Where is All This Money Coming From?

[Festus22]

I thought I recalled seeing something similar here but couldn't find it.

Anyway - Let's say Party averages 1500 playing tables over a 24 hour period, each table plays 50 hands/hr and each is raked an average of $1.

So 1500 x 24 x 50 x 1 = $1.8M/day or $657M/yr in rake alone!!! Now some of this is paid back to affiliates but I'm not counting SnG's and other forms of poker being played so I'll call it a wash. Now we take the amount winning players take home - and this is a wild ass guess - but let's say the top 10% (maybe 8000 players?) make an average of $10K/yr. That's another $80M. So the total paid toward rake and to winning players is roughly $750M!!! And this is just on Party!

Somebody is losing a lot of money.

[BradleyT]

People have better jobs than you?

[Mike Haven]

Somebody is losing a lot of money.

America?

[BirthdayBoy]

[ QUOTE ]
Where is All This Money Coming From?

[/ QUOTE ]

Me

Consider it a Birthday Gift.

[fluff]

Actually a lot of people are losing moderate amounts of money. That's pretty much how the gambling industry makes money.

[Prickly Pete]

[ QUOTE ]
Somebody is losing a lot of money.

America?

[/ QUOTE ]

Ok, Haven. Them's fightin' words... oh wait. I agree with you.

[GrannyMae]

Now we take the amount winning players take home - and this is a wild ass guess - but let's say the top 10% (maybe 8000 players?) make an average of $10K/yr. That's another $80M. So the total paid toward rake and to winning players is roughly $750M!!!

you are mixing 2 issues here.

the only money disappearing is the rake. the rest of it is just being passed from player to player and should not be added to your rake estimate (which is too high)

http://smilies.sofrayt.com/%5E/_950/candy.gif

[Prickly Pete]

[ QUOTE ]
the only money disappearing is the rake. the rest of it is just being passed from player to player and should not be added to your rake estimate (which is too high)

[/ QUOTE ]

Well I hope the money I've earned this past year "disappears" from the online poker landscape and doesn't just get passed to other players.

I assume what Festus was basically asking is "Where do the losing players get all of their money?" or "Where do all the losing players come from?" or some combination of the 2 questions.

[GrannyMae]

"Where do all the losing players come from?"

mike haven provided the simplified answer to this question. to address his curiosity on how the community can afford to pony up even the rake is explained by the fact that while 500mil/year (party's probable revenue) may seem like alot to come out of our pockets, it still pales in comparision to online casino drops. online casinos, located OFF SHORE, suck billions out of our economy per year.

as high as that sounds, the US spends $400 billion a month shopping in retail stores alone. this does not include what is spent on health care, groceries, cars, homes, insurance etc etc.

the rake generated by all sites per year is statistically insignificant to just this one measure of gross output alone. i guess what i am trying to say is that the free world economy is so much larger than any of us can even conceptualize. this revenue going to online gaming is a sliver of a sliver of a sliver of a penny.



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[Prickly Pete]

I agree with you Granny. Walk through any casino pit and you'll see it. I consider myself a fairly intelligent person, but I blew all kinds of $ on bets that I knew were long-term losers.

Money Wheel? No way idiot. I prefer to blow my wad more slowly at the blackjack table, thanks.

[Simon Diamond]

I agree with you Granny.

I hope you realise this statement with result in the all-seeing eye having you sectioned along with the rest of us.

Simon

[Beach-Whale]

[ QUOTE ]
Actually a lot of people are losing moderate amounts of money. That's pretty much how the gambling industry makes money.

[/ QUOTE ]

I don't know, I've heard that the gambling industry (or, the "gaming" industry, as they want to put it themselves...) make 80% of their profit from 20% of their customers. This is a much crueler business than the industry want us to believe. They, and the big poker winners, I guess, make most of their money from broken lives.

But, on the internet, you and I don't have to see that.

Good for us.

