Before Steve Lipscomb launched the World Poker Tour, poker had a vaguely seedy rep. Now it's a national obsession, and the WPT is a public company with a market cap of $300 million. How Lipscomb built his empire -- without risking a cent.
Before Steve Lipscomb launched the World Poker Tour, poker had a vaguely seedy rep. Now it's a national obsession, and the WPT is a public company with a market cap of $300 million. How Lipscomb built his empire -- without risking a cent.
Layne Flack needs a six. His opponent has just called Flack's raise, placing Flack's entire stack of chips, several hundred thousand dollars' worth, in jeopardy. This is happening in the World Poker Tour's "arena," an elevated table surrounded by flashing lights, multiple cameras, and hundreds of wide-eyed fans. The last two cards are about to be dealt.
Backstage, Steve Lipscomb is barking instructions into a headset while pacing and gesturing wildly in front of a bank of television monitors. Each monitor corresponds to a different camera, with the name of its operator on a piece of masking tape above the screen, and Lipscomb shouts nonstop: "Mike! Zoom in on the chips. Dave, good work, now pan left. Chuck, let's get the audience. I need some suspense."
For an average-looking guy of average size, Lipscomb has a big personality. As always, he's dressed in a casual two-piece suit and open-collared shirt. He openly roots for players during big hands, favoring not one over the other but the more dramatic outcome over the more mundane. This approach has helped him create one of the highest rated shows in the history of cable. He never sits, stopping his shifting and gesturing only long enough to drink a soda. He even directs the audience, relaying instructions to staffers within the arena, who in turn cue the fans when to gasp, clap, or look shocked -- using expressions Lipscomb himself rehearsed with them before the final table began. The only thing he doesn't do is answer his cell phone, which rings constantly.
Back at the table, the cards are dealt, and Flack gets his six. He cannot contain a smile. His opponent shakes hands graciously but is clearly seething, having done everything right and lost because of very bad luck. Flack will go on to win the tournament -- a fact that will be widely noted in bars and chatrooms and around water coolers. Overnight, "I'm all in!" has become a catch phrase. By some estimates, more than 50 million Americans are into poker, and Lipscomb -- founder and president of the World Poker Tour -- has made it his mission to build the game's premier brand. In three short years he has taken poker from smoky backrooms to the Nasdaq and prime-time television, with ratings that regularly top network coverage of the NBA and PGA.
Now 43, Steve Lipscomb was a lawyer by trade and an entrepreneur at heart, which led to his first business, an attorney-referral service. But relatively late in life, he changed course. The change came after Lipscomb, who grew up in Knoxville, Tenn., and came from a long line of Baptist ministers, watched his deeply religious mother continue the family tradition by entering the seminary -- only to encounter sex discrimination that she felt stopped her rise through the hierarchy of the Southern Baptist Church. Believing the world needed to know, an angry Lipscomb decided to make a documentary film.
He sold his business, taught himself the basics of filmmaking, and dove in. The result, Battle for the Minds, documented the rise of fundamentalism within the church and went on to win critical acclaim and numerous awards. It was selected to be one of 10 films shown on PBS's Point of View, which brought Lipscomb to the attention of producer Norman Lear. Lipscomb began making shows with Lear, which is how he found himself filming an inside look at the World Series of Poker, the sport's marquee annual event -- one with which he was personally familiar. He had once entered a $100 satellite tournament just for fun and won a $10,000 seat at the main event. "I never expected to win," he says. "I called my wife, who was pregnant with our first child, and told her I'd had fun and didn't care if I didn't play the rest of the tournament, which would have taken several more days. Then I told her first prize was a million dollars and she said I could stay."
When Lipscomb first saw televised poker, it was being shown by ESPN: "Worse than watching paint dry," he says.
He didn't win, but poker was now in his blood. And what he saw filming the World Series of Poker changed his life. He saw firsthand the culture, the characters, and the fans. He also concluded that ESPN, which aired the WSOP, was doing a terrible job. "Worse than watching paint dry," he recalls.
