Hi all,

I want to share my opinion on tournament mark-up and why you shouldn’t be paying high fees to even the best poker players in the world.

This proposition is made from a business perspective, if you are staking your beloved twitch streamers or admired poker players because you want to sweat them and see it as a good time or a sponsorship go ahead, but please read ahead to know what you are actually paying for.

For those of you who don’t know what mark-up is: it’s a fee added by the poker player for numerous reasons.

Now , let’s dig in the mathematics. It will be very basic so don’t click away just yet.

let’s say player A is selling 70% of a 100$ online poker tournament with a 10% mark up.

buyin:100

owned by player A: 30$

sold to public: 70$+7$markup

total: 107$

break-even point for investors: 77$/70$=110% or a ROI of 10%

From an investors standpoint this might not look too bad. After all, you don’t have to put in the time, you didn’t have to put in the hours to earn your poker knowledge throughout the many years of studying and practicing. and if you look at the numbers: if your expected ROI is above 10%, you will still make profit. Most of you have never looked further and I can’t blame you, as from a risk/reward analysis these are the primary tools you need to calculate your ROI on the investment.

But, and here comes the tricky part, let’s take a look from player A’s perspective:

Player A buyin: 30% at 30$

Player A’s profit on markup: 7$

Player A’s actual buyin for a 30% share of the tournament: 23$

Player A’s break-even point: 23$/30$=76.66% or -23.44%

Now, why is this bad?

By selling shares player A achieves a much larger profit margin than when he would play the tournament with his own money ( He would breakeven at 0% ROI) meaning if he has a historical ROI of 20% he now has a profit margin of 43.44% instead of 20% while his investors only make 10% ROI.

This is a very unfavorable position to be in as an investor. After all, it’s you who takes the risk. And we haven’t accounted yet for risk of getting scammed, a riskfactor that can only occur for investors as player A holds the entire responsibility to receive, use and return the money to investors.

Let’s say there is a 1/100 risk for getting scammed by player A. And let’s be honest, most of us don’t know the player personally and even if we do , this isn’t a guarantee we never get scammed. So the actual possibility will probably be higher than 1%.

Now, let’s talk about historical ROI’s. It’s very hard to measure, if not impossible, a player’s true ROI. So we should apply safety margins which I will not delve deeper into this blogpost, but you catch my drift. It will be a safety margin I strongly advise you to use in your investment analysis.

Hence, the not accounted risk factors in the used ROI calculations for investors would mean we have to find investments with atleast 15-20% ROI to breakeven on our investment. Meaning with a 1.1 mark-up we would need a player with an ROI of 25% or higher. Please note we aren’t making money at this point as we are only calculating break-even points.

As a conclusion, I personally don’t invest in any player asking 10% markup or higher and I advise you to do the same if your intention is to make money. The only reason players can ask this type of margins which only benefit themselves is because there is high demand.

I hope to have informed you well and like to add that not all players are doing this. Some players will ofer a fair markup that pays for their time and effort put into learning and practicing poker while still offering good value to their investors.

By spreading this message, we can change the staking economy and offer value for all.

I hope you will share the message.

Kind regards

DITM

Ofc, very important for poker eco-system

Kind regards

lol. it's your right to absolutely do nothing to help the poker ecology but venting your frustrations on people who do, doesn't help anyone.

I actually just took the time to watch your posts. You made 2 irrellevant off topic poker threads and responded a lot to the NVG threads.

This makes me assume you aren't a poker player, but a poker fan.

So this implies you gave up on poker, as you at some point in your life came to 2+2 to learn poker. given your low post count over 5years it seems like you never been that interested and probably never understood the game entirely. You probably got crushed when the games got tougher or never learned to beat the game in the first place.

As long as there are people playing poker and as long as there will be fans poker won't be dead.

I'll be honest and say i didn't read much of that post because it's 630 am and I just woke up, but what is the point in yet another person talking about people needing to be informed on markup / making sure people aren't ripped off in staking. Andrew barber (I think that's the name?) made a big deal about this before WSOP.

Staking is an open market and people are free to charge whatever they want, and people are free to pay whatever they want for their sweat. Not everyone is in staking to grind profits, some people do it for a fun sweat or a gamble, just like in poker some people play whatever games they want even if they aren't +ev just for the fun and the gamble.

People are aware they shouldn't be paying insane markups , or at least people who put any research or thought into their investments before firing off money.

Players selling should try to get the most markup they can sell for for their own benefit, and people who buy shares and stake should get the best players for the best prices they can find. It's a 'skill' game, not everyone should be offered a great equal value like it seems you elude to.

fwiw i feel the people moaning about how markups are too high and people are getting ripped off are the same people moaning about lowering the table max and complaining about software in poker because they are unable to play multiple tables efficiently or use software to improve / study / track their game like other people do.

I don't want to be rude but it's clear you haven't read more than a single line of my post.. I just made a case and handed you the facts, I just wanted to get the discussion going BUT with people who ARE informed. I personally am a fan of markup because it's not that simple as in person A gives money person B gives skill and they share profits. There should be an inequality to reward a player for his years of work.

