Internet poker slowdown

Well so after three months on the market, the future suddenly changed for Party. As a mutual fund manager I took part in the IPO with 800´000 shares, and I also met the analysts from the consortium in which Dresdner Kleinwort were the lead. As a poker player it took just seconds to understand that these analysts didn't have a clue about the industry. They simply extrapolated growth figures and profit margins to forever.

What is happening is growth slowing and competition is beginning to heat up? But guess what, things will change a lot more. The industry is just too profitable and the entry barriers fairly low. That’s why Party now expects that the cost of loyalty programs will increase for the second half of the year.

My expectation is that Poker players will see the total cost for playing decline significantly. The amount of money players today give to Party and the likes is just huge. Playing $1/2$ NL and paying up to 5% is not sustainable. At work we recently renegotiated our cost of trading Nasdaq listed stocks to 0.15%, and that require a full time trader working up to 20% of a days float.

I am still perplexed by the strange acceptance of all these semi-professional internet poker players to pay these enormous sums of money in rake. I bet you guys could use this money for something else. Some of you might be able to run a vodka tab in some of the hot Manhattan clubs like Marquee and Butter, and man you would have some hot girls by your side...

Well it will be nice to see the money leaving the corrupt poker room managers from Gibraltar and return to the pockets of those who deserve them - all you serious poker players!!!

[DeadMoneyOC]

Look at all those banners on the right side of the page _>>

[grinin]

Why would you do this:

[ QUOTE ]
As a mutual fund manager I took part in the IPO with 800´000 shares, and I also met the analysts from the consortium in which Dresdner Kleinwort were the lead.

[/ QUOTE ]

When

[ QUOTE ]
As a poker player it took just seconds to understand that these analysts didn't have a clue about the industry.

[/ QUOTE ]

[Uglyowl]

The latest trends are actually good for the players and bad for the sites.

The profit margins must shrink at Party. This is the case in any business out there. When there is that much money to be made someone comes in who is willing to give consumers a better deal and be less profitable.

The sky is falling mentality is just incorrect at this point from a players stand point. The shareholders of Party who paid a huge price for the growth of the company was/is a different story.

[Synergistic Explosions]

[ QUOTE ]
The latest trends are actually good for the players and bad for the sites.

[/ QUOTE ]

That is true. The competition to gain new players and retain old players will no doubt create positive opportunities for us players. Better than we've already seen.

[ QUOTE ]
[ QUOTE ]
The latest trends are actually good for the players and bad for the sites.

[/ QUOTE ]

That is true. The competition to gain new players and retain old players will no doubt create positive opportunities for us players. Better than we've already seen.

[/ QUOTE ]
Hopefully you are right.

[AlexTrue]

All of us would only greet new bonuses with higher frequency and higher amount on Party skin. When will Party Poker give us something to work out in September? /images/graemlins/wink.gif

[Timer]

[ QUOTE ]
I am still perplexed by the strange acceptance of all these semi-professional internet poker players to pay these enormous sums of money in rake.

[/ QUOTE ]

That's because they're mostly idiots who think they've butchered the fatted calf. I was just at the Commerce Club where they took $70 juice for a $40 satellite. Most of the games are a $4 drop as soon as there is a flop. Poker players are being raped in the B&M and online.

But since everybody here wins their 5BB an hour 8 tabling they don't seem to care.

Personally, I'm sick of getting [censored] by the online sites.

[ QUOTE ]
Poker players are being raped in the B&M and online.

But since everybody here wins their 5BB an hour 8 tabling they don't seem to care.

Personally, I'm sick of getting [censored] by the online sites.

[/ QUOTE ]
Are you suggesting that rake used to be much lower in the good ol' B&M-only days, or that you think rake should be lower?

Because there's a big difference there.

[Theodore Donald Kiravatsos]

[ QUOTE ]
I was just at the Commerce Club where they took $70 juice for a $40 satellite.

[/ QUOTE ]

40+7? Is that what you saying? I think I can top that.

