The end of the online poker pro?

In the beginning of online poker, there was no rakeback. There was only rake. In the days of Planet, Paradise, and Party Poker, no one thought that 5% to $3 was a great deal, but hey, it was the same or less than most brick-and-mortar rooms were charging. It didn't really matter; the games were so good. If you played poker seriously in the era where Chris Moneymaker, Greg Raymer, Joe Hachem or Jamie Gold were reigning world champions, then money was falling out of the sky and landing in your bank account.

It was, of course, the affiliate system that led to what we now know as rakeback. Poker sites wanted more players, so they turned to affiliates. Savvy affiliates said that they wanted lifetime value players, not to be played a flat CPA. Savvy players then realized that affiliates were making buckets of money from the rake they were paying, and in turn they demanded rakeback.

PokerStars was intelligent in proactively doing an end-around this process. They knew that people were hungry for rakeback and that they would circumvent the rules to get it, so they created the VIP program. And their tiered system was brilliant. The more you played, the higher your status. The higher your status, the more you earned. So you wanted to play more and more, a positive feedback loop that never seemed to end. At least, until this week. This week, Stars pulled out the rug on its highest volume players. With its announced VIP changes to 2016, PokerStars is being very obvious in what they want to do long-term. Stars no longer considers poker pros making 50k or more per year to be partners in their business. Rather the statement made is that poker pros are leeches on our games, parasites on our idyllic poker economy.

Pulling out the rug on the 2015 Supernova Elites in such a fashion is not something that sits well with me. From all indicators, these people entered into a quasi-contract with Stars that they would get an expected amount of effective rakeback for 2016. There certainly would not be the backlash that there is in the poker community right now if they announced these changes 12 months ahead of time. By announcing the changes so late in the year, they continued to make the revenue line look good for investors, keeping the stock price high. Who knows what the volume in 2015 would have looked like had they made this announcement in January? Stars is now under immense pressure from its players to pull back from their announced changes. I hope they do bow to that pressure, but don't be surprised if they don't. This isn't the Scheinberg era, folks.

In any case, the implications the new VIP program are huge. The death of the online poker pro has been predicted many times, but this one is as legit as it comes. It won't be an explosive implosion; the games will not suddenly dry up on January 1, 2016. But at least in the short term, there will be a significant contraction of the money available to win (across all limits) and the marginal pros won't survive. If you are an online poker pro, and you have not made at least 100k/year in the last two years, you should strongly consider applying for a real job somewhere. If you are an aspiring poker pro and haven't quite made the leap yet, you need to look long and hard about whether you really want to sign up for this grind. Stars' goal is to create an equilibrium where everyone is a small loser. It is an uphill battle when you are fighting against the most powerful organization in poker.

I have some further thoughts on how this will all shake down, but I'll have to save them for a Part 2. Tomorrow though I'll be talking about this more on this week's Pokercast (sponsored by the PokerStars VIP Club!) though, and hope to have that Part 2 up soon.

Edit: I want to clarify that with the exception of honouring its previously advertised 2016 commitments, I'm not taking a position on the rightness or wrongness of PokerStars devaluing their VIP program. They have the right (and responsibility) to control that program as they see fit and to maximize the long-term profits of their company. Stars does not owe poker players the right to make a living at their tables. They do, in my view, have a responsibility to deliver on the promises made to them in 2015. But aside from these commitments, I am not taking any sort of moral position on the changes.

Is regulation to blame for the PokerStars rake hike?

The biggest news of the month in online poker and indeed online gaming is PokerStars increasing its rake across a number of ring games and SNGs. Unsurprisingly, most of the online poker community is up in arms about it. While I don't play very much poker these days, I do see it as another step towards the eventual extinction of the online poker pro, at least as we know it now. In the economic parlance, Amaya/PokerStars are now capturing back a ton of the rents that poker players have held for a long time.

Among others, Steve Ruddock of Online Poker Report, has mentioned that the policy changes of the new-look austere PokerStars is part of the cost of regulation. Ruddock writes,

[O]ver the past five or so years, more and more countries have legalized and regulated online poker. This has forced operators to apply for licensing in different jurisdictions, resulting in sometimes-hefty licensing fees and local tax bills. 

These expenses were virtually nonexistent in the unregulated online poker markets during the poker boom.

Ruddock also notes that Amaya pulled out of 30 grey markets (albeit mostly small poker markets) and that would cost some revenue.

I've seen the following on 2+2 written many times in many different ways, and it rings true: "You guys wanted regulated poker, and now you're getting it."

