Internet poker slowdown

[Mempho]

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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.

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Agreed.