Of course this is a huge issue. I mean if you ask people at a homegame why they don't play online it will always be either they think its either illegal, rigged or that the foreign sites will steal their $100 deposits. Its rarely because they simply choose not to. But this market simply isn't reachable under the current situation. They won't be playing until online poker is regulated and brought to US soil. What we do have right now is tens of thousands of players who still do actively play online. And instead of working to try to keep online poker alive the sites seem content to play slash and burn and grab as much money as they can today with seemingly little regard to tomorrow.

Would love to know how much money all the winning players made (for that year).

I know this won't be a popular opinion. But can anyone think of any other industry where the average price paid by customers to use the product has decreased every year since 1998? I can't.

In online poker, with just a few minor exceptions, the rake has remained the same but the rewards given to players have increased. If the $3 rake cap were adjusted for inflation, it would have risen to $3.93 in 2009.

Returning more as rewards is exactly what poker sites should be doing if they want to continue to grow during tough economic times. Reducing the rake would be madness, as the vast majority of players either don't understand what rake is or don't care. It would have an absolutely negligible effect on the quality of the games. Recreational players care much more about promotions, bonuses, and so on than they do about rake.

I understand why people like Do It Right are campaigning to reduce the rake, really I do. But I think it would be much more effective to focus those campaigns on increasing the rewards given to players. That's something that is much more likely to be aligned with the interests of the online poker businesses, and hence more likely to be successful.

Alex Scott, when defending online poker sites you really do not want to using analogs of poker as a product. The games and thus 'product' have gotten massively worse over time, yet the sites continue to try to charge more to play in them. What industry release a product that become substantially worse each year, yet continue to increase the price of said product all the while watching all of their customers disappear? Welcome to world of online poker!

That said I believe you are severely misinformed on the levels of rake. The rake has not remained the same. It has constantly and consistently increased. Stars substantially increased it this year alone at certain stakes. Stars in has also continued to decrease the value of their rewards in a number of ways. A major way has been decreasing the value of promotions: bonuses used to be somewhat frequent, large and clear at 5x - now they are almost never given, are very small and clear at 20x. In the recent 50bn hand promotion, Stars opted to only distribute rewards based on the VPP obtained in the last 50 hands. Ostensibly this was to discourage angle shooting, in reality it dramatically cut the amount they had to pay out. They've also decreased effective rakeback by modifying how VPP is calculated and distributed. At the beginning of this year they insisted they would be giving roughly the same or even more VPP, now 10 months into the year its clear that for the majority the VPP/hand has substantially decreased. They've also completely gotten rid of some high value promotions such as the "double VPP week."

The rake has consistently increased by every single metric.

But really all that is just an aside. I think you're missing the big picture here. This isn't about attracting new players or encouraging recreational players to play more. You are absolutely correct that most people have no clue about the impact of rake. It is a silent killer. A casual player feels like he is doing okay at the tables, and indeed he is. He's still just a fish but hes not too far away from his average competition, yet somehow at the end of each month he sees a disproportionately massive red figure. He doesn't understand and eventually plays less and less poker, maybe starts feeling the site must be rigged and eventually just moves on entirely. That is rake at play.

The point of decreasing the rake is not to attract new players but to stop killing off the current ones so rapidly. Stars is raking $4,000,000 per day. That is $4,000,000 that people had deposited completely removed from the poker economy. I mean at Stars $50NL 6-max for instance, they rake $42.30 per 1000 hands, damn near a whole buyin. You're right our recreational player won't notice anything over a few hands. But what they will notice is after they played 20,000 hands last month $846 is missing. That's nearly a whole bankroll to play $50NL. Taken away in 20,000 hands. That is completely unacceptable in today's games where edges are becoming increasingly small.

