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WPT rides out license fee drop, market woes
Despite some encouraging signs, WPT Enterprises posted another round of revenue decreases in the second quarter of 2008.
"We continue to be disappointed in our online gaming results and have begun directing resources in[to] our growing sponsorship business. On the other hand, we continue to be encouraged by the strength of our brand in the domestic and international marketplace," said Steve Lipscomb, president and CEO of WPT Enterprises.
Revenues decreased to $5.1 million, compared to $7.7 million in the same period in 2007. According to WPT Enterprises the losses are primarily a result of a drop in domestic television licensing fees. This is due to lower per-episode license fees under the GSN agreement, as compared to the Travel Channel agreement in effect during 2007.
In addition, event hosting and sponsorship revenues decreased to $1.3 million from $1.4 million in the second quarter of 2007. The company attributes this decrease to the fact that there were no sponsorship revenues from Budweiser in the second quarter of 2008. The loss, however, was partially offset by increased international sponsorship revenues in the 2008 period.
WPT reported that gross margins were down 15% in the second quarter of 2008 compared to the second quarter of 2007 (from 60 to 45 percent), while domestic television licensing margins were 9% in the second quarter of 2008 compared to 40% in the same period in 2007.
WPT seemed optimistic a new deal with Fox Sports will help turn things around, however.
"We announced two important collaborations with the Fox Sports Network subsequent to the end of the quarter," said Lipscomb.
"The first is a broadcast deal to air 26 all-new one hour episodes of Season VII of the World Poker Tour television series across the U.S. as a part of FSN's Sunday sports block. The second deal is an agreement that will provide television and other media exposure that we expect to allow us to grow our subscriber based online poker business, ClubWPT.com.
"Fox will broadcast at least 13 one hour episodes of a new television series called 'ClubWPT.com' on FSN. WPT will have the option to produce up to 40 additional episodes as the subscription business grows.
"The only way that players can get onto the ClubWPT.com television show is to win a seat on ClubWPT.com. FSN will promote ClubWPT.com through in-show title sponsorship, in-show billboards, audio mentions, commercial inventory and website presence on the main page of FoxSports.com."
Lipscomb summarized the new agreements by noting, "We believe FSN is the perfect home for the World Poker Tour. The ClubWPT.com deal is a good example of the ways in which we believe we will be able to work with Fox into the future."
The company announced a $3.9 million net loss for the quarter, or $0.19 per fully diluted share, compared to a net loss of $3.3 million, or $0.16 per fully diluted share, in the 2007 period.
Apparently the credit crunch in the United States is also impacting the WPT.
Roughly half of the company's investments in marketable securities are of a type known as auction rate securities (ARS). These investments have been effectively frozen by the auction failures that have beset the market since February, triggered by investors declining to bid on the securities in the context of the overall U.S. stock market slowdown.
The lack of takers means WPT Enterprises can only wait on a stock market resurgence. This setback, combined with its yet-untested collaboration with Fox Sports, suggests that only time will tell if WPT Enterprises will improve its performance.