Regulation always costs money, and costs are always passed down to the consumer, in this case, the poker player. What's more is that the costs of regulation are not always obvious. Taxes, license fees, and lost revenue from exiting grey markets are obvious. But I suspect the average poker player (or journalist) does not have any idea how much regulation truly costs the online poker industry.

The truth is, the regulatory bodies attempting to regulate online poker do not understand it very well, if at all. The most recent example came of this is when PokerStars was required (and then apparently, not required) to remove its auto rebuy feature in the UK. Players hated this change, with good reason: players immediately realized there would be situations where they would pay the blinds, get stacked on a hand, then to add insult to injury, miss free hands. But this is the kind of thing that only a poker player would understand. A regulator who does not play poker in any serious way sees only that an auto rebuy feature bypasses the psychological hurdle of needing to click to reload, and could thereby potentially exacerbate problem gambling.

The auto rebuy regulation got a lot of press, but it is downright sensible compared to many of the regulations that I know exist in Nevada and New Jersey. While I was working for Ultimate Gaming, we were prevented from launching Omaha games in Nevada because they required a separate game tab to distinguish Hold'em from Omaha. Because of the way Ultimate Poker's software worked, this was not as trivial a change as it sounds, and Omaha games were delayed.  A situation came up in New Jersey where the Division of Gaming Enforcement were on our case over a promotion where we gave away t-shirts on Twitter. Seriously, t-shirts. If they can give sites a hard time over t-shirt giveaways, you can be assured that quite a lot of more substantive promotions got either shitcanned or altered beyond recognition.

These things may seem small, but they cost the companies a lot of money cumulatively. They also create technological overhead for the product development team. The end result is a poorer experience for the players, which means players play less, which means the liquidity pool shrinks, and the cycle repeats. The cost of regulation is very high, and much of it cannot be measured on a balance sheet. It manifests in promotions that never run, players that never play, games that never get started, extra payroll expense, redundant and replicated work, and more. As you can see, the costs of regulation go beyond simply higher rake.

Here's another insidious thing about onerous regulations, whether ridiculous or legitimate. It's that once regulations are established, the existing operators are often incentivized to ensure they stick around. If some regulator requires that the river card must be exactly 17 pixels from the turn card or that the geolocation be accurate to 75 metres instead of 100, then once the operator has made that required change, they actually want it to stay, because it creates more future work for their competitors. Thus the regulation game, at times, is simply throwing up one barrier after another at your opponent like an action movie chase scene. As soon as one company passes the apple cart in the crowded alley, they try to knock it over to trip up the next guy.

(By the way, this is not unique to online poker. One need only look at what the taxi companies are presently doing in Las Vegas. After months of desperately trying to keep Uber out of Las Vegas and protecting their regulated monopoly, Uber is now operational. The result? The taxi companies are on a rampage of bullying and intimidation, including this disgusting case where a cab company employee hired an Uber, contacted the taxi authority, who in turn showed up in bulletproof vests and masks posing as police officers.

This is an extreme example of government-protected business running amok, of course, but it is to the point: when companies are granted a special legal privilege to operate in an arena, they will do anything to protect that status against outside competitors.)

As should be fairly apparent, very little of this actually benefits the consumers. I should say that the majority of the online poker regulations that I have come across are reasonable, but they are also things that any legitimate operator would do anyways. At no time did I ever come across a regulation and think, "wow, that's a great idea, and no one is doing that!" Again, it's not reasonable to expect them to - they're not poker players and they don't understand poker.

It isn't all hopeless, of course. There are certainly some people who will be attracted to regulated poker who might not have played if the situation were the same as the mid-2000s. There is the hope of legalized poker in major markets like California, shared liquidity pools across state lines, and so on. But I cannot see the monstrous profits of online grinders from 2004-2008 ever coming back. I empathize with the individuals who have invested so much into developing their poker game and playing for a living. I think this tweet from Mike "Timex" McDonald encapsulates how many online pros must be feeling (obviously -- it got 89 retweets).

Spend years branding poker as a "skill game". Analyze winrates of top players. Set rake to be slightly more. Our job is now a carnival game
— Mike McDonald (@MikeMcDonald89) October 30, 2014

As seemingly unfair as this moving of the goalposts seems to the players, we all knew the era of big money for the 90th-98th percentile players would not last forever. I don't think the era of the poker pro is done with entirely, but if I were a poker pro, I'd be thinking long and hard about transitioning to the real world. Might I make a recommendation?

