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Howard Stutz

Close-to-Real Deal: Poker Paying Off

23 January 2006

Australian gambler Joseph Hachem, a three-year veteran of the professional poker circuit, spent eight days during last summer's World Series of Poker -- including 14 hours of play at the final championship table -- to win the game's ultimate title and the $7.5 million prize.

Representatives of several video game manufacturers have never spent a minute playing competitive poker. But those manufacturers needed just three months to make millions by selling World Series of Poker-themed video console games, personal computers and hand-held video entertainment devices.

The value of the game makers' licensing agreements with Harrah's Entertainment for World Series of Poker products makes Hachem's purse seem like penny ante.

Activision, a video-game developer and distributor based in Santa Monica, Calif., had retail sales on its World Series of Poker products of more than $14.5 million from September through the end of the year, which encompassed almost 500,000 video games for all console platforms, including Microsoft Xbox, Sony PlayStation 2 and Nintendo GameCube, as well a CD-ROM version for the home computer and the Sony PlayStation Portable.

Sony, which makes the PlayStation 2, was the only company that ranked its video game sales. The company said World Series of Poker was the 50th most popular title during the holidays, selling twice as many games as its immediate competition, "World Championship Poker," and "World Poker Tour."

The top-selling video game for PlayStation 2 was "Star Wars: Battle Front II."

"Poker is popular right now because of the television exposure and the World Series of Poker is the best brand out there," Activision brand manager Steve Williams said. "The sales of the World Series of Poker exceeded our expectations."

Activision's games cost $29.99 for the console version, $39.99 for the PlayStation Portable version and $19.99 for the CD-ROM version. The company doesn't expect to reduce the prices.

"We've had rock-solid sales and even after the holiday, the sales haven't clipped, Williams said. "That most likely has something to do with the brand."

Activision also sells games featuring extreme skateboarding sensation Tony Hawk and the military-themed "Call to Duty."

Stock analyst Mike Hickey, who follows the video-game industry for Denver-based Janco Partners, said the World Series of Poker games aren't a huge part of the portfolio for Activision, which is traded on the Nasdaq National Market. However, he called the games decent contributors to the company's revenue.

"The game is not a blockbuster title in the video game market, but as far as poker goes, (World Series of Poker) is the title you want to have," Hickey said. "Activision is doing well with Tony Hawk, and World Series of Poker is just a good game to have in their system."

Meanwhile, Miami-based Excalibur Electronics offers more than 50 different World Series of Poker-licensed products. Company President Shane Samole said Excalibur sold more than 1 million hand-held World Series of Poker Texas hold 'em games for $19.95 each during the holidays.

"There's no question, it's the brand," said Samole, whose company also sells electronic games with brands such as Monday Night Football. "Sales of this game are only going to increase."

Samole said nonpoker fans recognize the World Series of Poker title.

"There are dozens of manufacturers, but if a wife is buying a gift for her husband, and she knows he watches the World Series of Poker, when she sees that logo, that's the purchase she'll make," Samole said.

Harrah's, which bought the 3-decade-old World Series of Poker in 2004 when it briefly operated Binion's, viewed licensing opportunities as a way of expanding the game's reach. In a short time, the World Series of Poker image has grown through ESPN television coverage and the ever-expanding popularity of poker in general.

Branded World Series of Poker products have also developed their own revenue.

Each licensing agreement is different, but Harrah's is usually paid a fee for use of the brand, plus a percentage of retail sales.

Ty Stewart, who spent seven years as a marketing executive with the National Football League before joining Harrah's in September as director of partnership marketing, said he doesn't think the company has reached the limits of the World Series of Poker's brand potential.

Before Harrah's entered the picture, the most sought-after World Series of Poker-branded items were jackets with the event's logo. Merchandise such as hats and shirts are still popular, but the growth now seems to be in video games.

"When Harrah's purchased the World Series of Poker, it was a 36-year-old startup business," Stewart said. "The incremental revenue is an added dual benefit along with building the brand. There is tremendous untapped potential with the brand that we're just scratching the surface."

This month, Harrah's announced an agreement with Glu Mobile to place World Series of Poker-branded content, including games, graphics and ring tones, on wireless telephones.

"The idea behind licensing the World Series of Poker brand is to build awareness," Stewart said.

Branding the event has also allowed poker players to build their own exposure. Many have signed their own deals with the video game companies. Former world poker champion Chris Ferguson is one of the featured players in the console game.

Activision believes a key element behind the game is realism, Williams said. The game's images include likenesses of real professional poker players and elements of decor from the Rio's poker room, where the World Series is held. The room's carpet and wallpaper have been copied.

Williams said the company has ideas to keep the game fresh, such as adding new players for 2006.

"We have the best brand, but you can't just put a crappy product out there and think it will sell," Williams said. "We think the game's entertainment value is the experience."