Rake pricing for a sustainable poker ecosystem
11-21-2012
, 10:23 AM
11-21-2012
, 11:41 AM
11-21-2012
, 06:47 PM
tl;dr reply warning
I should add that in some situations one can make lots of small changes in succession after each other that equal to a 'big' change but without the risk that a one off big change has -assuming incrementation exists and there doesn't exist a threshold barrier issue that once crossed occurs.
IMHO If there's ever going to be a drastic new revenue model in the poker world then I expect it to be by some young upstart company that starts up with a new disruptive revenue approach. If it's successful then it may get bought out like Google and MS like to do- let the minnows take the risk then gobble them up if they are successful
@Mister #313 this is eerily similar to what some of my more rec friends say - "spin it up " FTW
Quote:
Two things here.
1. Small changes will necessarily decrease the sites' revenue in the short run. That massively decreases the chances of the sites even considering them. For instance, some people may believe that lowering rake by 5% could increase the sites' revenue in the long run....
If you argue that a small change will decrease their revenue in the short-term then surely a bigger change will decrease it massively even more? So a smaller change is easier to enact than a big one surely and when you don't know what downstream effects any of your changes will have isn't it less risky to go with smaller than bigger?
By changes I meant not just to actual 'front-end' rake but effective rake via rewards e.t.c. and includes rev-neutral redistributions.When PS last changed the rake caps NL100 went form $3 to $2.80 (with the 5 player chg) so some sites in the industry are certainly conducive at times to small changes.
This would make sense if you view rake similar to tax and thus following a sort of Laffer Curve. But I don't think anybody in their right mind thinks a solution would be, for instance, to increase the rake by 5%.
Laffer curve - hmm I think I should make clear I 'm no fan of econmetrics models being applied in situations of complex systems where agents adopt adaptive strategies. Malthus is the obvious example.
One change I've been advocating is to start to phase away from per-hand rake and switch to profit models that don't necessitate manipulating the score of the game as it's being played.
This is the part in your early post that I agree wholeheartedly with -the current setup creates too many 'losers' who aren't losers pre-rake ingame. FWIW Initial rake reductions bring increasing players within the positive region and further reductions get less bang for the buck.* The withdrawal tax I disagree with (not personally) as Sciloist and others have stated many players and 'fish' won't like it and go elsewhere.
That could be designed in a way such that it's actually revenue-neutral for the sites which is huge for its feasibility, but such changes are also anything but small.
Close to revenue neutral would be ideal -but it's a big risk for an existing operator than a new entrant or spinoff.
2. The impact of small changes may not necessarily be able to be properly discerned from variance or outside forces.
True. That's an epistemological problem and a hard one at that IMHO faced by many businesses - you can't just hold all the other variables constant and change one like in partial differentiation You've just got to collect the data and have some metrics and see what happens...
Right now for instance the sites ostensibly don't feel they're doing anything wrong. This even though Stars, after years of growth, is dropping players at about 10% year over year. Party/iPoker are pushing near a 40% drop year over year. If you read Party's financial reports it's comical.
LOL so true about PRTY - their annual report always blames anything but themselves - to be fair they are more of a betting/casino focused company nowadays
...
1. Small changes will necessarily decrease the sites' revenue in the short run. That massively decreases the chances of the sites even considering them. For instance, some people may believe that lowering rake by 5% could increase the sites' revenue in the long run....
If you argue that a small change will decrease their revenue in the short-term then surely a bigger change will decrease it massively even more? So a smaller change is easier to enact than a big one surely and when you don't know what downstream effects any of your changes will have isn't it less risky to go with smaller than bigger?
By changes I meant not just to actual 'front-end' rake but effective rake via rewards e.t.c. and includes rev-neutral redistributions.When PS last changed the rake caps NL100 went form $3 to $2.80 (with the 5 player chg) so some sites in the industry are certainly conducive at times to small changes.
This would make sense if you view rake similar to tax and thus following a sort of Laffer Curve. But I don't think anybody in their right mind thinks a solution would be, for instance, to increase the rake by 5%.