I realize that complaining about B&M rake is getting the original post off track, but how about 100+25 for the MTTs at Greektown Casino in Detroit. That takes some nerve.

"Your excuses are your own" -- Richard Roma

[ QUOTE ]
Why would you do this:

[ QUOTE ]
As a mutual fund manager I took part in the IPO with 800´000 shares, and I also met the analysts from the consortium in which Dresdner Kleinwort were the lead.

[/ QUOTE ]

When

[ QUOTE ]
As a poker player it took just seconds to understand that these analysts didn't have a clue about the industry.

[/ QUOTE ]

[/ QUOTE ]

He's a fund manager, not a day trader. It's not his money.

[ QUOTE ]
[ QUOTE ]
I am still perplexed by the strange acceptance of all these semi-professional internet poker players to pay these enormous sums of money in rake.

[/ QUOTE ]

That's because they're mostly idiots who think they've butchered the fatted calf. I was just at the Commerce Club where they took $70 juice for a $40 satellite. Most of the games are a $4 drop as soon as there is a flop. Poker players are being raped in the B&M and online.

But since everybody here wins their 5BB an hour 8 tabling they don't seem to care.

Personally, I'm sick of getting [censored] by the online sites.

[/ QUOTE ]

If you're a casino owner, why would you settle for less drop when you could just replace all the poker tables with slot machines and make twice as much money?

[Timer]

[ QUOTE ]
If you're a casino owner, why would you settle for less drop when you could just replace all the poker tables with slot machines and make twice as much money?

[/ QUOTE ]

It really takes a lot of nerve to post this nonsense, but you see it all the time. Do you really think if the casinos took out all of the restaurants, bathrooms, sportsbooks, bars, shops, stores, and poker rooms and installed nothing but slot machines they would immediately fill up with patrons willing to gamble away pulling the silver handle?

This is not about what they CAN do or SHOULD do, it's about what they're doing and how the custmers (poker players) just blithely accept it as if nothing is out of the ordinary.

A $20 sit'n'go on Party is $2 juice. A $100 sit'n'go is $9 juice. Why does the $100 sit'n'go charge more juice? There is only ONE correct answer. Let's see who is the first to come up with it.

Whoa there, let's work on our reading comprehension, mmmkay?

All I'm saying is that a poker table needs to charge what seems like a very high rake in order to make an equivalent amount of money for the casino as a slot/VP machine or roulette table would.

I agree that charging $9 for a $100 SNG and $2 for a $20 SNG is not something they need to do. It's like buying golf balls. If you pay $36 for a dozen ProV1s, it's not like it cost Titleist twice as much money to make them as the cheap balls, but better players are willing to pay more for them. Just like higher stakes poker players are willing to pay more in rake to play poker.

[Timer]

[ QUOTE ]
Just like higher stakes poker players are willing to pay more in rake to play poker.

[/ QUOTE ]

You are really out of the loop, or you just don't get it. Where on earth do you come up with the ridiculous notion that high stakes players are willing to pay more in rake to play poker? This is nonsense. Utter, nonthinking nonsense.

[Sniper]

[ QUOTE ]
Where on earth do you come up with the ridiculous notion that high stakes players are willing to pay more in rake to play poker? This is nonsense. Utter, nonthinking nonsense.

[/ QUOTE ]

This is simple... if the higher stakes players weren't "willing" to pay higher rake, they wouldn't be playing /images/graemlins/wink.gif Doesn't say anything about whether they are happy about it or not!

I'm still waiting for an answer to my question:

[ QUOTE ]
Are you suggesting that rake used to be much lower in the good ol' B&M-only days, or that you think rake should be lower?

[/ QUOTE ]

If it's the former, yeah, let's take up arms against the casinos.

If it's the latter, I wish ya luck, big dude.

Why did we take part of the IPO (Partygaming)? A very good question. The market interest was great, resulting in the book being 10x oversubscribed. The consequese is that the stock was almost bound to go up post the IPO. So that was a no brainer. However I was stupid not to flip the shares atleast a couple of weeks into traiding. The reasoning was that it is very unusual that a company messes up the first quarter like Party did (if it is a bad deal it usaually comes in the second or third quarter).

