Those of you who picked up online poker for the first time within the last couple years wouldn’t remember the days when Party Poker was the king of the hill. It’s not a small site right now by any means, but in the early-to-mid 2000’s, Party Poker was the 800-pound gorilla of the industry. Let’s take a look back at that time, specifically the most controversial period in Party Poker’s (and its parent company, PartyGaming’s) history.
For a long time, Party Poker had been the sun around which four skin poker rooms – Empire Poker, MultiPoker, Intertops, and Coral Eurobet – revolved. Unlike other skins, which were simply rooms on a network, these were skins of a specific site. Party Poker was the network. Party Poker was sort of the stodgy site, not allowing its affiliates to offer rakeback, and generally not having any tremendous promotions. Many players who wanted to play at Party, but wanted rakeback or some other special incentive, often signed up at one of the other sites.
Everything was going fine and Party Poker was by far the largest poker room on the internet when it released its new software platform in October 2005. To the surprise of everyone, the skins were not allowed to use the new platform. They were being “ring fenced,” cut off from Party Poker. As a result, the skins saw their player traffic drop precipitously, to the point where Empire Online, owner of Empire Poker, warned investors that its financial results would fall short of expectations. At the same time, Party Poker fell into a virtual tie with PokerStars in the battle for the world’s largest online poker room.
Why PartyGaming cut off its skins was subject to debate at the time, and is not exactly known to this day. Many speculated that PartyGaming was upset that more and more players, particularly high volume players, were signing up through the skins for rakeback, and therefore not giving Party Poker as much revenue as they would had they signed up directly through Party. Party, people thought, wanted full control of every player at its tables. In addition, the harm done to the skins would hurt them financially and perhaps make them more amenable to a buyout by PartyGaming. In fact, Empire Online’s share price dropped like a stone because of the combined effect of the ring fencing and PartyGaming’s public comments about an industry slowdown. All of a sudden, Empire Online was affordable and PartyGaming announced in November 2005 that it was considering buying its former skin.
Also in November, PartyGaming purchased the assets, player database, and intellectual property of MultiPoker for $14.5 million and took control of Intertops, making it an affiliate of Party Poker. Coral Eurobet was cut loose completely. So, Party dumped its skins, then absorbed two of them, taking their players, and was in the process of trying to purchase another.
Unfortunately for PartyGaming, Empire Online filed a lawsuit against the company, angry about the damage PartyGaming caused the skin as a result of the ring fencing. At that time, Empire Online’s stock price was fluctuating in the 50-60 pence range, having previously been as high as 288 pence within the previous 52 weeks. In February 2006, the two companies settled the lawsuit, with PartyGaming purchasing Empire Poker and for $250 million. This purchase included the Empire Poker brand name and website (the rest of Empire Online was eventually sold to PartyGaming by the end of 2006 in transactions unrelated to the lawsuit). PartyGaming had sucked up another skin and now controlled its entire “network.”
The rest is history. In late 2006, the Unlawful Internet Gambling Enforcement Act was passed in the United States and Party Poker banned all U.S. customers. Party Poker has never regained the place atop the industry that it had back before it demolished its skins. Today, Party Poker is the fourth largest online poker room, averaging 5,400 cash game players per day, according to Full Tilt Poker, the second largest, has about twice the cash game traffic, and PokerStars, the industry leader, has more than four times the traffic of Party. Whether or not Party would do it all over again if it could travel back to 2005 would just be a wild guess, but suffice it to say, life has not been as good at Party Poker since it dumped the skins.

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