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The Curious Case of LiveAce Poker

liveacelogoCan a paid-subscription online poker site succeed in creating a sustainable player base of American players?  That’s the business question facing LiveAce.com, a new paid-subscription site that launched last week.

LiveAce isn’t the first subscription-based site to give it a go, with the concept behind such sites being that by charging a flat membership fee and then offering various forms of limited or unlimited access, the sites are thus getting around the third prong of the traditional “three prong” test of US law regarding gambling activity, which describes the consideration (something of value) that is being directly wagered.

Subscription-based sites essentially try to create a loophole through which poker can be played without direct wagering or other consideration on the poker itself, and LiveAce is the latest effort to come along.  What makes LiveAce more interesting than most are the extra twists the site’s owners have developed in the hopes of making the concept new and fresh.

So let’s start with the basic release LiveAce sent out as it flung open its virtual doors, along with signing veteran pro Andy Frankenberger as its first sponsored pro.  Here’s the meat of it:

NEW YORK, NY – (August 14, 2013) – Tired of playing online poker against lackluster competition? Bored of spending hours grinding through drawn out tournaments in hopes of winning a prize that doesn’t even excite you?

Welcome to your online poker salvation: LiveAce.com. LiveAce allows you to win real money every day, increasing the quality of the gameplay experience and bringing back the excitement and fun associated with real money poker.

You can play No Limit Holdem, Limit Holdem and Pot Limit Omaha with no rake. No 10-hour tournaments. No satellites for elusive prizes. No more “no fold’em holdem.” Log on and jump right into a game. You can play for free. You can also purchase additional chips starting at just $2.49 and for only $19.99 per month you can become a premium member with access to exciting features such as custom avatars, real-time odds calculator, hand history and more. Best of all, you have the chance to win tens of thousands of dollars every month. LiveAce is based in the United States and is legal in 31 U.S. states plus the District of Columbia.*  [The “*” denotes that no purchase is necessary, an important legal inclusion — hh]

LiveAce lets you cash in the chips you win through unique daily auctions. Cash redemptions are processed quickly via Dwolla or check. No more wondering when overseas payment processors will deliver your winnings or waiting the dreaded 6-8 weeks for a check to arrive.

Plus, because LiveAce is browser-based, you can play on any computer or mobile device with no software to download, giving you access anytime, anywhere.

“Social poker sites are plagued with poor play because the chips have no value. Tournaments sites have their place but most players don’t like being told when to show up and don’t like playing all night to win a prize they might not be able to use,” said LiveAce CEO Adam Stein-Sapir. “Our chips have value because of our daily cash giveaways so people play to the best of their ability. Our focus on ring games allows you to play on your schedule and win cash.”

Okay, that’s a typical commercial, complete with all the slaps at other aspects of the US online-poker market that can cause players headaches.  What the above release doesn’t really talk about is how the site works.  It’s taken a few days of play by the site’s first visitors, who received extra free chips to give the site a whirl during its first week, to get a better picture of what it’s all about.

LiveAce’s model, to say the least, is complex.  Users can register and get a small number of chips each day for free; they can also buy a membership and receive more chips.  Then they have to play in the site’s cash games, through which the free chips are converted into “live chips” after being wagered with and won from others at the tables.

These live chips?  They still don’t have any real value; that’s part of the concept that LiveAce hopes will keep it legal and being under the domain of the sweepstakes laws as currently on the books in 31 states and the District of Columbia.

Other subscription-based sites have made the same arguments, from ClubWPT and PurePlay to SkillBet, none of which have been particularly successful in turning the US poker market on its ear.

So what’s LiveAce’s twist?  That’s to add yet another layer of complexity to the whole pageant.  Those “live chips” one wins at the table can’t be traded for cash directly, but they can be used to bid in multiple auctions that the site runs several times each day, wherein clumps of $500 and $1,000 (at least early on) are distributed to the auction’s highest bidders.

Each bidder has to guess at a valuation rate for their live chips, and the bidders who bid the highest — in other words, those who are willing to accept the least real-money per “live chip” in exchange for cashing out — are the winners.  The $500 or whatever is distributed across the highest winners until it runs out; the rest get nothing.

It’s something of a reverse penny auction, a variant on the noxious penny-auction theme which has infested the internet, attempting to shift the auction cost from buyer to seller by selling the right to bid for a fixed amount, usually in large packages of hundreds of bids.

Whether the way all this is thrown together at LiveAce is actually legal is anyone’s guess; it’s going to be a state-by-state thing, and trying to grasp all of LiveAce’s intricacies is likely to give any state’s attorney general a robust headache.

But let’s accept the claim at face value, and assume LiveAce is legal in all the states (plus DC!) where they claim it is.  Okay, it’s legal, but is marketable?  I look at LiveAce and I think this might be the greater concern for the business model.  Getting chips for free and playing with them in hopes of winning money or cash might be fun, but paying even a nominal $20 a month for the right to climb the same ladder and take part in an auction of indeterminate value is a dicier proposition.  My thought is that for a lot of people, it’s just not going to be worth the effort.

Then there’s another concept to be considered; as mentioned at 2+2 in one of several discussion threads about LiveAce, as more people join a site, such auctions tend to be inflationary; it costs ever more in the trade medium (here, the “live chips”) to win the same end prize, the real dollars up for auction.

The more customers LiveAce gets, the more robust and inflationary the auctions become; the site makes stride toward its business goals, but at the very direct cost of creating disincentives for the same players to whom they’re trying to sell these monthly memberships.

“But you get to play for real money!” would be the obvious retort.  And that’s true, too… sort of.

Yet the question still remains.  Since simple-concept subscription sites with some brand-name connections, such as ClubWPT, failed to set the poker world on fire, can a brand new site without such a big-name connection — and including even more wrinkles — make it all work?

It’s at best iffy.  I wish LiveAce well.  But I think the site faces a severe uphill climb to profitability, a status it might never reach.

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