[Edit: A few hours after this posted, Ultimate Gaming announced it is closing operations in Nevada. Sadly, a lot of good people there will lose jobs because of it.]

PokerListings "Easy Game" mini-documentary

PokerListings.com's Matt Showell approached me a few months ago to say he wanted to feature me in one of their mini-documentaries. Egotist that I am, I couldn't say no! Matt messaged me to let me know that the video is now online, and here it is.


If the above doesn't work, you can always click through to the original page here.

I think the documentary turned out great and I'm really happy with it! In particular I like the part where I get to talk about my motivations and reasoning for doing this. Matt was super easy to work with and the whole thing was far more fun than work.

I'm joining Ultimate Poker!

I've teased a couple times on this blog over the last year that I had something in the pipeline brewing. It's with great pleasure that today I get to announce it.

I have joined the Ultimate Poker team.

For those of you who don't know, Ultimate Poker is the newest venture out of Ultimate Gaming. Ultimate Gaming was one of the first companies to receive an online poker license in Nevada, way back in the fall of 2012. We are also majority-owned by Station Casinos and are partnered up with the UFC (who are of course, also owned by the Fertitta brothers).

It should seem fairly obvious that this is a pretty good place for an MMA-obsessed poker pro to land, from both my side and theirs.

I was first contacted with the idea of joining Ultimate Poker almost one year ago to the day. Since then it's been in my head the whole time. It was a struggle to decide though. I thought, "hey, my life as a poker pro/MMA nerd is great. Why mess with something that isn't broken?"

For the last two years (when I started to seriously get into MMA), my life has been a repeat of: wake up, work out, eat, nap, train MMA, eat again, and sleep - and I simply fill the gaps with a small amount of online grinding. Once in a while when there's an exciting major tournament somewhere cool, I go to that -- and try to find a fight gym worth training at as well.

Despite how content I was with everything, I still couldn't shake the idea. I talked to a few close and trusted friends and they thought it was a great opportunity for me. I thought back to my PokerStars days and how much fun it was to be part of a poker startup, to watch a business grow from infancy into something massive and awesome. At the same time, playing poker started to become less exciting to me. Ten WSOP cashes is great and all, but when you cash ten times, that's a ton of hours at the poker table (and no real big payoff, in my case). In the fall, I played only five live tournaments and had a 1st, 2nd and 4th. I ran super-hot in that period and yet I still wasn't sure if I wanted to play poker for a living. I thought, "if I'm not super-excited about poker when I'm running good, I'm a little worried what's going to happen when I start running bad..."

So I kept coming back to the Ultimate Poker thing. I had been mostly talking with their Chief Marketing Officer, Joe Versaci. Joe was North American Marketing Director at PokerStars for many years. Our respective Stars careers barely overlapped, but we know many of the same people, and the people I talked to all said great things about him. Joe not only wanted me because I had past experience starting up the PokerStars support team, but he also loved the idea that I'm a poker player who lives and breathes MMA and the UFC. So I said to Joe that I'd love to work for the company -- as long as you can promise that I'll still be able to train MMA the way I'm used to. When it came to salary, I didn't ask for a dollar more than they were offering; I only wanted the freedom. He agreed, and in fact told me that not only supported, but actually wanted me to fight and play major poker tournaments as it would be great for our brand. And that's why I'm sitting here with a real j-o-b in an actual o-f-f-i-c-e for the first time in nine years.

On one hand, it's a huge change for me. I know from experience that being part of a startup is crazy work. Stuff always goes wrong and there are always challenges and hurdles you didn't anticipate. But more than anything I'm excited. Excited to be hopefully a good team player and leader. Our Vegas office is a couple dozen employees and they're an awesome group who has welcomed me. We have a lot of fun in the office throwing around poker ideas as we stand on the precipice of the first legal real-money hand of online poker in the United States. There's so much talent here, all channeled towards the same goal, that I can't imagine anything other than success and good times.

As for what you'll be seeing from me: more of the same! Any time anyone ever sees me at a poker tournament, they want to know when I'll be fighting again. Well, I've now relocated (yes, legally) to the biggest fight town in the world. So, let's hope the answer to that question is, "soon!" And I'll still be at the WSOP; look for me rocking the Ultimate Poker gear at the tables. I might not have month-long training vacations in Thailand or be able to fly down to Australia or Europe as much, but I'll still be in the poker scene.

