PartyGaming / Bwin Merger – Good or Bad for Poker?

Ever since news leaked out about a possible PartyGaming / Bwin I’ve seen the story covered on several poker websites and have gotten the usual round of “So what do you think this means?” emails. I have no inside knowledge of this whatsoever other than having worked for Party about a year ago and having done business with Ongame so what follows is in no way, shape, or form authoritative. It’s just my impressions as an innocent bystander.

First off, I think it needs to be made clear up-front that PartyGaming and PartyPoker are not the same thing. PartyGaming is the parent company and as such also has PartyCasino, PartyBingo, PartyGammon, PartyBets, Moneybookers, PartyPoker, as well as several other sites going. I want to stress that because many people are looking at this primarily as a poker merger when in reality it is anything but.

Bwin is primarily a sportsbook. Currently it appears PartyGaming is attempting to shore up some of its products via acquisitions such as the recent purchase of Cashcade which runs the popular bingo site Foxy Bingo. I would have to imagine that any merger between Bwin and PartyGaming is primarily to benefit the sports book business.

There’s also a perception that Bwin would benefit from PartyGaming’s PartyCasino brand which is likely true. PartyCasino has been growing very well over the last few years and currently accounts for over half of PartyGaming’s revenues.

With that part out of the way, let’s look at the poker side. Party would also pick up Ongame as part of the deal. Ongame’s a respectable poker network with some decent skins but the recent player reaction to their summer P5 software release has seen their numbers suffer a bit.

Party could benefit from merging the two together as both could use a healthy liquidity kick but then that introduces the age-old skin problem that Party paid quite dearly to get itself out of several years back. Ongame has already had to slap a few wrists when skins were offering under the table rakeback and/or private loyalty schemes that exceeded Ongame’s limits. Would Party want to merge itself into that pool and start playing by network rules? That remains to be seen.

Certainly Party’s CEO, Jim Ryan, has been around the network world before so none of it will be new to him. And according to the sites I’ve read it’s being whispered that he would head any new PartyGaming/Bwin entity. How the rest of the management structure shapes out will be interesting.

But where exactly are the synergies? Unfortunately there are few. And that will likely always be the case when two poker rooms merge. Player bases overlap, job skills overlap, technologies overlap.

Synergy is often a code word for layoffs. And with PartyGaming having had multiple rounds of layoffs nearly every year since 2006 the knowledge that more will be forthcoming might push some of their best and brightest to seek greener pastures on their own terms. Regardless it is always a pull on morale and tends to leave the entire company in limbo mode until everyone knows whether they have a job or not.

That’s not something unique to this deal or online poker either. I’ve seen this in many different industries. Everyone is talking to recruiters, sprucing up the resume, and taking interviews. Nobody wants to commit to any long term plans because they have no idea if they’re even going to be around or they don’t want their exit impeded by the fact that they’re heading a major project and feel a moral obligation to see it through. Plus you don’t even know if your project will see completion because once the company comes out with the restructuring plan your project may fall under the axe. So everyone sort of sits around doing only what’s necessary while they wait for the verdict. The longer the management team takes to finalize their plans the longer the company sits dead in the water.

That’s one of the reasons that most companies downplay or deny merger talks (as Party and Bwin are doing now). They don’t want their companies to go into this limbo zone as everyone begins to contemplate what it means to them.

The one potential bright spot could be Bwin’s Ongame network. Back in 2008 Party announced that they wanted to get into the network operations business and this would give them a jumpstart. On the other hand, Ongame’s existing skins and potential new skins (or crossovers moving from another network) might have second thoughts considering Party’s last foray into operating a network which ended in them cutting off the skins from the PartyPoker customers which resulted in a collapse of the network and lawsuits.

That being said, very few of the management team that made the decision to cut off the skins is still with the company. Jim Ryan has some credibility in the network space and could be seen as someone the skins can trust even if they are hesitant about PartyGaming.

If it sounds as if I’m being grim . . . well, I am and I’m not. On one hand, I think consolidation is necessary and inevitable. It’s probably the best thing for the industry at this phase in its development. On the other hand, merging two major brands is not an easy task and could distract them at a time when they can’t really afford to be distracted. On top of that is the fact that the consolidation of online poker rooms will give them a boost but it’s unlikely even this size of a merger would create a seismic shift in the online poker scene.

A combined Bwin / PartyPoker would basically take 4th place PartyPoker and put them only slightly ahead of 3rd place iPoker (assuming they combined their players onto one network). They still wouldn’t even be half the size of 2nd place Full Tilt Poker. Significant to be sure but it doesn’t really change the overall online poker landscape too dramatically.

So, to that extent, it’s probably better to focus on what this means for PartyGaming and Bwin in the sports book and casino businesses than it does to look at it as a poker event. I’ll leave it to experts in those two businesses to comment.