PokerStars Will Be Challenged To Recuperate From Market Absence In Portugal

Legal Online Poker Returns To Portugal As PokerStars Receives The First License

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The Portuguese regulator, Serviços de Regulação e Inspeção de Jogos (SRIJ) has issued its first online poker license to Amaya’s subsidiary REEL Europe Limited.

Amaya is expected to launch as soon as it possibly can, having been out of the market since July 2015. The license does not mention Full Tilt, but in such a small segregated market, it makes sense for Amaya to stick to a single brand.

The license allows PokerStars to offer:

  • Tournament poker
  • Hold’em poker
  • Omaha poker
  • Blackjack
  • French Roulette—where there are 37 pockets rather than the 38 of American Roulette

Recovering lost PokerStars customers will take effort

In anticipation of the license, PokerStars has been pre-marketing and trying to keep its brand recognizable to former players.

The Twitter account has over 2,000 followers, 27 likes, and so far, no mention of the new license. Recovering the lost ground from its market absence may take some time.

Regular PokerStars players are likely to have set up accounts with less scrupulous operators, content to operate in the gray, or black market.

Many will be pleased to switch back to PokerStars, but a number will stay at their new poker homes out of sheer inertia.

PokerStars faces an early decision on rake and VIP benefits

The VIP scheme and rake structure at the new dot-pt poker room is also unlikely to endear former players to leave unlicensed sites.

Portugal has imposed potentially extremely high taxes as part of its new structure. These will inevitably pass through into higher playing costs even if PokerStars follows its usual practice of absorbing as much of the extra taxes as is commercially viable.

The Portuguese taxes are variable based on revenues, ranging from 15 percent for revenues up to €5 million and a punitive 30 percent for revenues over €10 million.

PokerStars will need to make a good estimate of its revenues in order to pitch its rake and VIP scheme benefits at the correct level to maximize margins.

At the 15 percent rate, PokerStars will be able to offer the same rake as at its dot-UK and dot-com sites. At higher tax rates, rake will likely have to increase.

Shared liquidity may be on the horizon

PokerStars will launch with liquidity restricted to Portuguese residents. This is a political policy of the government, not a direct consequence of the new laws.

A future government could easily reverse this policy, which would have considerable benefits for operators and players. This is unlikely to happen in the next few years.

In the short term, any liquidity above Portugal’s population of 10.5 million can only be provided if the SRIJ enters into an agreement with one or more of the other European segregated markets.

New French legislation makes it possible for the French regulator ARJEL to negotiate such an agreement. And Portugal’s neighbor, Spain, is also interested in expanding liquidity.

Euro regulators have had two meetings (paywall) to discuss the possibilities, but there has been no public statement from the most recent meeting other than guarded expressions of optimism.

Amaya’s bottom line will be improved

Withdrawal from the Portuguese market dented Amaya revenues. The Q3 report of 2015 made it clear that the dent was not insignificant, especially when combined with other headwinds the company was encountering.

As a result earnings expectations were revised downwards, and the share price took a severe hit.

Reentry to the Portuguese market was referred to in the 2016 Q3 earnings call as having the potential to mitigate some of the lost revenue should the company exit the Australian market.

CFO Daniel Sebag told investors that Australia, where PokerStars only offers poker, contributed 2.5 percent of Amaya’s revenues.

Portugal has less than half the population of Australia, and only one-third of the GDP per head. Given this, Portugal is likely to provide perhaps as much as one percent of Amaya’s revenues, but not much more than that.

The percentage could be extended if the Betstars brand secures a license to add casino and sports betting to Amaya’s product suite. A license application has been made, and the license could be awarded in the next few weeks or months.

Even so, although there will be an increase in revenues, the tax situation means that the bottom line impact will be a lot less than the top line increase.

There will be more profits, but they will be at a lower margin on revenues.

- A former founder of Poker Industry Pro and Head of Content at PokerNews publisher iBus Media, Joss Wood is a graduate in English from the University of Birmingham. Joss also holds a master’s degree in Organisational Development from the University of Manchester. His career path has taken him from the British Army, through business and finance to seven years as a successful professional poker player.
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