Casino Management 101: The Lunacy of a Jackpot in the Bike's NLHE Game

[Speed Racer]

The Bicycle casino has announced that a jackpot drop will be imposed in the No Limt games starting on Monday.

An extra $1 per hand rake will be taken to "finance" the jackpot and $1000 will be added to the jackpot daily.

No matter how you look at it and no matter how you slice and dice it, the Bike NL jackpot is the biggest ripoff to hit the SoCal poker market in decades.

Either the Bike management is completely clueless about poker, as opposed to managing a casino, or they think the players are idiotic gambling addicted completely clueless dolts.

The Bike is currently spreading 4 NLHE games for about 16 hours a day and taking a $3 per hand rake. Assuming 35 hands per hour, the daily jackpot drop would be (140*16) $2240.

The Bike has announced that they are adding $1000 per day to the jackpot so approximately 50% of the jackpot drop is being kept by the casino.

And what about the chances of the jackpot ever being hit?

The chances of an Aces Full of Kings or better beat jackpot being hit is about 1 in 69,000 (http://www.math.sfu.ca/~alspach/mag59/), but a feature of NLHE games is that hands rarely go to the river. In the vast majority of hands someone bets/raises pre-flop, on the flop, or turn and the other player folds.

IN THE VAST MAJORITY OF NLHE HANDS THERE IS NO SHOWDOWN AND NO POSSIBILITY THE CASINO WILL HAVE TO PAYOFF.

If 80% of the hands are folded before the flop, the Bike will take the $1 jackpot drop and not expose themselves to the possibility of a jackpot payoff.

Rather than paying off 1 in 69,000 hands, the jackpot will be hit only 1 in 345,000 hands. With 4 tables going 16 hours a day and 35 hands being dealt per hour 2240 hands of NLHE are being dealt each day.

On average, the NLHE jackpot will be hit once every 154 days (about once every 6 months) and be worth $154,000.

During this 154 day period the Bike will have collected $311,696 in jackpot collections for an expected profit of $157,696.

I'll leave the calculations to Barbara Yoon or Brian Alspach, but there is a good chance of the Bike NLHE jackpot going for a year or more without being hit.

Do the words "Waiting for Goudot?" have any application here?

And what will happen when the jackpot gets huge--given that there is little business incentive to increase the jackpot once it gets very large?

Will the Bike continue to add to the jackpot daily or will they go to a backup jackpot or will the jackpot drop money just silently dissappear?

If you factor in the fact that 40% of the jackpot will be taken by the government as taxes, only $94,617 or 30% of the jackpot drop will ever find it's way back to the players bankrolls.

The Bike has marketed itself as the value leader in th SoCal poker market--lower collections and better comps than their competitors.

Is the NLHE jackpot the beginning of the end for this strategy?

Speedy

P.S. this was also posted on RGP.

[Michael Davis]

"I'll leave the calculations to Barbara Yoon or Brian Alspach, but there is a good chance of the Bike NLHE jackpot going for a year or more without being hit."

Based only on experience, I just can't believe this. There will be times when someone flops quads and another person a full house.

Also, I suspect if 80% of hands didn't go to the flop, the jackpot would be more likely to hit.

The introduction of a jackpot sucks, but not because it might not be hit for a long time. From an EV standpoint, it makes no difference, unless you want to consider reinvesting the money in stocks and such.

-Michael

[Dynasty]

[ QUOTE ]
...the Bike management...think the players are idiotic gambling addicted completely clueless dolts.

[/ QUOTE ]

How far from the truth is this?

A basic truth is that the average poker player likes jackpots and bonus money to be given out.

[Ed Miller]

A basic truth is that the average poker player likes jackpots and bonus money to be given out.

Speed Racer is 100% right that bad beat jackpots are ill-suited to no limit games. I think he's somewhat overestimated the problem (with his estimate that it hits only 20% as often), as a significant percentage of jackpots are won between two big hands like AA and another pocket pair tens or higher, which are exactly the hands that are most likely to end up at showdown.

Nonetheless, the payoff ratio (number of hands played per jackpot) will be much higher at no limit than in a loose limit game. That means that the Bike will be holding a LOT more money on the no limit jackpot on average than they do on the limit jackpots. That's money that earns interest for the Bike instead of for the players and that isn't available to the regular player base for buy-ins.

