A Poker IPO Is In The Cards
By Julie Creswell

(FORTUNE Magazine) – In the immortal words of Kenny Rogers: "You've got to know when to hold 'em. Know when to fold 'em." And, if you're the founders of the World Poker Tour, knowing when to take the company public is a pretty good idea too.

Since hitting the cable airwaves in March 2003, the World Poker Tour has set off a poker-playing frenzy across the country. It sexed up what is--let's face it--basically a group of guys sitting around a table playing cards, by throwing in fog machines, bright lights, babes, and "lipstick" cameras, which show home viewers exactly what cards the players are holding. (The company has applied for a patent on the camera.) The result is a bona fide jackpot for the Travel Channel, a unit of the Discovery Channel. Last year World Poker Tour was the highest-rated show for the network, and its audience in the second season has grown 63%, to an average of 1.3 million viewers. Even casinos credit the show for luring new players. "Since the show came on, we've seen a 60% to 80% increase in poker revenues over the prior year," says Kathy Raymond, director of poker operations at Foxwoods in Connecticut.

The World Poker Tour was founded in 2001 by Steve Lipscomb, an actor-turned-lawyer-turned-TV-producer, who saw an opportunity while producing a documentary on the sport for the Discovery Channel. The poker games that were being televised were boring, Lipscomb found. "It wasn't even like watching paint dry. I'd rather just watch the wall," says Lipscomb. So, with an investment from Lyle Berman, CEO of Lakes Entertainment, which operates casinos and now owns 80% of the World Poker Tour, Lipscomb set out to produce more exciting games. Matches are shot using 17 cameras, live-action commentary, and computer graphics to better describe what's going on. The World Poker Tour has swept up professional card sharks and amateurs alike, including several celebrities. (Actor Ben Affleck won $356,000 in a poker tournament in June in California, which automatically gives him a seat in the World Poker Tour Championship set for April 2005.)

The question, of course, is whether the poker craze is cyclical like the gaming industry, performing poorly during economic downturns or--worse yet--another reality-TV fad that eventually flames out. "We didn't create a pet rock here. We took the great American card game played by anywhere from 50 million to 80 million people, and branded it and expanded it," says Lipscomb. Other networks have also jumped on the trend: Walt Disney's ESPN (home to World Series of Poker) and even Fox Sports now regularly feature poker programming.

Still, Lipscomb and his partner hope to push their luck just a little bit longer by taking the company public. This spring they filed with the SEC to sell four million shares at $5 to $7 a share. Last year the World Poker Tour took in $4.2 million in revenues--the bulk of which was generated from licensing agreements with the Travel Channel--yet lost $493,000. Going forward, though, its hand could be improving. In the first quarter of 2004 the company turned a profit. It will generate $12.6 million in revenue from licensing fees alone, and has also signed up corporate sponsor Anheuser-Busch. Hopefully the World Poker Tour stock will prove a better gamble for investors than that of another sports entertainment company--World Wrestling Entertainment. Its shares are off more than 25% from its 1999 IPO. --Julie Creswell