Lipscomb knew he could make poker more exciting to watch, but he also had a more ambitious vision: to create a league akin to the major professional sports, one that would lead to merchandising, foreign licensing, Internet competition, and spinoffs. As he now says, "I view us today as a Microsoft, not an IBM," meaning that he developed the show not as a product but as a platform.
First, he needed collaborators. He signed on two friends, Robyn Moder, who had overseen production on America's Most Wanted and Cops, and Audrey Kania, who had launched new divisions for Disney's Consumer Products Group. Selling licensed merchandise was a big part of his WPT plan, and Lipscomb knew that few were better at it than Mickey and company.
As he proceeded, Lipscomb followed the model of golf's PGA Tour. In golf, there are no teams or owners, just individual players who enter tournaments as they see fit and pay their own way. The prizes they compete for come mainly from sponsors, not the league itself. International events and players move in and out of the mix, and satellite tournaments have been developed in every corner of the globe.
"I created the only sports league in America where you can come out and play."
But Lipscomb set out to offer something even the PGA couldn't match: "I created the only sports league in America where you can come out and play. If you could sell spots for people to suit up and play in the NBA finals for, say, $25,000, lots of people would do it. But you can't. Here, you can pay your money and compete with the best players in the world. And you can win." Anyone with $10,000 or so can buy into a World Poker Tour event, and hundreds of people have been doing just that. Lipscomb's WPT has the largest prize pool -- $70 million to $90 million, this year -- of any sports league in North America and regularly creates one or two millionaires a month.
Early on, few shared the vision. From his television production days, Lipscomb knew executives at many networks and cable stations, but when he called, they laughed. Given the limited success of televised poker to that point, no one else thought the airwaves needed even more poker. Its seedy backroom image made it difficult to interest television, potential employees, sponsors, and later, investment bankers. Some potential hires visiting the firm's temporary office in Los Angeles wondered if the enterprise was closer to porn than to mainstream entertainment.
But Lipscomb was convinced that, as with Battle for the Minds, he just needed to show people his product. He decided to raise enough money to produce the show before it had been sold to television. His first call was to Lyle Berman, founder of Lakes Entertainment, a company that consults with Native American tribes in developing casino gaming. An avid poker player, Berman was one of many subjects Lipscomb had met while making his poker documentary. Berman got it right away. The Lakes Entertainment board approved a $3.5 million investment in December 2001, and the World Poker Tour was in business the following February, just five months after Lipscomb started writing his business plan. He sold 70% of his concept to Lakes, kept 16.5% for himself, and divvied up the rest to top management and others. To get the WPT off the ground, he gave up a lot, but he put in no money himself. "I'm a sweat equity guy," he says.
Lipscomb, Kania, Moder, and an assistant moved into four offices on a former Warner Brothers production lot in West Hollywood. The historic building had been converted to offices and was chosen for its flexible floor plan, which allowed tenants to expand as needed. In three years, the WPT has hired 57 full-time employees and now occupies almost the entire building. It has working sound stages -- and, says Kania, "celebrities playing basketball just outside."
The first thing Lipscomb did after securing his venture capital was to hit the road and persuade high-profile casinos to get involved. The events that are now part of the WPT already existed, as discrete tournaments, waiting to be pulled together under an umbrella. In the world of big-time tournament poker, the majors have long been the $10,000-entry No Limit Texas Hold 'em tournaments. One such event was the World Poker Finals at Foxwoods in Connecticut.
When Lipscomb and Kania showed up at Foxwoods in March 2002 to make their pitch, they were shocked to find the casino executives, from the boss through middle management, in suits and ties, seated around a huge conference table. "All we had brought was a flip chart," Lipscomb recalls. The audience seemed unreceptive to the pitch, but less than 20 minutes after Lipscomb finished, his cell phone rang. It was the casino's poker-room manager, Kathy Raymond, calling to sign on. Lipscomb says Kania still kids him about how big his smile grew as he took the call. They had a deal, and now Lipscomb had the leverage to get other venues -- the Bellagio, Commerce -- on board. "I signed them up within a month," he says, "and by the beginning of April, we had a tour."