[ QUOTE ]
[ QUOTE ]
Just like higher stakes poker players are willing to pay more in rake to play poker.

[/ QUOTE ]

You are really out of the loop, or you just don't get it. Where on earth do you come up with the ridiculous notion that high stakes players are willing to pay more in rake to play poker? This is nonsense. Utter, nonthinking nonsense.

[/ QUOTE ]

Gee, I dunno, I might get that utter nonthinking nonsense from the simple fact that higher stakes players have been paying more rake than lower stakes players for decades. They can tolerate it because it's a much lower percentage of each pot than lower stakes.

I'm beginning to wonder if you've ever actually played poker.

[Timer]

[ QUOTE ]
Gee, I dunno, I might get that utter nonthinking nonsense from the simple fact that higher stakes players have been paying more rake than lower stakes players for decades. They can tolerate it because it's a much lower percentage of each pot than lower stakes.

I'm beginning to wonder if you've ever actually played poker.

[/ QUOTE ]

OK. You're obviously an idiot, who is now on permanent ignore, but I'll give one last response anyway.

Since no one answered my question above, I'll assume no one knows the answer. Casinos and online cardrooms charge more for higher stakes games BECAUSE THEY CAN! That's the ONLY reason. It costs no more, takes no more time, and is no more effort, but because the stakes are higher they use that as an excuse to siphon off more money. I even asked a casino manager at the Commerce one time why they rake off more money in the bigger games and his answer I kid you not was, "the high stakes players can afford it." Some answer, huh?

High stakes players HATE BEING ROBBED. It's nothing but greedy discrimination. But since poker players in general (including high stakes players) are mostly degenerate gambers and not smart business men they pony up the dough. They have all the power and could easily get the raked lowered considerably, but they're too busy trying to stay in action. The same is true for online poker. $9 juice for a $100 sit'n'go? $15 juice for a $200 sit'n go? Are you kidding me? Why? Because they can, that's why.

And I'd also be willing to lay three to one I've been playing poker longer than you've been alive.

[MicroBob]

aren't you saying the exact same thing that Ron Burgandy is saying?

he is saying that high-stakes players are WILLING to pay more rake (otherwise they wouldn't be playing where there's more rake).

you are saying that the casinos do it because they know that the players can 'afford it'...thus the higher stakes players are obviously WILLING to do it.


Timer - I don't understand what you are getting so upset about here because it seems you are vehemently arguing a point about which you do NOT disagree.

[HesseJam]

As entrepreneur you want to maximize profits. Obviuosly, many poker players pay the juice of $9 at the $100 SnGs. I assume the regulars pay only between 6.3 and 6.75. I am not sure that lowering the rake would entice many players to play more SnGs per month. You might create an even worse effect: The bad players might be enticed to play the 100s INSTEAD of the 20s. So, if the juice was the same at both, they are likely to play LESS SnGs because they bust out sooner playing at higher stakes.

The rake WILL come down eventually. Providing rake rebate is a better option than lowering the rake across the board. The new/bad/hobby/compulsive players are more attracted by bonuses and don't care too much about rake. They care about atmosphere and easy access. The good/high volume/serious players care about rake and you can target them through rake rebate. Why not give them a 70% rebate if they play 300000 hands per year?

I think I got my answer in Timer's non-answer:

There's no specific "poker boom" price gouging going on; rake has always been like this; he just doesn't like it.

Um, keep fighting the good fight, I guess...

[MicroBob]

I, for one, don't think the rake will come down eventually (I can always hope though).

There aren't enough players with rake-awareness for it to provide enough incentive to the site.

Losing business because some of your players are dropping out??
Saying "Hey...we've lowered our rake so come back and play!!" isn't really going to entice too many players to try it again or play more (not enough to make it profitable anyway...they will just be hurting their own profits really).

Putting efforts into marketing and promotions is what the sites will continue to do.
"Win your way to the WSOP for FREE!!" (in an effort to just get the players back on the site) is far more exciting to most players than a rake reductions.

