BUSINESS

Zen Entertainment files for Chapter 11 bankruptcy, needs investors to step up to the plate

TAGs: bankruptcy, Business, Zen Entertainment

bankruptcyZen Entertainment, a Nevada-based company and B2B provider of casino-style games and gaming platforms, has filed for Chapter 11 bankruptcy, a move that was hardly surprising to those who know the history of the struggling company.

According to Pokerfuse, Zen’s decision to file for bankruptcy stemmed or a business model that it admitted was unsuccessful and one that has yet to turn a profit since it first began operations back in 2008. “From inception in November, 2008, Zen Entertainment has been cash flow negative and has never made a profit,” the company said in its bankruptcy filings. Exacerbating Zen’s plight was their continued reliance on borrowing money – an amount that has reached $16 million in the last three years – with the hope that a regulated online poker market in the US would create value for its large player base. But as the company behind Cardplayer Poker, South Point Poker, and Jamie Gold’s FreeGoldPoker, “hope” is but a fleeting concept when you’re dealing with a market that’ has yet to fully embrace online gaming.

With little alternatives left to take, the company decided that filing for Chapter 11 bankruptcy was the best way to move forward, enabling it to find a solution to its ails and create a solution for its creditors. One avenue ZEN Entertainment has explored is a deal with NYX Gaming Group, Ltd. that would allow the latter to become the sole shareholder of the company where it would then be tasked to search for outside investors. It NYX Gaming Group, Ltd. doesn’t secure outside investments, it will own ZEN Entertainment and have free reign to sell the technology platform itself. All this, of course, is contingent upon a bankruptcy judge granting ZEN Entertainment’s Chapter 11 filings.

On the surface, Zen Entertainment looks to be a company of good standing, boasting of being the largest business-to-business provider of free-play “social” online poker wit a network that includes 750,000 registered users and up to 4,500 concurrent players. But under that apparent facade is a business model that company CEO Marc Sperberg has deemed as “unsuccessful” and one that is showing “no signs of becoming profitable in the future.”

It’s become such a struggle for Zen Entertainment that even with the $16 million borrowed from gaming entrepreneur Ernest Moody, the man behind Triple Play Poker, nothing but bad tidings have come out of the company’s business dealings. One colossal flop was the ill-fated RISE Poker, which was launched in June 2011 with poker legend Scotty Nguyen being one of its sponsored poker pros. But RISE Poker has since fallen out of the face of the earth. But the most egregious example of Zen Entertainment’s broken business model is the amount of money they owe to prizewinners in Zen organized tournaments, a lot of whom have yet to receive a dime from their winnings, and are unlikely to do so now that Zen Entertainment has effectively thrown the white towel on ever becoming a profitable company.

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