The first WPT event, the Five Diamond Poker Classic, was scheduled for the Bellagio in June 2002 and several others followed quickly. The events, from the prize pools to the administration to the tables, chips, and dealers, are run (and paid for) by the casinos -- all, that is, except for the final table, when the last six contestants are seated in the WPT's "arena." Thus, despite purses as high as $7 million each week, the events are put on with little expense for Lipscomb and the WPT.
But Lipscomb did have to assemble the crew, staff, and infrastructure to start filming. He hired Mike Sexton, a poker pro, and Vince Van Patten, the former child actor and professional tennis player, to be on-air hosts. Shana Hiatt, a former host of E! Entertainment's Wild On adventure show, would be the roving reporter. Things were so frantic leading up to the first Foxwoods event that Lipscomb designed the WPT arena -- a stage featuring the final table and announcers' booth, surrounded by swirling spotlights, cameras, and banners, all mounted on metal scaffolding -- on the back of a napkin. He and his crew created the set, developed the show's structure, and brainstormed the innovation that changed everything about televised poker: the now-famous "hole cams," miniature cameras that allow the television audience to see the players' concealed cards. In Hold 'em, each player gets two cards dealt face-down, and then all the players share five common cards dealt face-up. By showing the down -- or "hole" -- cards to the fans, Lipscomb lets the audience see who's bluffing, who has a monster hand, and how the pros play.
After months of filming, Lipscomb had a lot of promising raw footage but no one interested in airing the show. "It took me eight months to edit the footage for the first two-hour show," he says. "That was me sitting down with an editor, six days a week, for 15- to 18-hour days. About three months into it, people from Lakes Entertainment were calling, saying, 'When are we going to see something?' I thought maybe we just couldn't do it. All the ways we tried to put it together and put it on the screen had not worked. There was so much information to get across."
It took three and a half months of searching for a format before Lipscomb had his "aha!" moment: Imagining a sports bar, he suddenly realized that all popular televised sports can be enjoyed with the sound off. He decided to use graphics to make poker watchable. To do this, he created an onscreen format that displays icons of the cards, along with the players' names and amounts bet and constantly recomputed odds of winning. He finished editing the show, and his investors and partners loved it. But the WPT still had no TV deal.
His worst-case scenario was to buy airtime himself, but he did not have enough capital; to raise it, he'd have to further dilute his ownership. So, finished episodes in hand, he kept trying to woo a network partner. From the beginning, Lipscomb had believed that to build a loyal audience, he needed a regularly scheduled time, like Monday Night Football. Among the many cable networks he eventually approached was, of all places, the Travel Channel. Somewhat to his surprise, the network bought an entire season, and as the slogan now declares, "Wednesday Is Poker Night on the Travel Channel."
The WPT attracts three million to five million viewers a week, often out-drawing the PGA and the NBA.
The first show aired in March 2003. Remarkably, its audience doubled over the course of its two-hour time slot, a trend that continued for the first five episodes. In television ratings, a single Nielsen point represents 1% of the nation's television households, or between 1 million and 1.1 million viewers. As Lipscomb recalls, the first show started with a rating of .42 and by the end of its two hours had grown to .85, for an aggregate of .6 or .7. By the end of the first season, the show had grown to an aggregate of 1. Even more impressive, when the show went into reruns, the ratings actually went up. "A third better," says Lipscomb. "I don't know of anything that's ever done that." Plus, it was a two-hour show, which is a long time to maintain those ratings. Today the WPT attracts three million to five million viewers a week, often outdrawing PGA golf and NBA basketball -- both on major networks.
The networks eventually noticed what Lipscomb was creating. On Super Bowl Sunday in January 2004, NBC, in cooperation with the Travel Channel, gave the WPT a network audience opposite the much-hyped pregame show -- and more than five million people tuned in.
Success, of course, brings new problems. The WPT was a hit, and it quickly spawned competitors, including Celebrity Poker Showdown on Bravo, Poker Superstars Invitational Tournament on Fox Sports, Poker Royale on Game Show Network, Hollywood Card Night in the works at E! Entertainment Television, and revamped coverage of the World Series of Poker on ESPN.