[jdl22]

If they make 80% of their money from 20% of the people which I don't disagree with (they gave some similar sort of stat on a high rollers show on the Travel Channel before WPT came on) then that is probably because the 20% are really rich, not because they are trying to pawn their gold teeth so they can scrape together a few bucks to bet on black. As for the other 20% of their income it probably comes from these people.

[ChristinaB]

[ QUOTE ]
I don't know, I've heard that the gambling industry make 80% of their profit from 20% of their customers. This is a much crueler business than the industry want us to believe. They, and the big poker winners, I guess, make most of their money from broken lives.


[/ QUOTE ]
Aren't 80% of movie tickets sold to 20% of the population?
And sporting event admissions?
And a lot of other "Entertainment type" industries?
People select their own form of diversion, and what they are willing to spend money on.

[Prickly Pete]

[ QUOTE ]
I hope you realise this statement with result in the all-seeing eye having you sectioned along with the rest of us.


[/ QUOTE ]

Of course I do Simon. /images/graemlins/grin.gif /images/graemlins/grin.gif /images/graemlins/grin.gif

[Mike Haven]

"The 80/20 Rule." (http://www.tkdtutor.com/05Instructors/ParetoPrinciple.htm)

[Senor Choppy]

The $500 million is insignificant when measured against how much the overall population spends on movies, shopping, and other forms of entertainment. There are a few problems though, 1) only a fraction of the overall population would ever consider playing poker online, 2) people don't financially cripple themselves going to movies or shopping, and if they do, through credit card debt, they at least have something to show for it and don't walk away from it forever, cursing their own stupidity, and 3) no one ever decides movies are rigged and quit forever, although the people claiming online poker is rigged sure seem to play a lot of online poker :/

$500 million, $1 billion, whatever the bad players who're paying our bills are losing, it's not a huge number. But if only 1 million people have heard of online poker or would be willing to play, it would be VERY significant. Hopefully the potential pool of players is much larger, and if that's the case, we shouldn't have anything to worry about for many years as long as interest in the game doesn't drop sharply for any reason. Another Moneymaker at the WSOP this year would make me relax for a while /images/graemlins/smile.gif

[GrannyMae]

Another Moneymaker at the WSOP this year would make me relax for a while

this would help initially, but not make much of an impact on the long term numbers. the greatest threat to the game is the crackdown on advertising. the player pool has to know the games are here. unless there is a softening of the new restrictions on marketing and fund transfers, poker will hit a plateu SOON. when that happens, the drop off will be almost as steep as the rise was. broke fish will move on to their next addiction and there will be nobody to replace them.

that's when collusion, site dishonesty and cannibalism will take the forefront, and poker will never fully recover. we will have 5 sites to choose from that are safe, and the games will be tougher than anything that can be imagined.

yes, i know that's a gloomy and doomy interpretation, but it is sure as tomorrows sunrise. there has to be softening of marketing and banking hurdles to avoid this.

play your 30 tables at a time this year kiddos. you may be in for a shock in 18 months or so

http://smilies.sofrayt.com/%5E/0/maniac.gif

[Senor Choppy]

i think the crackdown on advertising is worrisome, but not something that jeopardizes the future of the game. I hate to see my winrate drop because of the drop in beginners in the game, like how Paradise tightened up a few years ago when Party started taking off. My only concern is keeping the games legal (or as much so as they are now) and allowing average people to fund their accounts as they are today, without forcing them to either do something illegal, or jump through so many hoops it isn't worth it for them.

[GrannyMae]

i think the crackdown on advertising is worrisome, but not something that jeopardizes the future of the game.

so where will the new players come from? just how many people do you think magazine ads and spamming for banner farms will create for sites?

the best solution is corporate sponsorship for televised events because there will always be the secondary draw that comes from this. i think we are on the verge of this, and it just might preserve the growth rate.

http://smilies.sofrayt.com/%5E/x/eat.gif

[jwvdcw]

[ QUOTE ]
[ QUOTE ]
Actually a lot of people are losing moderate amounts of money. That's pretty much how the gambling industry makes money.

