Originally Posted by
Dan Druff
I have been given some inside information on the situation regarding the cancellation of the LockOps tournament series.
I was told that one of my guesses was correct:
Merge was nervous about the overlay situation, and the potential consequences if Lock couldn't cover it.
For those of you that don't know, the skins do something called "reconciliation" with Merge at the end of each month. The reconciliation process involves the skins balancing their books with Merge, so everything properly equals out. This is necessary because players from all of the skins share common games, and obviously money goes back and forth between players from different skins.
The reconciliation process involves Merge calculating a figure owed to or from each skin. This is calculated with the following formula:
Reconciliation = MoneyOut - MoneyIn
where
MoneyIn = Deposits + Bonuses + (Any Other Money added to the network by the skin)
MoneyOut = (Withdrawals paid directly by the skin) + (Skin's share of rake generated)
So if Reconciliation is a positive number, Merge pays the skin. If it's a negative number, the skin pays Merge.
For example, let's say there's a skin called Shady Poker.
During the month of April, Shady Poker processes $95,000 worth of deposits, gives out $6,500 worth of bonuses, and runs freerolls worth $2,000. ShadyPoker's MoneyIn is considered $103,500 (the sum of these figures).
ShadyPoker also sends out wires to their bigger players, and sent out $45,000 worth in April. In addition, Shady Poker is entitled to $18,000 as their portion of the rake generated by its players on Merge. This means ShadyPoker's MoneyOut would be $63,000 (the sum of these figures).
Therefore, on May 1st, when reconciliation occurs, it would be calculated as $63,000 - $103,500, for a total of -$43,500. This means ShadyPoker would owe $43,500 to Merge.
Now back to the LockOps situation.
If the LockOps actually took place, and if a huge overlay ended up occurring, this would have created a big reconciliation problem, as that overlay would have been charged to Lock's MoneyIn number. Why? Let's say the overlay was a combined $1,000,000. This would put $1,000,000 in extra chips on the Merge network, and all of those chips will have come from Lock. Therefore, Lock would be on the hook for $1,000,000 extra in that month's reconciliation!
But wait! If it's a Lock exclusive tournament, why would they have to reconcile with Merge? Because the winners of the tournaments would be free to use that money to play in any of Merge's network-wide games, and that money could be won and cashed out by members of any of the other skins. Therefore, the overlay is equivalent to Lock adding that amount of money to the network.
If Lock can't cover it, guess who has to eat it?
Yup, Merge itself!
Even worse, Merge won't even find this out until reconciliation time at the end of the month. If there ended up being a huge overlay, Merge would have to hold its breath and hope that Lock can come up with the money at reconciliation time.
And what if Lock couldn't? Well, Merge would pretty much be stuck with Lock until they generated enough rake (or player withdrawals that Lock itself processes) to cover the gigantic overlay amount.
Merge wasn't interested in taking this risk (especially with Lock's lousy track record), so they just denied permission for the whole thing.
This isn't just a theory. I was told the above tonight by an insider.