The Moneymaker Effect

How online poker got so popular.

Gambling regulators in the Channel Islands suspended Full Tilt Poker’s e-gambling licenses Wednesday, effectively shutting down the second-largest company in the multibillion-dollar online-poker industry. The suspension follows an April crackdown by the U.S. Department of Justice that blocked U.S. access to three major poker sites, including Full Tilt, and indicted their founders. Why has poker become such a big draw online?

Largely thanks to someone aptly named “Moneymaker.” Planet Poker, the first online card room to use real currency, dealt its first hand on New Year’s Day, 1998. But online poker really took off in 2003, when Chris Moneymaker became the first person to win the World Series of Poker after qualifying online. (He parlayed a $39 buy-in tournament at the online card room PokerStars into the main event’s top prize, which was $2,500,000 that year.) In what’s now known as “the Moneymaker effect,” Moneymaker’s win spurred legions of poker amateurs to try their hand online. Online poker revenues grew dramatically between 2000 and 2005, from $82 million to more than $2 billion (PDF).

The particular combination of skill and luck necessary to succeed at poker (especially the no-limit “Texas hold ‘em” variation that’s now dominant) helps explain why it, rather than some other game, has become such a seminal feature of the online-gambling scene. Hold ‘em requires more skill than most casino games, such as blackjack and slots. The more time you put into the game, the better you get, and because skilled players do, in fact, win more money than unskilled players, there’s a motivation to keep playing and learning. But poker also involves enough chance, unlike a pure-skill game like chess, so that if you play reasonably well you can get lucky enough to win a big tournament. Unlike slots, for instance, poker is an inherently social and competitive game, with players up against one another rather than the house.

As recently as the late 1990s, poker was largely associated with uncool, older men—many of whom picked up the game while serving in the military. Casinos began closing their poker rooms, which attracted little revenue compared with other games. Without access to the face-down cards, televised tournaments drew few viewers and bored those who did watch.

Poker’s fortunes began to shift in 1995—the year Henry Orenstein patented the “hole cam,” which gives audiences a sneak peak at players’ face-down, or “hole,” cards. (Tournaments aren’t broadcast live, so there’s no risk of a viewer relaying the card values back to a player.) The hole cam made its first major appearance in 1999, on the British Channel 4 program Late Night Poker. Use in the States followed soon after, with ESPN’s broadcast of the 2002 World Series of Poker and the Travel Channel’s World Poker Tour in 2003. The invention turned poker into a spectator sport and set the stage for Chris Moneymaker.

The surge in online poker doesn’t seem to have put a damper on brick-and-mortar games. Moneymaker’s 2003 win and the hole cam caused the number of entrants in the World Series to explode—from 839 that year to 2,576 the next year and 5,619 the year after that. The same casinos that were planning to close their poker rooms changed course and began to build more of them. Nevada poker revenue jumped, too, from $68 million in 2003 to $98.8 million in 2004 all the way up to a peak of $168 million in 2007 (PDF).

Got a question about today’s news?  Ask the Explainer.

Explainer thanks Frank J. Fahrenkopf Jr. of the American Gaming Association; Roger Gros of Global Gaming Business magazine; James McManus, author of Cowboys Full: The Story of Poker; and David G. Schwartz of the Center for Gaming Research at the University of Nevada Las Vegas and author of Roll the Bones: The History of Gambling.