"Look at this!! Instead of raking $0.50 for a $10 pot we are now waiting until it is a $15 pot and at that point we are only raking $0.25!! trust on this one....if you are a regular player this could save you THOUSANDS of dollars!!!!"

If you did this then most players would go "ummm...sure. thousands of dollars....25 freaking cents at a time. Big freaking deal. get a life.
At least with the free shot at a WSOP seat I know it's not some meaningless penny-ante rake-reduction."


Most casual players (and many less-than-casual players) are just THAT clueless about the effect of the rake.

Therefore...a rake-reduction does NOT have the same marketing impact as lowering the price of gas or milk or an airplane ticket or whatever where ALL the consumers can see and understand that they are paying less than they were before.



Just my thoughts.
Hey, if I'm wrong that's GREAT!! If more players understand the impact of a rake-reduction and a site like Party or Stars determines that a rake-reduction is in their best interests then I'll happily be wrong.

I just think they are going to continue to charge whatever it is they feel they can get away with.
To that end...I'm kind of surprised the rake on these sites isn't even a little bit higher than it already is.

There are plenty of disagreements on the effect that competition will have. We might lower rake or just more promotions for tournaments, give away things based on points collected etc. My take is that most sites will you an array of offerings to promote players to stay. The result will despite the form create lower margins for the sites and more money for players. I think operators are aware of the importance of high frequency players, those who spend +15h a week with multi tables. To keep these players loyalty programs are inevitable going to happen. We have a classical case for customer segmentation, where you offer different compensation for the recreational fish and another for the serious poker player.

Today I got a feedback from a UBS Warburg representative who had been attending the Vegas gaming conference, meeting with some of the European bet and poker vendors. Though I would share these notes..

LADBROKES
- confident presentation.
- have had a good August and not seen the same mkt slowdown that PRTY has but, note they have no US customers.
- emphasised importance of the Brand re customer retention.

SPORTINGBET
- criticised PRTY for single product revenue stream.
- are not seeing a slowdown in any of their businesses; sports betting & gaming growth still strong.
- brand devlpt and product breadth are key issues.
- dismissive of regulatory issues & Kyl bill.
- think excessive shorting activity is behind recent price moves and views this as counter intuitive of investors; criticised by some investors here as being too defensive in his presentation, particularly re shorting activity.
- I thought, good presentation came across as perhaps the most professional of these relatively immature mgt teams.

BETONSPORTS
- impressive presentation (ceo ex Ladbrokes).
- clearly had a very good q3.
- expanding futher into US, and now Asia and Latam: UK too competitive to consider.
- advertising in US - no resistance to this, unlike last year.
- Mobile delivery? Still some way off in the US but, will be big in time - as in UK & Europe.

BETANDWIN
- clearly had a blinding q3 - little disguising this fact.

EMPIRE-ONLINE
- purely a marketer, no interface; not researched.
- working on a big deal which "will transform the industry" - if the deal goes through, believes it will happen within about 6 weeks; deal is rumoured to be a merger with SBT.
- my view? Noam Lanir came across as extremely arrogant - mind your eye.

[HesseJam]

Thanks for sharing this

[grinin]

Macbeth

This was one of the most informative posts I have seen here in a while.
We appreciate your insight and hope that you could share these regularly.

Questions:
I assume blinding q3 means: really really good?
Empire merger with SBT. Is SBT Sportingbet? Also, any insight as to whether Empire would eventually leave the Party platform?

Thanks

[Folding Pete]

Just to too put in my two penney worth...

Speaking of raked games (limit games in particular) the product is not price sensitive. That is, for the majority of players, the amount of games they play is not dependent on how much the rake is. The amount of rake charged does not deter or attract the average player. It could be high or low as the true cost is effectively hidden from the majority of players.

The amount of raked games average players 'consume' is based on a number of factors - marketing (to get and keep the consumers) and an enjoyable/addictive/exciting/challenging experience being the most notable of the factors. How quickly a player loses his deposit also is a factor (which is dependent on luck, the rake and the relative skill of his opponents).