Add on top of that SR's contention that the Bike won't be returning 100% of the drop to the pool, but only $1,000 per day, and I'd estimate that adding the $1 jackpot to the game will have a similarly destructive effect as adding somewhere around fifty cents more rake.

I think the California cardrooms especially have to be concerned about overraking the no limit games, as they aren't allowed to cut a percentage, so they take the full amount each time. In Vegas, many, if not most, pots do not cap out the rake. So more money is already coming off the table in California.

This is a game that is hard on poor players to begin with and must fight against its nature in that respect to survive at all. Overraking the game on top of that may prove pennywise...

So, I don't think it much matters whether people "like" the jackpots or not. Many players' long-term results will be so dismal that they'll end up back in the limit games.

[daryn]

so wait...

you're telling me that the casino introduced the jackpot idea not to actually pay back players, but to make money??

this is an outrage!

[Speed Racer]

Since the jackpot won't start until Monday, the details of the jackpot are not clear yet and as the saying goes, "the devil is in the details."

In a typical NLHE hand someone makes a pre-flop raise and steals the blinds--will the Bike take the $1 jackpot out of the pot?

In the Bike $100 NLHE game the blinds are $3 and $2 and the rake is 50 cents with no flop.

Will the rake now be $1.50--50 cents plus the $1 jackpot drop--where the players pay the jackpot drop but get no shot at winning the jackpot?

In the second most common NLHE hand, there are a couple of pre-flop limpers, someone bets the flop, everyone else folds and the hands ends right there. Again, the jackpot drop will be taken but the players have no chance to hit the jackpot.

In the third most common NLHE hand, someone makes a big bet on the turn to protect their probable best hand. Again, the jackpot drop will be taken with no chance of winning the jackpot.

In my limited NLHE experience, these 3 types of hands account for about 80% of the hands played and in each of these cases the players pay the jackpot drop and the Bike doesn't expose itself to the possibility of a jackpot payoff.

-----------------------------------------------------------------------------------------------------

This also brings up the question of what the Bike is going to do about players colluding to get a "free" shot at the jackpot.

With the jackpot, it always a E.V. increasing move to let the hand go to the river and chop the pot.

For instance, a hand is folded around to the blinds and the two players agree pre-flop to check it to the river.

If both the player to your right and left agree to do this, it doesn't cost them anything and they get a "free" shot at winning the jackpot.

A second example is a hand where a player has a gutshot to a straight flush draw on the flop or a later street, the board is paired, and the other player makes a large bet--a situation where a player would normally fold.

With the Bike NLHE jackpot, the player with the gutshot could turn his hand face up and tell the other player that he will call the big bet so the hand can go to the river--to see if they can hit the jackpot, but that he wants his big bet returned and if he sucks out he'll push the pot to the player making the big bet.

I doubt the Bike management has thought through these scenarios and figured out how to handle them.

[Michael Davis]

Actually, when it gets folded around to the blinds, it costs them quite a bit since the Bike now rakes the full amount, whereas if one of them folds or they chop, the Bike only takes 50 cents, as you pointed out. The increased rake taken out here is so much that the jackpot has to be somewhat significant before it is even worth playing out jackpot hands, even though I see people doing this routinely.

I would bet they will not take the jackpot drop until the flop. That's what they do in their limit games.

-Michael

[Dynasty]

[ QUOTE ]
So, I don't think it much matters whether people "like" the jackpots or not. Many players' long-term results will be so dismal that they'll end up back in the limit games.

[/ QUOTE ]

Most people don't play poker to make money. They play it to have fun. They won't notice (or care if they did) any difference between their losses in the limit games and the no-limit games. They're going to play the games which they enjoy most.

Mason has been writing for a long time about how rake increases can cause weak players to bust out and put an end to games.

The rakes have been steadily going up. Yet, the games grow and grow.

This jackpot rake is a total non-issue. It poses no threat the viability of the games.

[Speed Racer]

The rakes in SoCal have been going down not up.

The $4 rake taken in the $40-$80 HE games in SoCal is a rake reduction compared to the $10/half hour time charge that preceeded it.

The rake and jackpot drop may not kill the games in SoCal, but they can have the effect of driving the action away from a casino.

This is what happened to the Hustler after they imposed a jacpot in their top section games.

[Ulysses]

Speedy,

I hope you become a more regular fixture here. Your posts over the years on RGP have been great and this one is no exception.

I agree completely that adding a jackpot to this games is ridiculous and definitely hampeers the ability of these games to be a feeder ground to the real NL games.