The Fall of PartyGaming|IT and Systems|Case Study|Case Studies

The Fall of PartyGaming

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Case Details:

Case Code : ITSY056
Case Length : 15 Pages
Period : 1999-2006
Pub Date : 2007
Teaching Note :Not Available
Organization : PartyGaming
Industry : Online Gambling
Countries : US/UK

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Initial Success

The initial success of PartyGaming can be attributed to its unique business model and its aggressive marketing strategy. Its rapid growth was backed by its technology savvy management team and quality customer support (Refer to Exhibit II for revenue details of PartyGaming between 2002 and 2004).

Business Model
PartyGaming acted as a facilitator for people who wanted to play online games like poker. The participants played against one another, rather than against the company. As a facilitator, the company charged a commission (known as rake) from the players (Refer to Exhibit III for the visuals of PartyPoker interface)...

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Legislation Against Online Gambling

The popularity of online gambling peaked in the early 2000s despite legislation-related uncertainties in many countries including the US. In fact, the US generated the highest profit for almost all the online gambling companies. Commenting on this, Lawrence G. Walters, an Internet gaming attorney, said, "Today's main driver is the profit incentive. In an age where many online business models have been tried and many have failed, online gambling has consistently produced profits and strong results and therefore it is a model that people continue to look at as a potential option. People tend to dismiss the legislative uncertainty."...

The Road Ahead

Though the UIGEA had come into force, industry analysts still speculated about its validity in the long-term. They said that Section 5362(6) of the Act defined "unlawful Internet gambling" as placing or receiving a bet where such bet or wager was unlawful under any applicable Federal or State law . On the other hand, Section 5363 mentioned that no person should knowingly accept electronic transfers, credit cards etc., for the purpose of unlawful Internet gambling. Therefore, some analysts opined that the UIGEA would be applicable only if the act of gambling was already illegal under the existing law...


Exhibit I: Stock Chart of PartyGaming (July 2005 - November 2006)
Exhibit II: Growth of PartyGaming's Revenues (2002-04)
Exhibit III: PartyPoker Interface
Exhibit IV: PartyGaming PLC's Financial Summary
Exhibit V: American Values Agenda (Announced On June 27, 2006)
Exhibit VI: A List of Gambling Sites
Exhibit VII: Weekly Share Price Details of PartyGaming (From September 4, 2006 to November 27, 2006)

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