As the cost of the purchase is hidden to poker consumers I don't predict any decrease in rake. In fact I would predict more unnannouced and hidden rake increases (as are almost all rake increases). This will be only slightly offset by increased bonuses and player loyalty programmes. In particular you can expect to see more innovative programmes to get casual players to play longer sessions and play more of them.

The only reason for a poker site to lower rake is to attract and keep knowledgeable players. Much better for them to have a high rake (as all poker sites have now) plough some of it for marketing to attract the casual players and the big rake generating multitablers will follow the fish as they always do.

Rake only goes up.

Always be folding

[Timer]

[ QUOTE ]
you are saying that the casinos do it because they know that the players can 'afford it'...thus the higher stakes players are obviously WILLING to do it.

[/ QUOTE ]

They are not WILLING. They are FORCED. If they got together and did something about it the casinos, online and otherwise would have no choice but to lower the rake.

Here's the bottom line:

A $20 sit'n'go and a $200 sit'n'go SHOULD CHARGE THE SAME JUICE. But they don't because they know THEY CAN GET AWAY WITH CHARGING MORE because of the flimsly excuse that the players can afford it or because they are playing for more money, WHICH ARE NOT REASONS AT ALL--but rather a convoluted way to literally rob their customers.

[Timer]

[ QUOTE ]
As entrepreneur you want to maximize profits. Obviuosly, many poker players pay the juice of $9 at the $100 SnGs. I assume the regulars pay only between 6.3 and 6.75. I am not sure that lowering the rake would entice many players to play more SnGs per month.

[/ QUOTE ]

WHO CARES! Here's a stat for you. I played the $200 sit'n'gos for about a year straight. I PAID ALMOST AS MUCH IN JUICE AS I WON!

[ QUOTE ]


You might create an even worse effect: The bad players might be enticed to play the 100s INSTEAD of the 20s. So, if the juice was the same at both, they are likely to play LESS SnGs because they bust out sooner playing at higher stakes.

[/ QUOTE ]

When I read something like this it makes me want to pull out my hair--literally, my one remaining hair. My response?

SO GOD-DAMNED WHAT!

Do you work for some online site--you must.

[ QUOTE ]
The rake WILL come down eventually.

[/ QUOTE ]

I tend to agree with MicroBob or whoever said the rake probably won't come down. It SHOULD have come down ages ago. With all of the competition out there, and the big online sites making BILLIONS of dollars. But no, it hasn't. And personally, I don't look for it to come down anytime soon--rather the opposite--it will probably go up. Goddamn theives.

[ QUOTE ]
Providing rake rebate is a better option than lowering the rake across the board. The new/bad/hobby/compulsive players are more attracted by bonuses and don't care too much about rake.

[/ QUOTE ]

Wrong again. Anyone concerned with a bonus would obviously be concerned about the rake. They go hand in hand.

[ QUOTE ]
They care about atmosphere and easy access. The good/high volume/serious players care about rake and you can target them through rake rebate. Why not give them a 70% rebate if they play 300000 hands per year?

[/ QUOTE ]

Because not everyone is a degenerate stay in in front of the computer 12 hours a day multi-tabling 8 games kind of player, that's why. Why give some kind of special break to high-volume players over those who choose to play a more "normalized" kind of game.

TREAT ALL CUSTOMERS THE SAME!

What's so hard about this people?

[Wyers]

A $20 sit'n'go and a $200 sit'n'go SHOULD CHARGE THE SAME JUICE. But they don't because they know THEY CAN GET AWAY WITH CHARGING MORE ....

Errr... no kidding.

You call Burgundy an idiot for essentially agreeing with your point. Now you bust out the CAPS just to make sure that feeble-minded Bob can understand the very, very complicated theory behind your rant.

You haven't reinvented the wheel, dude. And this most definitely is not epiphany inducing info. Everything you are spouting is common knowledge in these parts but you're losing your mind like you're the first to figure this out.

Stop being such a dick.

