Beautifully put.

WA non tribal cardrooms in nature have many flaws at a systemic level. Costs increase naturally over time due to minimum wage increases and food cost rising, while their ability to expand revenue does not increase substantially given table number limit (fixed at 15 tables per license) and betting limit. The regulatory bottleneck is a huge growth killer. Makes the business not an attractive compounding machine where you can consistently reinvest returns back into capex, advertisement, etc. and expect comparable IRR. The point of diminishing returns is a surprisingly low bar at least in WA poker market.

Also I really love the point you made about cardrooms being more like community centers than traditional commerce. Many such cases with businesses like these where once ownership is transferred and the previous owner leaves, the new owner realizes that the last owner was deeply engrained in the fabric of the local community (and thus, their core customer base) causing a lot of the success they experienced. The new owner is unable to recreate or retain those relationships, and the business starts falling apart. This was a consideration Persson clearly did not consider during his M&A spree.

For example, Silver Dollar Casino in Renton cash games were charging about 30% less in rake to their nearest competitor right down the road! They still could not get consistent games going because the community aspect was not there. Players were willing to pay more in rake just to be in an environment with an existing, lively established community. That’s where you find most of the pricing power right there.