One of the nice things about having been successful and reasonably smart with my money over the years is that I only have to do this as long as it's fun, and if it stops being fun, I'll go do something else. That goes for poker, MMA, or working in a poker startup. But I'm loving the people and the environment so far, and I'm excited to be a part of something big. They say that when one door closes, another opens. But I've walked through a new door here, and I still get to keep the other ones open. Good deal for me!

But that's enough self-indulgent writing for now. If you'll excuse me, there's work to do to get Hand #1 dealt!

Oh, I play poker sometimes too: A recap of my WCOOP main event

After the big high of my debut fight, I had a chance this weekend to put the wraps on what would have been by far the most epic 9-day stretch of my life by winning the main event of the PokerStars WCOOP and the $1.4+ million that came with that title. Unfortunately, I had to settle for 36th place and a substantially less impressive $29286.

I was surprised by truly how grueling the event was. The 13 hours of play on Day 1 were very mentally taxing and felt more like two days of a live event. The experience was stressful enough that my skin actually broke out the next morning. And my Day 1 wasn't even really filled with difficult decisions. And I only played one table. I'm not really sure as to why it is the case that I find online tournaments so grueling compared to live tournaments. Perhaps it's the rushed 5-minute breaks. Or maybe it's the increased frequency with which one plays big, important pots. In a live tournament you might only play 1-2 really significant, stressful pots in any given hour, but obviously online (even one-tabling) you might play closer to a half-dozen.

It's also, of course, less fun to go deep in a big online tournament than a live one, because of the absence of a support network (putting aside random shouting in the chatbox or on Twitter). There are no dinner breaks with friends or encouragement from the rail. There isn't really even that weird and awkward sense of camaraderie one develops with one's tablemates, those very same people whose dreams you are trying to crush.

In any case, by the end of the long day, I was fairly drained. I did manage to squeeze some of my good practices from training for the fight into the 5-minute breaks. In general, I want to start bringing my healthy lifestyle approach for MMA into the poker world, by using deep breathing, exercise and better eating habits to feel better and less stressed while playing, which should ultimately result in better decision-making. I feel like readers of this blog are going to think I'm becoming this total hippie, so I'll emphasize that it's still far more important to play well and have technical skill (in both poker and in fighting), than it is to do all these other lifestyle things. But these things can significantly improve performance and have negligible cost, so they're certainly worth doing.

The other thing I did that was new for today was turning off all distractions. At the WSOP in 2009 and 2010 I became known among media and players as the guy who was always reading his Kindle at the table, and I almost never play live tournaments without making sure my iPod is full of fresh, new podcasts. In online tournaments I'm even worse, between the easy availability of chat, Twitter, Facebook, RSS feeds, blogs and just general dicking around on the web. But for an event as big as the WCOOP main, I decided it was worthwhile to embrace the boredom and turn off all of these things. The only things loaded on my computer would be the PokerStars client, PokerTracker and PokerStove, and the only non-poker tools I allowed were iTunes and my cell phone (which I mostly ignored). I don't feel like it helped me that much with information tracking because my mind still wandered a great deal, but where it did protect me was that I didn't make any clear blunders (misreading bet sizes or stack sizes and things of that nature) because I was never distracted by anything other than my own thoughts.

As you might guess, I feel I played pretty well. Since getting back from the WSOP, I've returned to my roots as a cash-game player, and up until the fight I was trying to squeeze in an hour or two of 5/10 NL cash on HeroPoker every day. My results there have been strong but nothing special, but more importantly it's gotten me back to feeling confident playing 50-100 BB NLHE. The tournament landscape is so much different from the mid-stakes cash one, though. I have this theory that a lot of this small 4-bet/5-bet/6-bet stuff that is occurring is not part of optimal strategy but is in fact borne of an unwillingness of many tournament players to play flops. I think people doing this would be better served making more calls and large jams. I will disclaim this by saying I do think that this is a very unpopular opinion in the tournament world and that there are obviously a lot of very talented and successful players who would disagree strongly with that statement.

Going deeper into hand analysis is not really my style; I played a couple of questionable hands that I posted on my Twitter, and I do wish I could take one action back on my final hand. But again, I'm happy with how I played and I feel like even though I've taken a few weeks off to prepare for the fight, that my NL game is as strong as it's ever been. I'll be going to WSOPE in Cannes -- which I've been looking forward to that ever since the 3rd week of training camp -- so this run, while disappointing, at least gives some confidence going forward. Yesterday was, I think, the deepest I've gone in a tournament that paid over $1 million for first. Maybe in a couple weeks I get to join that elusive million-dollar club!