[/ QUOTE ]

I don't know, I've heard that the gambling industry (or, the "gaming" industry, as they want to put it themselves...) make 80% of their profit from 20% of their customers. This is a much crueler business than the industry want us to believe. They, and the big poker winners, I guess, make most of their money from broken lives.

But, on the internet, you and I don't have to see that.

Good for us.

[/ QUOTE ]

While this may be applicable to the addicted casino guys who continually lose at games of luck, I don't think it is to online poker.

In online poker, the guys whom the sites make the most money from are those who play multiple tables at once and for many hours each day. Generally speaking, these are the best players, so theres no reason to feel sorry for them.

[Senor Choppy]

[ QUOTE ]
i think the crackdown on advertising is worrisome, but not something that jeopardizes the future of the game.

so where will the new players come from? just how many people do you think magazine ads and spamming for banner farms will create for sites?

the best solution is corporate sponsorship for televised events because there will always be the secondary draw that comes from this. i think we are on the verge of this, and it just might preserve the growth rate.


[/ QUOTE ]

I don't really understand where the people come from. The idea that someone sees a commercial on TV one minute and is depositing money to play a game he doesn't understand on a site he's never heard of the next is entirely foreign to me. And yet, everyday, thousands of people are waiting on Party.

Even if advertising is cracked down on in a big way, there is always word of mouth, and whatever guerilla methods they come up with to spread the word. It could hurt growth in a big way and tighten up the games far more than everyone would like, but it's not going to be the death of internet poker.

[GrannyMae]

there is always word of mouth


the word of mouth approach saw 5,000 people playing TOTAL on a good night. yes, this was before the wpt, but the wpt and the party commercials appeared at once and in tandem. that's where they came from. will people still say "hey, i wonder if i can play online?" after watching a wpt show, then go hit google?? probably. however, when the 2 hour show had sexton and his bad hair in a party commercial every 9 minutes, they came out of the woodwork.

word of mouth might help the decline, but if there can be no mention of online sites, and no online clothing allowed, then the wpt will only pull in a fraction of the players it did when the commercials ran during the show.


if suddenly the bellagio final becomes the 'budweiser world poker tour finals", then you get marketing opportunities through the sponsors website, promotions, packaging etc.

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[jasonHoldEm]

I came into the poker world right before the the WPT boom (about six months prior). I wonder...were the games tougher back then when there were 5k players on? Or do you think they'll be tougher in the future (when there are 5k players once again) now that the boom has happened and the sharks are bigger and stronger?

J

[GrannyMae]

much tougher before wpt, and will be even tougher than that if there were a serious decline. i don't think the decline would bring the total back to 5k total, but 50k on party won't happen the way things are now. i would venture to guess the numbers have leveled and/or are dropping in past month

http://www.computerpannen.com/cwm/contrib/edoom/jump_to_dotted_line.gif

[jmark]

[ QUOTE ]
as high as that sounds, the US spends $400 billion a month shopping in retail stores alone. this does not include what is spent on health care, groceries, cars, homes, insurance etc etc.

[/ QUOTE ]

I heard once that the US spends enough on diet programs each year to feed all the starving people in Africa. I wonder how close this is to the truth.

[Cptkernow]

I think you have to be more global in your outlook.

Yes advertising may be restricted/banned in USA, but that is not the case in other countries.

Poker is also booming in the UK, online poker sites are being marketed in an aggresive manner and refrences to online poker in the media; print,tv and radio are becoming more and more common. Poker is slowly edgeing into the zeitgeist.

Amounts wagered in the UK on online poker sites is predicted to grow by 600% this year.

If this is a trend that repeats its self across Europe then we have another large pool of potential players to draw from.

Basicaly we are dependent on the major poker sites to globalise the market of poker. If they can do this then I expect the online poker pheneomenon to last at least another 5 years.
If Just .1% of the total of those with internet connections (globaly) were playing poker online at one time that would mean 1 Million online players at that time. 0.05 would equal half a million. This is surely enough to keep the boom fueled.