[Timer]

[ QUOTE ]


Stop being such a dick.

[/ QUOTE ]



F.uck you.

[AASooted]

[ QUOTE ]
They are not WILLING. They are FORCED.

[/ QUOTE ]

Put it in caps all you want, but they are definitely not forced to pay. I suppose if you assume, as you clearly are, that the only thing they can do with their money is play poker then you could twist your worldview around to believing they're forced. They're not.

Anyone with $109 can play a SNG, give it to the Red Cross, buy some new clothes, set it on fire, or buy a bathtub full of ice cream. No one is forcing them to do any of those things.

[Wyers]

[ QUOTE ]
[ QUOTE ]


Stop being such a dick.

[/ QUOTE ]


F.uck you.

[/ QUOTE ]

My point exactly.

Why are you losing your mind on people who essentially agree with you? It seems bizarre. You were so busy arguing semantics with Burgundy you didn't pay attention to the fact that he is basically on the same page.

Maybe you're having a bad day or maybe you started drinking a little earlier than normal. I really don't care. I'm through with you.

...but you may want to be aware of the consequences of circumventing the language filter.

[mbpoker]

>Wrong again. Anyone concerned with a bonus would obviously >be concerned about the rake. They go hand in hand.

That is completely wrong. Bonuses and freerolls are highly visible to all players including novices. Rake is not.

[livinitup0]

Quote:
WHO CARES! Here's a stat for you. I played the $200 sit'n'gos for about a year straight. I PAID ALMOST AS MUCH IN JUICE AS I WON!

so expected profit 215$ on a 200$ investment
0.075 ROI? woah...rough year... or you suck.

[Mempho]

[ QUOTE ]

Most casual players (and many less-than-casual players) are just THAT clueless about the effect of the rake..

[/ QUOTE ]

I'm fairly certain that you're correct about this. This is also one reason that most small-stakes players in B&M actually prefer a jackpot game. Most of them simply don't take the time to understand how many times they pay for what is essentially a $1 lottery ticket. Many of them wouldn't even care if they did understand the effect for the simple premise that they can play poker, have fun, have a decent shot of winning $100 or so, and, at the same time, have a shot at some potentially life-changing (albeit not retirement-inducing) money.

I would like to debate one point, however. I would like to know what effect lowering the rake would have on the population of players in general. In other words, since the fish pay most of the rake (because they win more pots than TAGs), it would greatly increase the time it would take for them to go bust. Now, this would mean that, in the short-term, the TAGs would get more of the fishies' money. However, is it possible that, in the long term, this might actually contribute to revenue growth because the poker population is more sustainable. In addition, a more stable poker population would mean that poker sites would, in aggregate, have to spend less money on marketing to entice players to redeposit. Think of the potential effect: Bill, a fish, decides to deposit $100 at Party. Instead of going busted in 2 weeks of his usual play, he takes 4 weeks. If he got busted every two weeks, he might eventually quit playing altogether. On the other hand, if it takes him 4 weeks, he might think, "Gee, I sure got to play a lot of poker for $100. I'll do it again. Maybe I'll just get lucky, move up, end up on TV....yada, yada, yada."

One more effect this could have is that it could make the games better and, in effect, the games would be better not only for the TAGs, but for the fish as well.

Meanwhile, if the rake were increased to a certain point, all but the very best players would be big-time losers. At some point, the rake becomes unsustainable for all. At that point, revenue drops off sharply because the player population drops even more dramatically than the increases in drop per hand.

Think about it this way: It's basically like the political issue concerning taxes. Bush's economist stated that a decrease in taxes would create an overall growth in tax revenue due to the growth of the economy as a whole. Meanwhile, Gore's economic team stated that a decrease in taxation would not cause growth in the economy to the extent that it would make up for the decrease in the taxation rate.

The question is, "What side are you on?" To be perfectly honest, I'm not an economist and I don't know which is the correct answer. Just food for thought.

[obsidian]

[ QUOTE ]
Stop being such a dick.

