I was invited to a club on pokerrrr 2. The guy runs two games at night. A $0.50/$1.00 game and a $2.00/$4.00 game. Earlier in the week it was capped at $4 tip for the smaller game and $6 for the bigger game, but today I noticed it's $6 each now.

I watched last night and they played over 500 hands in the larger game and a few hundred in the smaller. Seems to me like he's pulling in +/-$4,000 in tips. Let's say he only pulls that in for three nights a week (or a smaller amount for 7 days, totaling the same amount as 3 days), he's pulling in over $12,000 a week, or over $600k a year.

This simply doesn't seem sustainable in a club with only a few hundred players and just a handful of those who actually play.

What am I missing? Do clubs survive like this? Does he likely just cycle through new players until they quit because they can't beat the rake/tips?

assuming most people get rakeback

There's no "rake." It's' just "tips" that go straight to the owner. If he wanted to do a "tip back," why not just decrease the tip amount?

Maybe he does do a "tip back." I'll ask him.