I've personally been looking to stake some people for some time and it only occured very, very rarely I eventually stakes someone. what annoyed me the most was not that people do pay the mark-up, but WHY they pay the mark up. A lot of people are getting scammed in a legal manner because they didn't understand what they were actually paying for.

I think it's very hypocritical to criticize poker sites for increasing rake just because they can while asking unbeatable markup, just because you can..

We both know where these type of businesses will end, and they never build a strong relationship with their clients. short term gains never made a company last forever.

For me personally ,it doesn't have a great impact as I play cash and have nothing to complain about. But I see so many people doing things they don't understand and it makes me sad as while we earn our $ by others mistakes, we always have to keep in mind they have to return in order for us to earn continuously.

Like i said this 'issue' was brought up a few months back , didn't get much discussion there either because it's kind of a non-issue in most peoples opinion.

People spend money how they want, people set the price to what they want. If the price is too high they won't get as many buyers. For your poker site analogy, if a poker site raises the rake, less people will want to play on the site. If someone raises their markup, less people will want to pay the higher markup and will go to someone else.

http://forumserver.twoplustwo.com/29...29/index2.html

Haha tu m'connais même pas et tu t'permets d'me juger comme ça ?
Faut un peu te détendre mon pote, hein

Tu veux mon avis sur le staking ?
Un monde d'arnaqueurs et de pigeons avec quelques personnes honnêtes dans l'tas. TreadLightly a très bien résumé ma pensée : c'est un "non-issue", les gens font ce qu'ils veulent de leur argent et si des abrutis (pigeons) sont prêts à payer le prix fort pour un staking, c'est leur problème pas le mien, mais viens pas nous parler de "poker-ecology", t'es vraiment à côté d'la plaque.

Retourne voir sur Pokerstrategy.fr, les gens là-bas aiment bien parler dans le vide aussi, tu devrais t'y faire plein de coupains

Worth about .02cents

ye its true most investors have no clue what they are buying and they dunno how -ev their deals are, but there have been threads about this in nvg b4 so no new thread necessary.

So you're saying greed isn't good?

You are discounting the sweat your fav player factor. Some people want to buy into Mr X as they like/love him as a poker player and get a bit of love from said player in return.

right??? make up your mind!

ok.. no clue what you are trying to say maybe because the conversation was in english?

Anyway, by the length of your post I assume I was right. Please go vent your frustrations somewhere else.

I wasn't aware, I normally don't visit 2+2 anymore because it became so hard to have a decent conversation on the forums over here. I wrote this blog primarily for myself to practice my writing skills in a foreign language and to try out wordpress. I'm also aware It's not ground breaking analysis or that I'm telling something new to the 10% of poker people that are up to date.

It's for the 90% of people who aren't and have a much worse idea about poker than us. I don't care about the 6 comments I now received, I'm sure there will be 6 others who read it and didn't respond but have a better idea about markup.

I would much rather prefer to see poker grow again by good advice and a few big ships by recreationals who bought shares of their favorite streamer, won big and then received the $$$ on pokerstars.

typical tournament players career begins with running like Jesus in a few live MTTs then gaining a reputation way beyond their skills (for example Jason Mercier, did you see the whack sh*t he was doing on stream for 100k!?)
this then enables them to sell at ridiculous mark-up and its easy money from there

I think there is great value to be had in investing in certain people. The problem is a lot of mediocre/bad players sell packages at markup and a lot of investors are clueless.

Variance can make someone really bad look really good for a while. So you either have to see a database of a lot of tournaments which is hard to verify (especially in live tournaments) or you have to be a good player yourself in which case you can recognize someone else as being good enough to have a big edge.

I know someone who has played 200 live tournaments in the past 5 years (he primarily plays cash). His average ROI over that time is approximately 200%. If you exclude his top 5 highest ROIs during that time period, his average ROI is still 40%. I think you are a fool if you don't invest in him any time it is offered.

OP, liked your write-up... thank you

doesn't the player have expenses that easily eat up the 10% mark-up?

if the player sells 100% then isn't his ROI infinite by your thinking? like a hedge fund manager... note: i'm not a fan of hedge funds

i think 10% mark-up is fine.......... aren't there people that do much much more than that?

basically you are correct that financier gets reduced return and player gets leveraged return......... but as i and others noted, player has cash expenses - hotel, food, airfare - and puts in huge amount of labour.

probably the better question is "how soft are WSOP tournaments?"... i.e. what's a reasonable ROI for a good player? my guess is not very high.

That should not be a problem for astute investors, in fact they should be happy with all the clutter to distract and allow them to concentrate on better spots.

The problem is only for those making bad investment choices, but part of the market system is to allow consumers to do just that when offered.

Thx River! And yes I certainly agree with you on live tournaments, but my angle was mainly online (which I notice I didn't make too clear in my post)

For live I would say it depends.. It's like having the company's visa with you on a business trip. Should the company pay for business flight and expensive hotels? but 10% seems fair like you say