Quote:
Originally Posted by WCGRider
New episode is out!
8/18 - Topics Include
3:46 - EPT flattens payout structures and the dream dies a little more
Doug, the flatter payouts will not reduce your ROI by as much as you fear. (and may increase it after you factor in taxes, but I have not done the math yet to confirm or refute that).
In your podcast example you said paying 100% of the field will lock in the loss rate of the rake assuming everyone gets the same min cash. That is true. But the other extreme would be winner take all not top 1%. In winner take all, the tax rate over $416k is 39.6% and that will take a heavy toll since you cannot carry forward prior losing year losses to offset a big win. And few would show up for a winner take all event or even a top 3% pay event.
The tables below show how flatter payouts can lower a pro's ROI. It looks at the 2010 WSOP main event with 7319 players. If you were an average player your ROI would simply be the -6% rake. This is based on a model that you get your money all in on a 50-50 coin flip. If you were twice as likely to win vs. an average player, then your ROI would be 41% and you would get your money in as a 52.77% favorite on average. If you were 3x as likely to win vs. an avg. player your ROI would be 80% and you would get your money in as a 54.47% fav. on avg. And your ROI would be 117% if you were 4x more likely to win vs. an avg. player and you got your money in as a 55.70% favorite on average.
The actual payout to 1st was $8.9 mil. The A,B,C,D columns show flatter alternatives. If you were 3x more likely to win, and 1st was cut down to $6.2 mil. your ROI would only fall to 71% from 80%. But your variance goes down too as shown in the 2nd table. If you had no top 9 finishes, your ROI would be -1% under the actual pay of $8.9 mil, but you would still have a +7% ROI under the flatter B payout of $6.2 mil.
The final table shows how rare it is to make the top 36. For example, as a 3x to win player with an 80% ROI, you would only make the final table once every 356 years vs once every 2440 years for an average player assuming a 7319 player field.
There needs to be a balance between the desires of the pros and amateurs. I feel 10% payout is too snug and 20% is too loose. Therefore I think 15% for now is a good compromise with a 1.5x min cash. (12.5% would be ok too with say a 1.75x min cash) However, I still feel the amount paid to 1st place in 95%+ of tournaments is still too high. From the 2010 WSOP Main event below, I think choice B is the best with $6.2 mil going to 1st vs the actual pay of $8.9 mil. (B would also add 2% to the pool or over $1 mil in tax savings) With the new WSOP 15% payouts in 2016, that $8.9 mil to 1st would be around $8.2 mil now. So still lots of room to trim from the top. Payouts have been way too top heavy for years and so it is a challenge to get them to levels they should be without creating player expectation "sticker shock". But hopefully they will begin to fall to get in line to where they should be.
RedOak
Last edited by RedOak; 09-21-2016 at 07:41 PM.