[sumdumguy]

[ QUOTE ]
Anyway - Let's say Party averages 1500 playing tables over a 24 hour period, each table plays 50 hands/hr and each is raked an average of $1.

So 1500 x 24 x 50 x 1 = $1.8M/day or $657M/yr in rake alone!!!

[/ QUOTE ]
If we took ONLY their peak hours (8,500 real money players or less) and extended it to a 24 hour period AND assumed they are all in 6 max games, that's still only 1,416 tables. The estimate is way too high. But the raked hands per hour is a little low. /images/graemlins/smile.gif

[sumdumguy]

[ QUOTE ]
I don't know, I've heard that the gambling industry (or, the "gaming" industry, as they want to put it themselves...) make 80% of their profit from 20% of their customers. This is a much crueler business than the industry want us to believe. They, and the big poker winners, I guess, make most of their money from broken lives.

But, on the internet, you and I don't have to see that.

[/ QUOTE ]

The dynamics of poker room profits are a little different than the gambling industry in general. Still cruel, but in a different way. /images/graemlins/smile.gif

It may be nearer correct that 90% of a poker room's profits come from 80% of its customers.

[MicroBob]

agreed.
as i stated in a previous post...it doesnt have to stop in america.

there is still mucho growth potential in europe.

and if it ever somehow is incorporated in asia (japan, hong kong, elsewhere) then hang on for a crazy ride.

i'm not quite so 'doom and gloom' about the down-side as granny is.


also, party is still finding a way to keep the TV ads on the air with their partypoker.NET commercials promoting their play-money site.


i also think there is still a LOT of room for growth in the US.
i dont know if we are going to get many more players of the 40-and-up crowd...but the under-30 demographic is still a potential goldmine.


maybe Granny is right and i'm just seeing the online-poker future thorugh rose-colored spectacles.....but i just dont think party and others will get THAT tight.

if it happens, then maybe i'll hit B&M poker-rooms more often.
i played for a couple hours at a B&M the other night and there were a few players who were just plain freaking awful.

[Festus22]

I think winning players remove money from the game. Winnings spent on cars, rent, mortgage payoffs, drum sets, etc. will not be returning to the poker table. How else can one make a living by playing poker other than removing profits from the field of play?

Regarding the rake estimate, of course I'm only making a gross estimate. Even if it's "only" $500M, we're talking 1 site that people are coming to for the exclusive purpose of playing poker. That already makes the average player better than his/her casino counterpart. And Party typically has an average of 20K players over a 24 hour period. How many of them are new? How many just keep playing and losing? I have absolutely no idea but if there's 100K players who rotate through Party's doors in a year and 80% of them lose, then each loser averages over $7K in losses (80K losing players - $500M in rake + 80M to the winners). Maybe I'm out of touch but I'd think the average Party gambler (young and without a large, disposable income) does not burn $7K before he/she realizes they're not a winning player.

Or maybe I've just lived a sheltered life and have no idea what goes on in some of these folk's heads. /images/graemlins/crazy.gif

[TimM]

[ QUOTE ]
I think winning players remove money from the game. Winnings spent on cars, rent, mortgage payoffs, drum sets, etc. will not be returning to the poker table.

[/ QUOTE ]

Auto workers, landlords, bankers, music store employees etc. will just have to bring that money back to the tables.

"It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred from one perception to another."

I also think you may be overestimating the rake and the number of winners relative to the number of losing players.

[bernie]

This must mean 80% of my chips are going to the 20% better players and the other 20% of my chips are going to the other 80% that suckout on me on the river.
/images/graemlins/laugh.gif
b

[OnlinePokerCoach]

I think another threat to the long term success of online poker is poker programs. I know that the possibility of a good poker program has been debated. I still believe that some programmer out there will create a solid program that can play winning poker by analyzing its opponents. Think Poker Tracker meets WinHoldEm meets Wilson Turbo. The poker sites will need a creative solution.

OnlinePokerCoach