Caesars and the World Series of Poker

From the first day of the final round, the winner of the 46th WSOP seemed certain. Joe McKeehen had what most observers called an unbeatable lead, twice as many chips as the next person. They were right; he controlled the action from start to finish. It took just 184 hands for McKeehen to win the top prize of $7.6 million. But no one in that final nine went home broke; even ninth place paid $1 million. Joe had the $7.6 million and the prestigious bracelet but it was Caesars that really won the game.

Joe McKeehen, a 24-year-old professional poker player from North Wales, Pa., won the World Series of Poker Main Event, going wire to wire at the final table to take down the $7.68 million first prize and his first WSOP gold bracelet. – David Schoen, Las Vegas Review-Journal, 11-11-15

The World Series of Poker has become a major event for Las Vegas. During the summer of 2015 some seventy thousand people came to Vegas to play poker. Six thousand poker players put up $10,000 to compete in the Main Event creating a total prize pool of sixty million dollars. They played into July, continuing until there were only nine players left. The tournament then took a break until November when the final nine returned to the Rio to compete for the big prize. This year that was over $7 million, not quite the $12 million Jamie Gold won in 2006, but still enough to keep the audience watching. Now, for the next seven or eight months you can watch the final days replayed on ESPN until you have had your fill. High stakes poker makes great theater and ESPN and Caesars milk that drama for every single nickel they can.

Caesars is in the middle of a very painful bankruptcy. In January of 2008, Caesars, then Harrah’s closed on a private equity buyout. The $17.7 billion deal was the largest of its kind in the gaming industry and the last of its kind; immediately afterwards the economy started into a long downwards spiral. The new company was not profitable, revenues had dropped too much and the company struggled to make its debt payments. The last seven years for Caesars have been a struggle to deal with that debt. The company filed bankruptcy, sold part of its assets to a REIT, closed several under performing properties and fought with bondholders and their attorneys to reduce the debt.

It is difficult to predict what exactly will come out of bankruptcy and subsequent restructuring, but I have a working hypothesis. The bankruptcy has made it very difficult to maintain most of Caesars’ properties. Deferred maintenance is a major problem lurking in the background; it is eroding the value and competitiveness of the majority of Caesars’ properties. Regardless of how the company is structured, the post bankruptcy Caesars will not be in a position to bring all of its properties up to market standards. There is little choice; the under performing, lower cash flow properties will have to be sold. That list will include almost anything that is not on the Strip in Las Vegas and its two really valuable assets – the data base and the World Series of Poker.

Over the years, Caesars bought many other brands, most were profitable at the time. But times have change that, Showboat, Harvey’s, Rio and even the Horseshoe brands have lost their luster. However, Caesars added to its database with each purchase; today that database is the largest and most valuable in the industry. Whether or not it can be monetized is another question. The World Series of Poker is also very valuable and certainly could be monetized. A pared down, Las Vegas only Caesars might not need its current database, but it could certainly make very good use of the WSOP. It is a brand worth keeping – and in November it was doing its share keeping Caesars. Caesars and the World Series of Poker is a winning combination.


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