Laffer curve - hmm I think I should make clear I 'm no fan of econmetrics models being applied in situations of complex systems where agents adopt adaptive strategies. Malthus is the obvious example.
One change I've been advocating is to start to phase away from per-hand rake and switch to profit models that don't necessitate manipulating the score of the game as it's being played.
This is the part in your early post that I agree wholeheartedly with -the current setup creates too many 'losers' who aren't losers pre-rake ingame. FWIW Initial rake reductions bring increasing players within the positive region and further reductions get less bang for the buck.* The withdrawal tax I disagree with (not personally) as Sciloist and others have stated many players and 'fish' won't like it and go elsewhere.
That could be designed in a way such that it's actually revenue-neutral for the sites which is huge for its feasibility, but such changes are also anything but small.
Close to revenue neutral would be ideal -but it's a big risk for an existing operator than a new entrant or spinoff.
2. The impact of small changes may not necessarily be able to be properly discerned from variance or outside forces.
True. That's an epistemological problem and a hard one at that IMHO faced by many businesses - you can't just hold all the other variables constant and change one like in partial differentiation
You've just got to collect the data and have some metrics and see what happens...Right now for instance the sites ostensibly don't feel they're doing anything wrong. This even though Stars, after years of growth, is dropping players at about 10% year over year. Party/iPoker are pushing near a 40% drop year over year. If you read Party's financial reports it's comical.
LOL so true about PRTY - their annual report always blames anything but themselves - to be fair they are more of a betting/casino focused company nowadays
...
IMHO If there's ever going to be a drastic new revenue model in the poker world then I expect it to be by some young upstart company that starts up with a new disruptive revenue approach. If it's successful then it may get bought out like Google and MS like to do- let the minnows take the risk then gobble them up if they are successful
@Mister #313 this is eerily similar to what some of my more rec friends say - "spin it up " FTW
Last edited by munkey; 11-21-2012 at 06:57 PM.
Reason: * 1st graph in post #89 H/T DCI
11-21-2012
, 07:41 PM
Quote:
A suggestion myself, and others, have mentioned is to simply do away with per-hand rake to a system that doesn't change the score of the game as it's being played. For instance sites could charge a rake on withdrawals inexcess of deposits. What I mean by that is a casual losing player who deposits $10,000 and finally binks a $5,000 tournament score isn't going to get raked on that $5,000. In essence only winners get raked.
One thing that I think is overlooked is how hugely negative an impact the rake has on casual prerake slightly losing players. Consider a player who would normally lose at -1bb/100 prerake. He hops into a lowstakes hold'em game online and is suddenly paying 10bb/100. Casual players, and many regs, may not really appreciate exactly how damaging the rake is but anybody is going to realize when they're losing 1000% faster than they're used to. Money that might last him a month at his homegame (which is madeup of relatively comparable opposition to what he's facing online) suddenly lasts him a weekend online given the same number of hands?? He's going to blame cheating, rigging, whatever else. He's certainly not going to blame those few cents to couple of bucks the site drags out of the pot each hand - but the result is the same. He's not going to stick around. The system I suggested above would completely fix this problem and start to help depolarize the skill levels in poker. Right now only very good players who can beat the rake and very bad players who don't really care how much they lose tend to stick around. The middle class, which is presumably the majority of players as in any zero-sum game, are the ones most hurt by high per-hand rake.
This would also suddenly completely align the interests of the players and the site. Right now it's in the sites best interest for there to be no big winners or big losers for that matter. They earn the most when everybody puts in tons of hands but nobody earns anything - a terribly unenjoyable situation for all players. When the site makes their profit by having winning players suddenly they have the exact same interest as players do.
Suddenly regs can play against other regs with the expectation of one player actually being able to come out a winner. The reason consciously intended (as opposed to incidental) reg vs reg action is so rare at low and middle stakes is because neither player can ever really expect to be able to realistically win. Poker is a game of small edges and the rake is anything but small. When you're facing a competent player the only 'person' who's going to come out a winner is the house. The suggested system would solve this and ideally even start to work out some of the problems we have of excessive predatatory activity, bumhunting, etc that is so hurting the games today. I love playing against regs, yet I actively table select simply because I know there's no point playing regs when I'm paying 5, 10+ bb/100 in rake. I may as well just save my time and write a cheque to the site.