[/ QUOTE ]

[Jimmy The Fish]

[ QUOTE ]
[ QUOTE ]
you are saying that the casinos do it because they know that the players can 'afford it'...thus the higher stakes players are obviously WILLING to do it.

[/ QUOTE ]

They are not WILLING. They are FORCED. If they got together and did something about it the casinos, online and otherwise would have no choice but to lower the rake.

Here's the bottom line:

A $20 sit'n'go and a $200 sit'n'go SHOULD CHARGE THE SAME JUICE. But they don't because they know THEY CAN GET AWAY WITH CHARGING MORE because of the flimsly excuse that the players can afford it or because they are playing for more money, WHICH ARE NOT REASONS AT ALL--but rather a convoluted way to literally rob their customers.

[/ QUOTE ]

So much capitalized anger, over the most basic principle of the free-market system. Management behavior is economic behavior; they charge the rake that they do, because the players who make up the demand curve are willing to pay that price. (Yes, they are "willing". No, they are not "forced". They have the option of not playing, which denies the casino every cent the player has. Players may hate the rake; but if they choose to play, they choose to accept it.)

Don't get angry at the sites for charging too much. Get angry at the players who pay it. Better yet, don't get angry at all; instead, persuade the players to demand better from the casinos. The supply side reacts to the demand side, not the other way around. When a site sees its business decline, and learns that the decline is caused by an excessive rake, they'll lower it.

It seems like most people are skeptical to a rake cut across the industry. Well this is understandable, since inception the rake has been flat at 5% of certain minimum pot sizes. Poker rooms have been run like an oligopoly where they compete on everything but the rake. We have seen competition toughen significantly on all the side fringes like: reload bonuses, sign up bonuses, recurring monthly payments, guaranteed tournaments and player bonus points. As this is likely to continue even further, my expectation is that it will cause rake to also come down. Up till now there has not been the need to offer players anything extra since the growth rate was so fast that there were players enough for almost every new poker room. But this is not sustainable. Looking at the industry size so far

2003 $314m
2004 $1404m (~350%)
2005 $2400m

If we look at PartyPokers revenues

2002 $9.7
2003 $124 (1280%)
2004 $552 ( 345%)

With this in mind it is quite significant that PartyPoker recently warned that the growth rate had approached 0% in the last couple of months. There is also a supply backlog, since it takes time to start up a new poker room and we continue to see new rooms coming to market every month. Most of these new poker rooms will go bankrupt eventually, but before that they together with the second and third tier vendors will change the competitive dynamics.

So be patient. The time of easy theft is passing by and after that the renaissance of a new era were money will stay among the players. And when money stays within the system it will take longer for the fish to fry and profitable players will become increasingly profitable.

[Mempho]

[ QUOTE ]
It seems like most people are skeptical to a rake cut across the industry. Well this is understandable, since inception the rake has been flat at 5% of certain minimum pot sizes. Poker rooms have been run like an oligopoly where they compete on everything but the rake. We have seen competition toughen significantly on all the side fringes like: reload bonuses, sign up bonuses, recurring monthly payments, guaranteed tournaments and player bonus points. As this is likely to continue even further, my expectation is that it will cause rake to also come down. Up till now there has not been the need to offer players anything extra since the growth rate was so fast that there were players enough for almost every new poker room. But this is not sustainable. Looking at the industry size so far

2003 $314m
2004 $1404m (~350%)
2005 $2400m

If we look at PartyPokers revenues

2002 $9.7
2003 $124 (1280%)
2004 $552 ( 345%)

With this in mind it is quite significant that PartyPoker recently warned that the growth rate had approached 0% in the last couple of months. There is also a supply backlog, since it takes time to start up a new poker room and we continue to see new rooms coming to market every month. Most of these new poker rooms will go bankrupt eventually, but before that they together with the second and third tier vendors will change the competitive dynamics.

So be patient. The time of easy theft is passing by and after that the renaissance of a new era were money will stay among the players. And when money stays within the system it will take longer for the fish to fry and profitable players will become increasingly profitable.

[/ QUOTE ]

Agreed.