CHARLOTTE, N.C. – Who would have thought that Charlotte — known as the home of staid bankers with conservative financial philosophies — would become the center of the emerging electronic poker table industry?
But with the success of PokerTek, Inc., that’s just what the Queen City has become.
Founded three years ago and actually located in the Charlotte suburb of Matthews, PokerTek is a publicly traded company that markets electronic poker tables to casinos. Local entrepreneurs James Crawford (president), Lou White (chief executive) and Lee Lomax (board member) teamed up with poker legend Lyle Berman, who started the world poker tour and is a hall of fame poker player.
“Lyle lends us credibility,” White said. “He is to gaming what Hugh McColl is to banking.”
The management team has put together a strong plan based on a savvy and sophisticated business model. In other words, they are strategically playing the odds. White, who worked for Dell for seven years, describes himself as a “techno geek” who also loves playing Internet poker. PokerTek “connects two of my passions,” he explained.
Poker Is Popular But Not Too Profitable
Poker has exploded in popularity, becoming part of the culture, White said, primarily due to people playing online and watching it on TV. As a result, an increasing number of them want to play it when they visit a casino. A few years ago, there were only four poker rooms along the Las Vegas strip; now every casino has one.
But poker is not much of a moneymaker for casinos. It is labor-intensive, plus because players compete against each other and not against the house, the only revenue a casino earns is the rake, or the service fee it charges each player per hand.
To address those concerns, PokerTek developed the PokerPro electronic system, which deals hands and displays them on private screens so each payer can see his or her hand and play the game from the screen. There are no actual cards or chips. Players can also set up accounts for betting.
White said the table could increase a casino’s revenues from poker by 50 percent. “It deals faster, so more games are played,” he observed. “It reduces labor expenses and is also the most accurate poker dealer on the planet.” He noted that with PokerPro, at least 40 hands can be dealt an hour, compared to the 25 that can be dealt manually. (On the Internet, 60-70 games per hour is common.)
Players like it, too. “They see more hands, make more decisions and have the opportunity to make more money,” White explained. “It eliminates mistakes and misdeals that cause conflicts and arguments. Plus there is no dealer to tip.” PokerPro also eliminates any chance of dealer and player collusion and the possibility of marked cards, making it “the most secure way to play poker.”
Software, Not Tables, Is Key
White said the founders started PokerTek in a basement with their own money. Two private placements helped with the financing, but to speed up introduction into the market, they decided to go public in mid-2005. The company has 30 patents pending (“a portfolio that will pay off in spades,” White said); three competitors are younger start-ups.
PokerTek doesn’t sell its tables — they’re free — but it does license the software. “We’re a software company,” White said. “Those monthly fees are recurring revenues with a high margin.” So far the company has installed 11 tables, including one on a cruise chip operated by Carnival.
“We have a robust pipeline to add more,” added White, who said the potential worldwide market is 7,000 tables. He expects more opportunities to become available when PokerPro receives certification from Gaming Labs International, which guarantees fairness and technical quality. Some casinos require it.
Copying the Dell model, PokerTek doesn’t manufacture the tables, White said, but rather assembles them from outsourced components at its 10,000-square-foot facility, where it employs 54