I also feel you are way off in that the sites should focus on increasing player rewards. Player rewards, particularly VIP style clubs, are incredibly backwards. For the most part these sort of reward systems only meaningfully benefit winning/break even high volume players. Yet what keeps the poker economy churning is depositing players. VIP style clubs and rakeback are just backwards as they completely ignore the people that need help the most. As I've said before the best analogy would be welfare for the rich.

99.99% of Americans I have talked to over the last couple years think online poker is illegal. These sites have to make Americans aware somehow that is not illegal cuz what they're doing now has had little or no effect. Rake must be reduced my 90%. Most people on this site ridcule people asking for reduced rake which is absolutely mind boggling. They call us the people who are making 100k a year spoiled whiners when stars is making hundreds of millions of dollars a year. You guys make a lot of sense. Keep demanding more rake and we will get vip programs like casinos have and we will earn 00.01 % rakeback.

This is the key point on which we disagree. I really don't think it has increased for the average player when rewards are taken into account, and even if it has, it hasn't increased anywhere near as much as the cost of other products and services (measured by inflation).

The fact is, we are paying 1998 prices - or perhaps less - for a 2010 service. That's actually quite shocking in a business sense, and I know of no other business where I am paying the same as I was in 1998.

In your original thread you quote an annual revenue of $1.4bn and a profit of $500m. There are some important things to note about those figures:

1. Some of the annual revenue will not come from online rake, but from other sources (such as interest paid on the substantial player deposits) and live poker ventures.

2. An estimated gross profit of ~35% is not unusual for a business that manages it's overheads well. I know of businesses in many sectors that have comparable gross profit.

It seems there is a general distaste for companies that are making a lot of money. Personally, I don't have any problem with people working hard and making lots of money, as long as they do it honestly. That's why I love poker so much.

Not that it matters, but 20,000 hands is a LOT. I suspect less than 10% of the entire poker playing population has ever played 20,000 hands.

Alex Scott, this isn't a matter of opinion. You can't just choose to disagree. It is a fact that the rake has increased and substantially. This is even more true for the average player since they don't put anywhere near huge volume required to start seeing decent rakeback percentages. Stars has been consistent in decreasing the quantity and value of their promotions, modifying the VPP system to reduce the amount given, and increasing the rake itself on top of all that. One other correction since you seem fond of trying to repeat "we're paying "1998" prices", Stars didn't open for real money until December 2001. Repeating we're paying "1998" prices just looks foolish on so many levels.

And comparing poker sites to other businesses is pointless due to one extremely unique characteristic of poker sites. That is - the more money the company earns, the objectively worse their product becomes. If Toyota decided to triple their prices tomorrow, they would sell fewer cars but its not like the ones they did sell would be suddenly inferior. But when you take $4,000,000 out of the poker economy every single day you start to kill your own games and ruin your 'product'. And that is what's happening today.

Also, in case you again want to just keep on repeating that you think the rake hasn't increased. Here you go:

PokerStars rake levels from 2003: http://web.archive.org/web/200302081....com/rake.html

PokerStars rake levels from today: http://www.pokerstars.com/poker/room/rake/

You'll notice large increases in a variety of stakes. Back in the day nanostakes actually weren't even raked! And in numerous stakes they have done things such as change the rake from $0.25 per $5 to $0.05 per $1, or even $0.01 per $0.20 in some instances. You'll also notice increases on the max rake. For instance, the rake cap at 4-man NL $25 was doubled from $1 to $2.

Of course this also isn't even taking into account the very juicy promotions that used to be offered 'back in the day' like somewhat frequent $200 bonuses that cleared at a rate of 5x. Now we pay more than double the rake in some circumstances and get extremely mediocre promotions the rare times the sites even bother to run one!

This thread has suddenly gotten very funny.

In 1980 E.F. Hutton used to charge me $89 to trade a stock. This was a great deal because my broker knew I was a penniless kid trying to cobble together some assets. Other brokers might charge $200+ at that time.

Thirty years later a stock trade costs me less than 5% of what I once paid.

