Is the Shared Network Model Dead?

When I recently read that Party-Bwin was putting Ongame up for sale the first thought that crossed my mind is that this is basically a signal that the whole shared network model has been declared dead. While poker has begun to play a smaller and smaller role for PartyGaming for the last few years it is something they should know how to do pretty well. Party has also run a shared network in the past. If Ongame had any hope of being salvaged wouldn’t they try to continue to run it?

Party’s move signals to me that they see the shared network model, as it has existed in the past, as a dead-end path.

First off, consider the timing. The merger wasn’t that long ago and one of the first public moves they’ve made is to announce their willingness to jettison the shared network. Even industry experts are scratching their head at this. Who would even want to buy it and why announce it if you haven’t got possible buyers lined up?

Second, consider that any buyer would become an immediate competitor. According to PokerScout Ongame still ranks as the sixth largest online poker room. With Party’s constantly sliding poker numbers one would think that they would do everything possible to marry the two player bases so they could get back in the fight with PokerStars and Full Tilt. Poker is a game of liquidity and Party’s liquidity has only been declining. Here’s a way to provide an immediate liquidity boost but they would rather sell it off and let someone else compete with them. That’s an interesting decision.*

Of course, you have to look at Playtech (iPoker) since they’re the biggest existing network for a clue too. In addition to doing a joint venture with William Hill it’s now being reported that Playtech is in talks with Ladbrokes about a possible merger. That may sound like there’s still some life in the poker network model but both William Hill and Ladbrokes are desperate money. With land based revenues declining and an inability to successfully run their online operations as well as online only companies they’ve both been forced into the situation they’re in.

Traffic at most of the shared online poker networks has been dropping for some time. None of them have a coherent strategy for combating the Full Tilt and PokerStars blitz. What, if any, growth that the networks seem to demonstrate is when they acquire an existing skin from another shared network. For instance, when Doyle’s Room leaves Cake for Yatahay. But it’s a zero sum game.

Overall, they keep losing players to Stars and Tilt though.

I’ve written many times before about the flaws in the network model. They’re just not built to be competitive. Much like the flaws in the affiliate model the shared network model’s flaws owe their origins to the fact that the industry has evolved but their models have not.

And while the affiliate model can and is changing (much to the ire of poker affiliates) the network model is flawed beyond repair in today’s poker environment. One hundred small poker rooms cannot compete as effectively as one large operator. There aren’t enough new players coming into the poker ecosystem and the more experienced and winning players are gobbling up all of the fish too quickly or leaving and going to Stars or Tilt.

And with customer acquisition costs skyrocketing 100 small rooms simply don’t have the budget or revenue to finance any sort of real challenge against Stars and Tilt.

Anybody who purchases Ongame would have to have a serious change of strategy plan. Operating the network as it is now would be suicide.

* Party has not said what they will do with BWin. They could keep BWin and transfer over those users to the Party Poker platform.