Most unsettling to the WPT crew is that the other shows use visual formats similar to the one Lipscomb developed. His is currently patent pending. "If the greatest form of flattery is imitation," says Lipscomb, "then we have been overflattered." Still, he accepts the situation, and his experience as a lawyer has left him inclined to consider legal action only as a last resort. "When a television show creates a new phenomenon," says Lipscomb, "others will imitate it, like reality TV. Everything from our hole-card cam to our graphics has been copied. But we are the Survivor of this genre.
"The real question is, Do we have an advantage over the competitors that are coming after us? Anyone who wants to take on the WPT has to take on not just the WPT and the Travel Channel, but also the resources of the Bellagio, Foxwoods, Borgata, Commerce, and the Bicycle Casino. We make the best television. The future is for us to continue to make the WPT events into the Wimbledons and the U.S. Opens of poker."
Lipscomb's plan has always been to do more than build a hit show. "The New York Times said that 50 million people were playing poker on a regular basis, and no one had branded it," he says. "This became our mission."
The next phase was merchandising, starting with chips, tables, and playing cards, what Lipscomb calls "the lowest-hanging fruit." For months prior to this past Christmas, U.S. Playing Cards was unable to make its fancy WPT chip sets fast enough to meet demand. "We are just getting started," says Kania. "We'll have 40 to 50 licensees" -- boxed DVD sets, clothing, more -- "by the end of 2005." The company just signed a multivolume book deal with HarperCollins; Mike Sexton, the show's co-host and expert commentator, wrote the first volume, released in March. Also on the way is a wireless platform that lets you play WPT poker on your cell phone. Lakes Entertainment has developed a casino table game version of WPT All-In Hold 'em Poker, to be rolled out alongside roulette and blackjack tables nationwide. Casinos wishing to deploy the game will pay fees to Lakes and Lakes will pay a fee to the WPT. The WPT brand has even been extended to scratch-off state lottery tickets in seven states.
And yet, the WPT's greatest opportunity may lie on the Internet. Internet poker has been red-hot -- even though running a U.S.-based gambling site is illegal. One leading site, PartyPoker.com, gets more than 100,000 players a day. In December, Lipscomb finalized a deal with WagerWorks to create a site that will be operated abroad and can be accessed only from outside the U.S. WPTonline.com, which will allow live poker play from legal markets, is expected to launch by summer. "It is my expectation that this will be bigger, financially, than anything else they have done," says Dennis Nielsen, an analyst for Minneapolis-based Feltl and Co., the investment banking firm that took WPT public last year.
It will also continue the global expansion. A dramatic side effect of Lipscomb's conceiving the show as if the volume were off is that people who don't speak English can follow it. By the end of 2004, the WPT had foreign distribution deals in 57 countries. "You do not even have to understand poker to enjoy it," says co-host Mike Sexton. "When someone pushes all his chips into the pot, says 'All in,' and stands up, everyone understands. That's the magic and the drama. It's the ultimate in reality TV: real people playing real poker for real money."
In the second season's "Party Poker Million" episode, for example, construction worker Chris Hinchcliffe, who qualified for the $10,000 entry by winning an online tournament with a $35 entry fee, came to the final table as the Cinderella story. He held an immense chip lead, nearly three times as much as the second-place player, despite facing four of the world's top pros. He stood to take home a cool million in his first big tournament. Instead, he made mistake after mistake -- playing bad hands too aggressively -- but still finished a respectable third. "The whole key to the poker craze," says Lipscomb, "is that you are watching ordinary people in extraordinary situations. Not only are you seeing a construction worker playing poker for a million dollars, but he's doing it against the very best. It's David versus Goliath." Sometimes, of course, Goliath wins.
Originally, Lipscomb's dream was to take the company public in five years. But the opportunity came faster than expected.
