter last year.


The stock price is hovering at about $10, precipitously down from a 52-week high of $29.50. But four out of five Wall Street analysts listed on Yahoo’s finance site show a “buy” rating for the stock. The main reason for the optimism is the CyberArts deal.


“This deal will finally allow us the opportunity to innovate the online gaming experience and deliver a product worthy of the World Poker Tour brand,” Lipscomb said.


Maintaining the widely known World Poker Tour brand is extremely important, Lipscomb said, and the firm has tried to exploit it with an array of licensing deals, including scratch-off lottery tickets and partnerships with the Hands-On Mobile phone company.


One reason for last year’s stock slide was pending litigation between two cable TV channels. The Travel Channel, which currently carries the World Poker Tour, had sued EPSN to stop the sports network from negotiating a deal to steal it away.


The suit left WPTE in a costly limbo while it was producing a new show called the “Professional Poker Tour.” The uncertain status of the TV rights prevented WPTE from lining up a home for the show, Chief Financial Officer Todd Steele said. With no deal in place, the production costs had to be paid out of pocket.


In January, WPTE struck a one-year deal with Travel Channel for “World Poker Tour.” The show’s ratings appear to have hit a plateau, off from their peak, but still steady. The Travel Channel declined to take on the “Professional Poker Tour,” however. ESPN, which has since picked up other poker shows, has not come calling, so the WPTE is looking for another TV partner.


Lipscomb said that the proposed federal legislation that would ban the use of credit cards to pay for online wagering, passed by the House of Representatives last week, would have no effect on WPTE’s site, since there is no wagering capability for users in the United States.


Lipscomb is no fan of the prohibition on online wagering, however.


“It’s utterly nonsensical,” Lipscomb said. “This is happening. No one will stop it from happening.”


Calvin Ayre, chief executive for one of the world’s largest online gaming firms, Bodog, is confident that online gambling will be made legal within the next five years.


Ayre said that the American Gaming Association must develop a position that would align the broad U.S. gaming industry’s divergent sectors, which also include casinos and horse racing, and then approach Congress. The industry’s largest lobby has opposed online gambling in the past but recently backed a study of the feasibility of regulating it.


“It makes more sense to create a better dialogue with the AGA (American Gaming Association),” Ayre said.


All of the executives agreed that the revenues from online gambling would skyrocket if the current ban were overturned.


“If that happened, we would be addressing a market that would be 80 percent bigger or more than what it currently is,” WPTE’s Steele said. “It would be an extremely dramatic shift.”

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