I could go on about various pros of the system forever. But there's one another crucial part here in terms of its plausibility. This idea doesn't necessarily dictate the site losing money. They could work to charge a fee that would result in comparable profits to what they see today! It's win win all around.
EDIT: Ok, I have to rave about one other pro of this system. The impact it would have on poker's image. Right now if you ask most of anybody about online poker you're not going to hear anything besides negatives: the sites are rigged, players cheat, the sites will steal your money, blah blah. That will invariably be met with a knowing nod or ten from anybody else within earshot. But poker is a zero sum game, in a world where rake is only charged on winnings you're going to have an enormous amount of winners. Given there are more huge donator outliers than huge winning outliers and with the middle all being of fairly comparable one can only imagine how high that exact percent would be. The image transformation, and resultant impact, that would cause in online poker cannot be overstated. It would turn the image of the image of the game around effectively overnight. Imagine if at a homegame when somebody invariably brings up online poker instead of bemoaning the rigging and cheating people end up using to explain their losses - the topic of discussion flows towards what players are doing with their winnings.
One thing that I think is overlooked is how hugely negative an impact the rake has on casual prerake slightly losing players. Consider a player who would normally lose at -1bb/100 prerake. He hops into a lowstakes hold'em game online and is suddenly paying 10bb/100. Casual players, and many regs, may not really appreciate exactly how damaging the rake is but anybody is going to realize when they're losing 1000% faster than they're used to. Money that might last him a month at his homegame (which is madeup of relatively comparable opposition to what he's facing online) suddenly lasts him a weekend online given the same number of hands?? He's going to blame cheating, rigging, whatever else. He's certainly not going to blame those few cents to couple of bucks the site drags out of the pot each hand - but the result is the same. He's not going to stick around. The system I suggested above would completely fix this problem and start to help depolarize the skill levels in poker. Right now only very good players who can beat the rake and very bad players who don't really care how much they lose tend to stick around. The middle class, which is presumably the majority of players as in any zero-sum game, are the ones most hurt by high per-hand rake.
This would also suddenly completely align the interests of the players and the site. Right now it's in the sites best interest for there to be no big winners or big losers for that matter. They earn the most when everybody puts in tons of hands but nobody earns anything - a terribly unenjoyable situation for all players. When the site makes their profit by having winning players suddenly they have the exact same interest as players do.
Suddenly regs can play against other regs with the expectation of one player actually being able to come out a winner. The reason consciously intended (as opposed to incidental) reg vs reg action is so rare at low and middle stakes is because neither player can ever really expect to be able to realistically win. Poker is a game of small edges and the rake is anything but small. When you're facing a competent player the only 'person' who's going to come out a winner is the house. The suggested system would solve this and ideally even start to work out some of the problems we have of excessive predatatory activity, bumhunting, etc that is so hurting the games today. I love playing against regs, yet I actively table select simply because I know there's no point playing regs when I'm paying 5, 10+ bb/100 in rake. I may as well just save my time and write a cheque to the site.
I could go on about various pros of the system forever. But there's one another crucial part here in terms of its plausibility. This idea doesn't necessarily dictate the site losing money. They could work to charge a fee that would result in comparable profits to what they see today! It's win win all around.
EDIT: Ok, I have to rave about one other pro of this system. The impact it would have on poker's image. Right now if you ask most of anybody about online poker you're not going to hear anything besides negatives: the sites are rigged, players cheat, the sites will steal your money, blah blah. That will invariably be met with a knowing nod or ten from anybody else within earshot. But poker is a zero sum game, in a world where rake is only charged on winnings you're going to have an enormous amount of winners. Given there are more huge donator outliers than huge winning outliers and with the middle all being of fairly comparable one can only imagine how high that exact percent would be. The image transformation, and resultant impact, that would cause in online poker cannot be overstated. It would turn the image of the image of the game around effectively overnight. Imagine if at a homegame when somebody invariably brings up online poker instead of bemoaning the rigging and cheating people end up using to explain their losses - the topic of discussion flows towards what players are doing with their winnings.
