Over the past several years, ring games on PokerStars have dried up at an increasingly rapid pace.
The latest data from Poker Industry Pro (paywall) via online poker trafficking site PokerScout.com, shows that 7-day average cash game traffic on the world’s largest dot-com network has plummeted to a nearly nine year low of approximately 11,500 players, representing a decline of over 50 percent in the past six years.
At face value, these figures appear to signify a death knell for PokerStars, precipitated by strict regulatory laws and declining interest in the game itself.
However, a counterargument can be made that the decline is merely a manifestation of a conscious strategy to shift emphasis away from cash games, and toward other online poker formats.
In truth, there’s merit to both arguments. The question is how much of the decline stems from Column A, and how much from Column B?
Cash game decline gains momentum
After growing by leaps and bounds in the years following the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), cash game liquidity on PokerStars has been in a tailspin since 2011.
Interestingly, the impact of Black Friday (April 15, 2011) was not as significant as some might believe. From July 2010 to July 2011, liquidity on PokerStars only dipped by 6.4 percent — the site’s second smallest decline of the past six years.
It is presumed that the increasing popularity of online poker in Europe, including Spain (which had yet to be segregated from the international player pool) prevented liquidity from taking a pronounced tumble.
2012 appeared like the beginning of the end, as cash game liquidity dipped by 11.7 percent year-on-year. Yet, the introduction of Zoom Poker in 2012 saw the average number of hands played per hour increase dramatically, and presumably offset the loss of liquidity.
After holding steady from July 2012 to July 2013, cash game traffic has taken a nosedive over the past three years, dropping 42.8 percent in that time, with the rate of decline accelerating in each year — from 8.9 percent in 2014 to 22.6 percent over the past twelve months.
Contributing factors to the downward trend
There is no catch-all that neatly explains the mass exodus away from PokerStars’ ring game tables over the past several years, and more notably, the last twelve months.
Instead, a number of factors each played a contributing role — we estimate the impact of each one.
Recently, new laws in smaller jurisdictions have either temporarily forced PokerStars to withdraw its services or severely limit the operator’s reach.
- In mid-2015, PokerStars pulled out of Portugal. The nation approved a bill regulating online poker in 2014, but numerous delays will prevent PokerStars from relaunching there until later this year.
- PokerStars has been forbidden from advertising in the Netherlands gray market since 2014. That should change soon, as offshore operators will be permitted to submit license applications beginning in early 2017, but a 29 percent tax rate will present a whole new set of challenges.
- Greece has imposed a 35 percent tax on online gaming revenue. This combined with unattractive tax laws has rendered online poker sites an inhospitable environment for players.
- Earlier this month, PokerStars left Slovenia. Just several days earlier, PokerStars cited business risks as the rationale for leaving Israel. In the case of Slovenia, PokerStars will likely return shortly after the new regulatory regime goes into effect later this year.
- New and restrictive regulatory regimes in Poland and the Czech Republic will make it difficult for licensed sites to attract customers away from unregulated sites.
Any one of the aforementioned changes to the regulatory landscape would have probably only had a marginal impact on PokerStars’ liquidity.
Taken together, and suddenly we’re talking about a population approaching 100 million — certainly enough to land a significant blow.
The ‘not so’ emergent U.S. market
Three years ago, only the most cloudy-eyed pessimists thought that U.S. regulated online poker would fail to expand by 2017. Yet, progress has moved along at a snail’s pace, with only Pennsylvania having a reasonable shot of launching operations within the next 12 to 18 months.
As it stands, PokerStars’ presence in the U.S. is limited to the New Jersey market. Even if (and it’s a big if) NJ follows through on a proposed plan to share liquidity with the United Kingdom, we’re talking about a 1.1 percent immediate increase to PokerStars’ cash game averages.
Granted, as more players gravitate to New Jersey to play with the international pool, this figure will undoubtedly swell — but hardly enough to offset the steep rate of decline that has plagued the dot-com cash game lobby.
So while the lack of movement in the U.S. isn’t a direct contributor to PokerStars’ decline, it is preventing the site from rebounding.
