Malcolm Graham, CEO of the online poker company PKR and chairman of the United States Online Gaming Association, was in town last month to talk about the industry and demonstrate how online poker works.
Tell me about PKR.
We’re licensed in the UK, in Albany between the Channel Islands, and in France and Italy. We are one of a handful of operators who have licenses across all the Europe territories where you can have a license. In Europe, certainly the legislatures have embraced online poker as a legitimate way to manage online gaming and raise some tax revenues.
The UK has been pretty liberal towards online poker for awhile, and it’s been pretty prevalent for the last five or six years. …[It’s] been happening over the last 18 months pretty fast in Europe. The Danish government has passed legislation, we expect the Dutch to do that as well this year, potentially the Germans, also the Spanish.
Is there something cultural about that?
I think some population in the UK is uncomfortable with it. That’s no surprise. I don’t think they are quite as vocal about it as in the U.S. Most poker is played around a kitchen table, friends from college or school or whatever. It’s going on anyway. There does seem to be a lot of merit to a regulatory framework which protects citizens from underage consumers gaming or from people gaming beyond their means, ensuring the games are fair, the system is protected and secure, and, at the same time, raise some incremental tax revenues.The Italian authorities were very clear about it. Doing the regulatory thing was critical, but the rational was very much raising some tax revenues, as with the French authorities. They introduce it with slightly different nuances depending on which country. It would be impossible for the Europeans to structure that type of legislation across all the countries, much to our frustration, but there is no doubt the broad principles are the same.
To give you some scale of the business happening right now in North America, if I go to Google and type in “online poker,” not surprisingly, Google fires you a whole host of online poker businesses: Full-Tilt, UB/Ultimate Bet, Doyle’s Room, Poker Stars, the biggest, most successful poker room in the world. They don’t allow North American players to participate. World Series of Poker, PokerStars.net, and Party Poker. That’s an historical thing. They left the North American market in 2006 when UIEGA [Unlawful Internet Gambling Enforcement Act] was passed.
What’s happening now? Well, it’s 10:30 on a Thursday morning. I go to Full Tilt’s poker room. [Describing man on screen] Chris Ferguson, aka Jesus Ferguson. He’s a maths [sic, British term] PhD.. Having a PhD. in maths is very helpful. Right now they have 95,000 people playing as we speak, on 30,000 tables, playing 4,000 tournaments. That’s generating a reasonable chunk of revenue. PokerStars, which is the biggest one in the world and does dominate the industry, have 245,000 people playing right now. We estimate the PokerStars’ daily revenues are between seven and eight million dollars, of which about 40-50 percent is U.S. PokerStars’ business does net nearly $2 billion in revenue. It is probably the most profitable business, relatively, in the world. It is more profitable than oil companies, it’s more profitable than Apple, in terms of the size of its business, because it pays no tax. It will pay them in Europe after March.
When you load up their software, register and put in your credit card, you confronted with a list of thousands and thousands of poker games. If you imagine a normal poker room in a casino has maybe 50 to 80 tables, this has 10,000 tables. It’s absolutely vast. I can pick any one of them. These are real cash games. If I’m playing on a table that has a $50 or $100 small bind/big bind, and the average pot is $300. If you got to a table that’s $2/$4 small bind/big bind, the average pot will be $30 to $50. Sixty and 100 hands per hour is normal, which is about two-and-a-half times faster than you get dealt in a casino, and they’re collecting 5 percent. You can play multiple tables at the same time, four tables, six tables. It’s hard. I’ve seen a video of people playing 30 PokerStars tables, four screens. Then you’re just playing the maths. It’s a very mechanical process. But if you just play perfect maths, you’ll make money. [Describing screen] That’s what the table looks like, somebody from Toledo, Plano, I have no idea where that is, Seoul, Boras, looks like it could be Peruvian, Gibraltar, Los Angeles. That was a random table. They’re playing for real money.
This is our product [new screen, looks like a video game], which is a very different proposition. We produce a much more interactive experience. People build their own avatar, it’s in 3D. You can play it if you live in North America, you just can’t play it for money. You can exclude people based on their location, based on some sophisticated GIOP software. We’ve always taken the view that online poker is not legal in the current regime.
The rules that the European governments have put in place are very strict in terms of deposit limits, loss limits, wager limits. We’ve not seen or heard an issue at all relating to online gaming in Europe. It’s not something I want to wake up to on a Sunday morning and find an article that says “I lost my house playing online poker at PKR.” That’s not in my interests at all. Because poker is a game of skill and a game of chance, the people who don’t have the wherewithal play for two or four cents, and the people who have the wherewithal tend to play for $10 to $20 dollars, people tend to find their own level pretty quickly. I tend to play the two-to-four-cent level.