When Lipscomb and Kania went out on a road show in July 2004, visiting 13 cities in less than two weeks to sell investment bankers on the initial public offering, they met considerable skepticism. At the time, the WPT had just turned profitable, but there was still concern about poker's lowbrow image. In response, Lipscomb talked about their efforts to build and brand a sports league. "If you had been able to invest in the NFL when it started," says Kania, "you'd want in. We have transformed poker into a sports model that transcends the events themselves or the show. We have monetized the brand."
Lipscomb and Kania also realized that they could demonstrate the WPT's licensing potential by passing around a product -- a case of heavy clay casino-grade poker chips. "They all wanted to buy it," says Kania. "The analysts came with skepticism and walked away enthusiastic. The transformations in those rooms were amazing."
Initially, Lipscomb hoped the offering would debut at $6 or $7 a share, but last August it went out at $8, raising $32 million. Since then, the shares, still somewhat thinly traded, have been running as high as $20. The company's market capitalization is about $300 million -- all built on the original $3.5 million investment less than three years back.
The successful IPO has brought new challenges, including another layer of management infrastructure and regulatory costs that contribute nothing to the bottom line. But perhaps the biggest change has been in Lipscomb himself. He's been forced to take off the headset, step back from the control room, and turn over his directorial duties to someone else. He no longer has time to attend multiday tournaments every week. He will still edit the tape, but the frenetic camera instructions will be barked by someone else.
Instead, Lipscomb is busy investing the IPO money. He just launched a second league, the Professional Poker Tour, once again borrowing a page from the PGA playbook. The Professional Poker Tour will showcase the colorful full-time players who made the WPT so popular but are now getting lost in the sea of upstart amateurs making it to the final tables. Lipscomb is giving the true professionals a place to play with his new tour, which players must qualify for by winning events or placing high enough on the WPT's annual money list.
The first PPT tournament was filmed at Foxwoods last September, the day after a WPT event. Because the players and crew were already there, the PPT's overhead, time, and production costs were minimal. Now that the national poker obsession is official, Lipscomb thinks the PPT may get a bigger deal than the WPT has with the Travel Channel, possibly on a major network. "We have had several good offers," says Lipscomb.
Meanwhile, poker keeps exploding. Hollywood celebrities -- Ben Affleck, Toby Maguire -- have become serious players. Several movies are in development. Not long ago, casino poker rooms were closing all across the country. "Cut to today," says Lipscomb, "and every casino is scrambling to add rooms."
On a recent Friday night at Foxwoods, the wait to play Hold 'em was over two hours; the line just to sign up for the waiting list stretched the length of the huge room. The nation's largest casino-based poker room, it has been enlarged repeatedly and still cannot satisfy demand. "The hunger is insatiable," says Kathy Raymond, the Foxwoods poker room manager. "Since April 2003 we have seen a constant increase in average hours played and number of tables in use, and it just won't stop. The World Poker Tour has taken an American tradition and merged it with the American Dream, and there is no stopping it."
Midway through the WPT's third season, individual tournament prize pools surpassed the $10 million mark. More to the point, the WPT recently released financial results that showed fourth-quarter revenue had leapt from $379,000 in 2003 to $5.7 million in 2004. Revenue was $17.6 million for the year, and the company turned a profit of $752,000.
Just days before the Academy Awards, many of L.A.'s brightest stars turned out for a much different kind of celebration, the World Poker Tour Celebrity Invitational at the Commerce Casino. The normally cheery Lipscomb was even more bubbly than usual as he worked the room, exchanging pleasantries with Lou Diamond Philips, James Woods, Ed Asner, Mimi Rogers, Macaulay Culkin, Jennifer Tilly, Skeet Ulrich, Tanya Roberts, Gabe Kaplan, Ray Romano, Norm Macdonald, and Jon Favreau. As the stars walked down a red carpet and waiters hustled about with champagne, it was clear that the seedy backroom image of the game had been largely dispelled.
It would appear Steve Lipscomb has found a way to turn gambling into a sure thing.
Larry Olmsted is a freelance writer who finished 15th in a recent WPT tournament and who holds the Guinness world record for consecutive hours playing poker, more than 72. He can be e-mailed at email@example.com.