Pokerstars

The Saga of Paradise Poker

Doing Everything "Right" But Still Ending Up Wrong

Paradise Poker"The only obligation which I have a right to assume is to do at any time what I think right." - Henry David Thoreau

Except for transition times, in the history of online poker the most popular cardroom has always been significantly larger than its next most popular competitor:

1) Planet Poker was the first and only cardroom for a time.

2) Paradise Poker had vastly superior software to Planet's, which was eventually even hacked.

3) Party Poker enormously benefitted from spokesperson Mike Sexton also being the face of the World Poker Tour, which for quite some time allowed Party to exclusively run the only TV ads on the WPT television program.

4) PokerStars superior software brought virtually every innovation that came to the online poker world during the boom, while also having a deliberate plan to diversify into other languages and markets besides the United States.

While I'll write more about Party and especially PokerStars elsewhere, here I want to give credit where credit is due. If it wasn't for Paradise doing what they did so well, it is unlikely as many competitors would have sprung up wanting to get a piece of the pie. One interesting aspect of this though is that much of what Paradise did "right" ended up being wrong...

Simultaneous with my contributions to the creation and development of PokerStars beginning circa January 2001, as an independent website owner I was also closely involved with Paradise Poker, both as a player and as their largest source of website traffic. Since I took only paid-in-advance advertising from Paradise, I wasn't what would be defined today as an "affiliate", but for all practical purposes at different times my websites were the largest traffic source for Paradise when they were the industry leader, Party when they were the industry leader and PokerStars when they were the industry leader. (Not all the time, but for some months or years with all of them.)

Additionally, I was the first member of a group of sponsored tournament players that Paradise put together. (Phil Hellmuth and Annie Duke were already associated with UltimateBet, but they had a closer relationship to that site than the Paradise "we'll pay you to wear a shirt" team.) Teams of sponsored (and "wear a shirt at this final table") players are now common... even though the return-on-investment on the vast majority of these player relationships is utterly abysmal.

In short, most sponsored player deals are worthless. Unless 1) you do the amount of work and have the profile of Daniel Negreanu, or 2) have a name like Chris Moneymaker and win the WSOP main event, or 3) are one of the most prominent players in some non-English speaking country like Brazil or Spain... you wearing the shirt of a cardroom probably brings them close to zilch value.

Paradise knew this, and thus did the "right" thing. None of the sponsored player deals from Paradise exceeded $20,000 for a year. In early 2002 Paradise spent two months trying to get Phil Ivey (then with just one WSOP title) to sign for $25,000 plus incentives. If he would have made that deal, he may never have signed to be part of the Full Tilt group -- especially since 2002 was the year Ivey won three WSOP bracelets. It's hard to imagine that winning three bracelets as a sponsored player would not have led to a longer term, bigger money deal. (Coincidentally the Ivey/Paradise negotiations were going back and forth at about the same time as the negotiations between Chris Ferguson/PokerStars.)

This is one example of doing something right, recognizing player deals in general are a waste of money, but if a specific one had been made, subsequent events could very well have been quite different.

When it was just Paradise and Planet, Paradise had 90% of the market. When UltimateBet, Party and PokerStars came along -- but before the WPT and Chris Moneymaker -- Paradise still had about two-thirds of the market. This was an interesting time to be part of the online poker world, because Paradise lead by example. In other words, if you didn't do things better than Paradise, why would anyone play at your cardroom?

With PokerStars, this thought was always with us. Doing things only as well as Paradise was the road to failure. The only path to be a peer with Paradise was to do things better than they did.

Paradise did not offer no limit or pot limit games, so PokerStars' software made it possible to play big bet games. Paradise did not offer multi-table tournaments, so PokerStars software did. For a long time Paradise's biggest limit was capped at $20/40, so PokerStars (and Party and UB) offered $30/60 and higher limits.

Paradise took the position that the "right" thing to do included protecting players from themselves. They already had goofballs complaining about "action flops" and "can't make a hand hold up" and other bad beat whining, but these complaints were mitigated by the limited impact possible while playing limit poker in non-multitable tournament settings. In other words, losing one hand is never going to be that truly big of a monetary deal if playing limit ring games $20/40 or smaller or a one-table tournament.

When you have 90% of the market and only one competitor, you can do "protect players from themselves" things. But when you have multiple aggressive competitors who want to set themselves apart, nanny-ist protection becomes impossible. Paradise resisted these changes longer than they should have. In short, if Paradise had offered big bet games, multi-table tournaments and player note functions, what would even be the point of developing PokerStars, except perhaps hoping to fluke into a marketing goldmine like Chris Moneymaker. What is "right" when you have a near monopoly is not right when you have a pack of hungry wolves fighting for your scraps.

(When PokerStars introduced large multitable tournaments, it became clear that multitable tournaments could be profitable for the cardroom while also somewhat "protecting" players from their worst impulses. Most tournaments have mundane buy-ins. A single tournament entry will seldom destroy the bankroll of a player. In contrast, new players in particular can sometimes lose their entire online bankroll in a single big bet game pot or playing in games with sky-high limits. So, players in fact didn't ever need to be protected from multitable tournaments. Paradise wasn't "right" about that.)

When I opened my first website, I emailed Paradise asking them to advertise. They had never done this before, but when I said pay whatever you want for three months, they took the leap of faith and gave me literally ten times what I was hoping for. Since in short order I was their largest source of web traffic, they actually made a fortune from our deal. This cooperative attitude was another thing that Paradise did "right". At the same time, they also understood that while new players were the lifeblood of an online cardroom, there was also great value in advertising in places that would get players to not just play, but to play more.

This cooperative attitude lead to another thing Paradise did "right" that went horribly wrong: advertising on the World Poker Tour. Party had these advertisements to themselves for a few months and had grown dramatically. In early October 2003, Paradise made a deal to pay $3.5 million for over 300 advertisements on World Poker Tour over a period of six months. Paradise paid in full, in advance, but only a few ads ever appeared. The same month they made the deal with Paradise, in response to a US Department of Justice letter, the Travel Channel stopped running commercials from online cardrooms. Then, Paradise lost their $3,500,000 when it was seized by US Marshals. So, not only was it bad for Paradise that Party Poker got the benefit of exclusive commercials for months, since Party nor the other cardrooms had negotiated such major paid in advance deal, only Paradise suffered such a large cash loss.

The final nail in the Paradise coffin that they did "right" was to sell the cardroom to a publicly traded company, Sportingbet. For most people, it is certainly easier to trust an entity traded on a major stock exchange rather than a company with no clear accountability. But then the Unlawful Internet Gambling Enforcement Act became law in the United States in 2006, and like the other publicly-traded gambling companies, Sportingbet withdrew from doing business with US customers. Since its player base was heavily US-centric, Paradise only survived as a mere shell of what it had been previously.

My business philosophy with my own sites and advocating with PokerStars has been to do things better than everyone else. Do it best, do it better, do it right. But the saga of Paradise Poker shows us doing things right sometimes doesn't end up right.

See also A Tale of Two Cardrooms: PokerStars vs Full Tilt Business Choices Pre-Black Friday