What the Economic Crash Means for Poker (Part I)

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Economic Crash A provocative cover story by writer Richard Florida in current issue of The Atlantic magazine entitled, “How the Crash will Reshape America,” got me thinking about how the global economic mess could affect the poker industry. The trouble is few experts are qualified to offer any credible opinions. Prognosticators in the mainstream media know next to nothing about the gambling industry. Financiers and business forecasters have proven to be utterly worthless in predicting economic chaos or prescribing a solution. Even those decorated with academic credentials lack any real understanding of our unique subculture.

Accordingly, in order to foresee what might be ahead for many of us, I sought the opinions of individuals who possess real world experience combined with substantial knowledge about the poker industry. I wanted to learn what they predict will happen to global economic markets, the U.S. economy, the gambling sector, and the poker industry. That’s an ambitious agenda for a poker column and a lot of territory to cover.

The assembled panel consisted of variety of successful people, each with unique insights, including an attorney, a former management consultant turned author, a tax accountant, a psychologist, a high-tech consultant, a computer programmer, a college professor, a former online poker executive, and a casino industry observer. Some of these names will be known to you; others will not. All who responded have strong opinions, which sometimes conflict. Their only common trait is that each expert has been playing poker for many years and follows the poker industry closely. This is a two-part series.

Nick Christenson
Nick Christenson has been a fixture in the information technology field for over 15 years. He has written over 250 reviews of gambling books, many of which have been published in Poker Player Magazine. Over a decade ago, Christenson founded and continues to oversee one of the most fascinating websites on Las Vegas and the gambling industry, the “Las Vegas Casino Death Watch.” He also co-wrote “Winning Strategies for No-Limit Hold’em.” Christenson lives in Las Vegas.

I have been tracking Las Vegas casino openings and closings for over a decade. Generally, Las Vegas sees a greater number of casino closings during good times than bad. Casinos close more often when someone wants to replace them with something better. Even in really poor economic conditions, a Las Vegas casino will usually make enough money to justify keeping it operating.

Of course, we have already seen Black Gaming essentially close down the Oasis Casino in Mesquite, Nevada. We’ve also seen a fair number of casinos close in Reno over the last eight years. We could easily see more closings in these and similar markets that have and will be especially hard-hit by the economic downturn. If times wind up being really difficult, we may see a closing or two in downtown Las Vegas; a Strip property throwing in the towel is not beyond the realm of possibilities, either, but I don’t expect wholesale closings in Las Vegas.

This doesn’t mean that it will be smooth sailing for casino owners. I’d set the line on the number of corporate bankruptcies by companies with a Las Vegas presence at three. In most cases, though, I don’t expect this to cause casino closings, although as with nearly every other corporate sector, several rounds of “belt tightening” are all but certain.

How will this affect the Las Vegas poker scene? During the poker boom of the early part of this decade, there was a mad rush for casinos to add poker rooms as quickly as possible. Since the poker wave has crested, we’ve already seen the beginnings of a consolidation in Las Vegas. I expect this trend to continue, with several, perhaps many, of the smaller rooms closing over the next few years. Still though, even if the economic downturn turns into a serious depression, I’d still don’t expect the number of poker tables in Las Vegas to drop below the numbers that existed 10 years ago.

Perry Friedman
Perry Friedman is an online gaming programmer, World Series of Poker bracelet winner, and self-described “raconteur.” He is also a sponsored pro at Full Tilt Poker. Friedman is a graduate of Stanford University and now lives in Las Vegas.

Living in Las Vegas, I have seen the effects of the current downturn firsthand. Casinos have been hit pretty hard. Several of the major casinos are in danger of bankruptcy or restructuring. Some casino projects have stalled, while others have been completely abandoned. You can’t read the newspaper or watch local news without more bad news being reported about the casino industry. People are still coming to Vegas, but they aren’t spending as much while they’re here as before.

On the bright side, gambling in general tends to be pretty resilient when it comes to economic downturns. There is always the “lottery effect,” where gambling is a way out for people who perceive themselves as having no other alternatives. However, those people aren’t about to head to Las Vegas to gamble — they will instead play locally (whether it’s the lottery, horse betting, online gambling, or whatever is available to them).

As far as poker goes, live poker is seeing the same downturn. The recreational poker player now has less expendable income and cash game poker doesn’t have that same “lottery effect.” On the flip side, tournament poker does have that big reward potential. I believe tournaments will suffer less than cash games. Tournament poker was already seeing a slight decline prior to the economic downturn, mostly due to the huge peak it hit in the post-Moneymaker era. I expect this year’s World Series of Poker to do about the same numbers as it did last year. I think that as the economy rebounds, the poker industry will begin to rise again. There is also hope with the new Administration in place that the regulatory environment may change for online poker, which could lead to a new resurgence in live poker as well.