The Spin & Go effect
Analysts are quick to cite the screamingly popular Spin & Go format as the primary culprit behind the decline of cash game popularity on PokerStars, and for good reason:
- When the format debuted on dot-com in late September 2014, liquidity plummeted 10 percent in a week.
- Spin & Go fueled promotions have proven highly effective at driving players both to the site and away from their regular cash games.
Given this, there’s strong reason to believe that the growth of Spin & Go’s was responsible for most of the 18.8 percent decline incurred at the cash game tables from July 2014 to July 2015.
That’s good news for PokerStars, as it lends credence to the idea that any pronounced dip in liquidity was merely a byproduct of a calculated shift away from cash games, and toward greener pastures.
That being said, it’s much more difficult to blame Spin & Go’s for the even larger decline (22.6 percent) in cash game liquidity PokerStars experienced in the past year.
Yes, the operator has dedicated a growing percentage of its promotional spend to the format, but I’m hard pressed to believe that the recent marketing directive is having an even greater negative impact on cash game liquidity then the launch of Spin & Go’s themselves.
Are Spin & Go’s still a contributing factor to the decline of cash game traffic? Yes, but they’re probably no longer the primary driving force.
Changes to the business model
To say that PokerStars has changed its approach to online poker in the post-Amaya era would be underselling it. Why, just in the past 12 months, the site has:
- Phased out its highest VIP Club loyalty tier, SuperNova Elite.
- Capped rakeback at 30 percent (45 percent in 2016), down from just over 70 percent last year. Higher stakes players no longer receive rakeback.
- Changed its Sunday major schedule.
- Placed further third-party software restrictions.
- Increased rake on Spin & Go’s, hyper-turbo tournaments and heads-up ring games. PokerStars now also charges fees on rebuys and add-ons that are in line with the original fee.
- Introduced new promotions that reward luck over volume.
- Launched marketing campaigns fronted by popular celebrities.
- Most recently, eliminated players ability to hide their hole cards during all-in confrontations at the cash game tables.
Regardless of whether you believe the totality of these changes will have a positive effect on the site’s long term health or not, the impact on cash game liquidity is difficult to deny.
From the time the most sweeping amendments to the model went live on January 1, cash game liquidity has tumbled 31.5 percent. By contrast, over an equivalent time frame in 2015, traffic dropped just 21 percent — more or less in line with one would expect during the seasonal downwind.
Waning interest in online poker
Then again, an argument can be made that the accelerated decline of cash game volume on PokerStars is simply one part of an industry wide trend that is seeing players either abandon the format for others, or leaving online poker altogether.
Backing this claim is the fact that the rest of the dot-com industry has seen it’s cash game liquidity drop by 14.9 percent over the past twelve months.
However, most of these operators also recently instituted net depositing player-friendly changes, aimed primarily at attracting players to their tournaments, lottery sit and go variants, and casino and sportsbook verticals — not so much their cash games.
In other words, a roughly 15 percent year-on-year decline is an expected result — not entirely, but somewhat.
Yet, at over 24 percent (as of July 20) and growing, the falloff on PokerStars is much larger, especially considering that the site recently absorbed Full Tilt‘s liquidity.
This could signify one of two things:
- PokerStars has done a more effective job than other sites of distributing volume across formats.
- Players are abandoning PokerStars at a faster clip than they’re leaving other sites.
While it’s impossible to know for sure why PokerStars’ cash games are underperforming the industry, there are indicators that the rest of PokerStars is in a somewhat healthier, yet not entirely vibrant, state:
- Turnout for the site’s flagship weekly major, the Sunday Million, are up year-on-year. Other majors, many of which have seen their guarantees slashed, have seen participation rates dip dramatically.
- Amaya online poker revenue only fell 11 percent from Q1 2015 to Q1 2016.
- Recent marketing campaigns are going viral (paywall), but Facebook likes and actual conversions are two different things.
Bottom line: Cash game decline a somewhat expected outcome
From what it appears, the seemingly catastrophic falloff in cash game liquidity on PokerStars is at least something of an expected result, fueled by conscious changes to the company’s business paradigm.
That being said, the harsh regulatory climate and PokerStars’ underperformance relative to an already underperforming (if only slightly) industry, signify that PokerStars is perhaps in a more difficult spot than it anticipated.