That sites based their pricing off a B&M model despite having costs which are fractional when compared to that model isn't a great justification to keeping prices high. It doesn't cost them any more to spread a $50/$100 game than a 5 cent/10 cent game, yet in the former case sites take $5 while the rake in the latter can be measured in pennies. The same example can be made for tournaments.

Sure, but it's also gotten much cheaper for them to execute that trade. There's no high-priced stock broker involved, the transactions are all executed electronically and they probably don't even have to send you paper statements any more (which would have involved actual bookkeepers 30 years ago too).

Whereas for the poker sites, costs have increased. Payment processing, payment processing, payment processing. Worse payment processing also increases the customer service burden as someone needs to handle all the complaints when payments are slow or checks bounce. There is also more advertising now. It is just harder and more expensive to run a poker site than it used to be.

Poker rake levels were never set based on a reasonable profit/cost model. They were simply carried over from live poker. Of course in live poker you have a number of employees constantly waiting on you, a live dealer, FREE ALCOHOL, free food in some instances, etc. In online poker you have none of that fact. In fact you have nothing but a computer sitting on some indian reservation or tax haven spitting out random numbers.

Its also very silly to try to imply the sites are spending more on advertising now. Anybody who was alive in 2005 knows advertising for online poker has plummeted to a fraction of what it once was. And even at its peak the costs were not particularly high for a site that is raking 1.4billion per year.

The only thing cost that has increased is payment processing. And given the sites are raking in 1.4billion with profits of half a billion, the payment processing costs obviously haven't increased too much.

Online rake is about half of live rake and that's if you don't include jackpot/bad beat/etc rake.

Live players get comps and free food/alcohol (in some places) but they don't get rakeback or deposit bonuses.

I dunno. In 2005 poker shows had about 100% ads for poker sites and I rarely saw a poker site ad otherwise. In 2010 it is pretty much the same, but there are more poker shows. Did I miss the poker ads on Joey or something?

How much does Stars spend on the Big Game for instance? Producing a TV show can't be cheap even if it is mostly reruns and clip shows.

I'm willing to accept though that advertising is probably not that expensive compared to revenues of $1.4 billion regardless of whether there was more then or now.

Saying online rake is half of live rake is almost as silly as saying "we're paying 1998 prices." In Vegas you can find rooms that have 5% to $3. Absolutely identical to online play, with the difference that you get a million times more service and the games are vastly softer. When playing high stakes you can even find rooms where you pay LESS rake live due to hourly table rates instead of per hand rake.

There is absolutely no justification for how much we pay to play online.

Cell phones, computers.

You can add just about everything but food to this list.

I don't understand this whining about the rake, some sites has tried a rake free system but the players didn't care. If you want a low rake; find a site that has low rake and get people to play there. Unless you are prepared to support these initiatives the rake won't go down. You as a player has a choice and you should be prepared to take a loss in the short run to get these sites going.

this article is from 2006, and is only used to quote typical profit margins:

http://www.fool.com/investing/value/...-paradigm.aspx
to put things in perspective, 500/1400 is a 35.7% profit margin. I'm just sayin...

Making five hundred million dollars profit seems a decent amount of justification to me, even though I don't get any of it.

Stars is not running a poker economy. I assume you mean killing off = running out of money. Why would Stars take less money so a player can play longer?


How does rake correlate to available edges from the sites pov?

You're comparing the very best live rake against the typical online rake and disregarding rakeback. Rakeback > comps for a serious player (how many free drinks are you going to enjoy and still plan on winning?). Meanwhile the rest of the country is still paying 10% with max of $4 or more, plus jackpot drop which they may or may not get back, and even more on tournaments usually, and may not even get the free drinks. Also don't overlook the cost of tipping the dealers.

There's a big segment of players who are good enough to care about rake, but don't want to move to Vegas and be full time live pros.

