- ZEN failed to turn a profit since inception, and borrowed over $16m in the last three years.
- The company hoped that regulation of online poker in the US would give value to its 750k strong player base.
- ZEN is the largest B2B provider of free-play “social” online poker with$100k in monthly cash prizes, 750,000 registered users, and up to 4,500 concurrent players.
- A judge will decide if NYX Gaming will become the sole shareholder and put up $695k attempting to rescue the company by finding outside investment.
ZEN Entertainment, the Nevada-based company behind the prominent network of free-play subscription poker sites, has filed for Chapter 11 Bankruptcy, pokerfuse can reveal.
ZEN, the name behind such online presences as Cardplayer Poker, Southpoint Poker, UFC and Jamie Gold’s FreeGoldPoker, admitted in its filing that its business model was “unsuccessful.”
It failed to turn a profit since inception, and borrowed over $16m in the last three years in hopes that regulated online poker in the US would give value to its 750k strong player base.
Chapter 11 bankruptcy provides the troubled company with breathing space to find a better solution for its creditors. After six months trying and failing to sell the technology platform, ZEN has proposed doing a deal with NYX Gaming Group, Ltd.
If the bankruptcy judge agrees to the plan for Chapter 11, NYX Gaming will become the sole shareholder and put up $695k attempting to rescue the company by finding outside investment. If it fails, it will own the technology platform and attempt to sell it itself.
ZEN Entertainment is the largest business-to-business provider of free-play “social” online poker. Its network boasts $100k in monthly cash prizes, 750,000 registered users, and up to 4,500 concurrent players.
Legally, ZEN and its ilk are considered “sweepstakes” tournaments, not real money poker, due to their “no purchase necessary” clause, and thus permitted in the United States. Players can optionally purchase monthly subscriptions to gain access to additional tournaments.
But according to the disclosure statement filed on Friday, ZEN’s CEO Marc Sperberg contends the “business model is unsuccessful, and shows no signs of becoming profitable in the future.”
“From inception in November, 2008, [ZEN Entertainment] has been cash flow negative and has never made a profit,” it claimed in last week’s filings.
The company has borrowed over $16m in the last three and a half years from stock broker-turned-gaming-entrepreneur Ernest Moody. Moody invented the Triple Play Poker video poker game which is distributed through former Entraction owners International Gaming Technology.
Reportedly, Moody made up to $15m a month from the license fees on his invention, but his investment in ZEN has gone in the opposite direction.
The group hoped that the free play platform would open the way for real money play, “as the United States seemed to be moving toward the legalization of online real money wagering.”
“However,” it explains, “every proposal to regulate online gaming through Federal enabling legislation in the US has failed. As a result, online gaming will likely become authorized, if at all, on a state-by-state basis. This is an extremely slow and expensive process.”
Various prominent brands today operate skins on ZEN Entertainment. South Point Poker has been offering play money on ZEN to build up interest ahead of its planned real money Nevada debut this year. Cardplayer Poker is also on ZEN, after its previous incarnation, “SpadeClub,” closed in 2009 and moved to ZEN.
In August 2011, Jamie Gold lent his name to FreeGoldPoker.com, a site still active today.
One short-lived ZEN skin was RISE Poker, which launched with great fanfare back in June 2011 boasting a pro-team roster including Scotty Nguyen, Maria Ho, Danny “Ansky” Stern and Jean-Robert Bellande. But updates on its official Facebook and Twitter accounts stopped just two months later, and that site has long since been offline.
Prizewinners in ZEN organized tournaments who have not received their prizes are unlikely to be paid unless an investment knight in shining armor can be found for the business which has burnt through $4.6m a year without getting close to making a profit.