I don't think the logic is about "paying for using a service". It's really about having access to a large player pool, of which the majority are weaker players than oneself. (think about paying an entry fee to have 1 hour of free digging in a gold mine)

This is by the way exactly the reason why rake free poker sites like WPX have not worked. The reason was not that their "service (i.e. software, etc)" wasn't good enough, it was because there was a clear lack of weak players.

In essence, rake is also a tax for having a license to take other peoples money.

The site with the most fish, i.e. where a good player has the highest earning potential, is the site that can afford to give the least RB and charge the highest rake - or, if it still keeps the rake and rb competitive - the site the has the fastest growth.

To get weak players, large scale, long term marketing measures are required. Those can be quite expensive.

I agree that it is a fact that the rake has increased since 1998 in some cases. You cite one particular poker room and example which I won't comment on, as I'm talking about general trends in the industry rather than one particular operator. But my opinion, based on my experience over the last eleven years, is that rewards have increased and rake has not increased as much as you would expect, so that the average player may pay less in effective rake now compared to 1998.

I chose 1998 carefully. This was the year that Planet Poker launched, which was the first online poker room of real significance. It set the rake standards ('prices') which were admittedly derived from live poker, and which were subsequently followed by other online poker operators.

PS. It was September, not December.

That's only true if the size of the market remains the same. If a poker site's profits double and the size of the market also doubles, then the product should be equal or better to before.

I suspect you are arguing that the size of the market hasn't grown to the same extent that the amount of money taken out of the poker economy has. You could prove that, if you really wanted to make a serious argument, with a simple comparison between the amount paid by players (rake paid minus rewards given) and the market size at different points in history.

Come on, this is nonsense. In a brick and mortar casino, it doesn't cost the business every time you bring your money onto the premises, or leave with money in your pocket. Deposits and cashouts are a massive cost for the online poker industry and are almost entirely subsidised by the rooms.

Frankly, if you really believe that the online poker industry is as simple as you are making out - just a few greedy businessmen sitting on an island with a computer, stealing your hard earned money - then you are beyond logical argument anyway.

Prove it. I was alive in 2005 and I know for a fact that advertising costs are significantly higher now. Thankfully, much of the money no longer goes to the US but to developing other more promising new markets.

At the end of the day, I think this argument boils down to one thing. Online poker isn't the same as it was a few years ago. The average player is more knowledgeable than ever. Many people who were successful during the poker boom have become complacent and are no longer learning or working hard enough to keep up with the field. Some of these people are now losing (or not winning as much as they feel they should be) and are looking for something to blame. /thread

What???

This gotta be the worst try ever.

Computers, TVs, broadband, phones, phonecalls , music (including CDs), movies (including DVDs), airtravel the list goes on and on and on.

Can only think of one area where cost have consistently risen and that is tickets to sports and concerts. Almost all others that have gone up (alcohol etc) is because of taxation.

I wasn't around the pokerworld in 1998 but even if the rake has been the same since one could argue that there is no reason what so ever that the rake then (whether correct then or not) has anything to do with what the rake should be today.

Also as others have said. Stars is not spending anything near what some others have suggested on advertisement. Most of those cable shows they air on cost very little to advertise on.

I genuinely think that if one of the number 5-10 sites that are now slowly dying decide to go rake free for say the first $100 or so for each player and then use a lower rake or a withdrawal cost would quickly grow the necessary mass for this to work. The problem is you can't do it from scratch because you'll never get the necessary player pool.

Yeah OK, fair enough, I was pretty damn wrong with that comment. Not sure about air travel though, but I didn't fly much until the last 5-6 years.

Two things that haven't been mentioned yet:

1) Deposits/cashouts result in an MGR hit to rakeback. Anyone with rakeback is paying the payment processor expense.

2) Nobody is factoring in the (significant) income these sites generate in interest, etc. simply by having millions upon millions of dollars on deposit. It's not just rake that they make money on.

Does not apply to Stars, of course.