My take on Party

[thwang99]

So, everyone's complaining saying Party is doing the wrong thing. I've been playing on both Party and Empire lately, and the games on Empire are definitely worse. A lot tighter! They are running deposit bonuses to try and get players back, but their core player base is becoming rakeback players and bonus whores.

Party's got it right, once you get fish, you'll get the multitabling pro's too. It doesn't matter if there's no rakeback, it's still more profitable to play with fish, even if you are making Party millions (or billions?). So Dikxit is going to get most of my rake (and the affiliate I originally signed up under, if there was one?).

Hopefully though some rewards system for high volume players will come I'm hoping, of course.

- Tony

[FlFishOn]

"Party's got it right, once you get fish, you'll get the multitabling pro's too. It doesn't matter if there's no rakeback, it's still more profitable to play with fish,..."

I contended many months ago that a site like Party could not only eliminate rakeback but could go one further and impose a tax on multitablers. I'm halfway to proving my point.

They are in a position to sh+t on the multitablers and expect them to say 'Thank you Sir, may I have another?"

[Indiana]

Party's problem is that they went public. They never really cared about poker players before the offering, but now they just want cash. That's why I love pokerstars. Word on the street is that there are no immediate plans for stars to go public.

Indy

[jrz1972]

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They are in a position to sh+t on the multitablers and expect them to say 'Thank you Sir, may I have another?"

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Not really. I multitable and am perfectly happy taking my business to Stars and/or Absolute.

I could see if you were just talking about people multitabling 15/30 or so, but there are a lot of people like me who grind out some extra money each month at low-limit tables. Other sites offer plenty of good games at that level, provide regular bonuses, and allow rakeback. All else equal, yeah sure I'd rather play at Party, but when a site like Absolute is offering rakeback and essentially infinite bonuses, all else is far from equal.

This is all really just Econ 101 stuff. Some people have relatively inelastic demand for poker services. Those folks include fish (who are oblivious to rake-related issues and thus don't respond to changes in the rake structure) and high-limit pros (for whom Party is basically the only game in town). You're right that Party doesn't need to do anything special to get their business. The fish are going to stay there anyway because they've seen it advertised on television, and the high-limit pros are going to stay there anyway because that's the only place they can multitable relatively soft 20/40 games.

On the other hand, low-limit whore-types like me have much more elastic demand. There are a bunch of good substitutes for PartyPoker at my level of play, so when Party raises the price of its service (by refusing to provide reloads and nuking rakeback) I can just go elsewhere.

Bonuses, rakeback, etc. are all just forms of price discrimination, and basic economic theory predicts that consumers with inelastic demand will get charged a higher price than consumers with elastic demand. That seems to be exactly the way this is playing out. Low-elasticity players are returning to Party sans rakeback (or with some shaky under-the-table deal in place), while high-elasticity types are going elsewhere and getting better deals.

You are correct when it comes to economic theory. An important consideration here though is that the low cost producer always wins out. Right now, thanks to volume, Party is able to be the lowest cost producer. High bonuses and Rak*B*ck at smaller sites won't withstand for two reasons.

First, if PartyPoker truly felt that bonuses and Rak*B*ck were attracting real cash generating players (as opposed to bonus whores or players that play casually on low limit tables, and thus aren't part of the 20% of players who create 80% of PartyPoker's revenue), then PartyPoker would/will match the other poker rooms. If anybody can afford to go "tit for tat" it is Party.

Secondly, a business can only give away free stuff for so long. Eventually you have to win over loyal customers who are going to generate revenue. (Look at how MSFT tried to eliminate Quicken by GIVING AWAY Microsoft Money. Needless to say, even when people got the product for free Quicken won out). So even if Party feels it is necessary to demolish profits by giving HUGE bonuses and 50% of the rake back, they will be able to survive the longest, as all other little guys will start to fold first because they don't have the resources or money.

Bottom line, IMHO, enjoy the big bonuses and Rak*B*ck now while you still can, cause it won't be here for long.

Thanks for the cool ideas, and thanks for reading this post.

[FlFishOn]

Nice post. Excellent use of the 'dismal' science.

[obsidian]

Sorry, but I am going to call BS on this. Before the split, I was playing 25-35k hands of 5/10 and 10/20 6-max a month at Empire so as you can tell rakeback was a fairly large chunk of money ($2k+ per month). Since the split, I have decided to go check elsewhere and see how the games are. To my suprise, I have found tables just as good as those on party. Some better. And at these sites I'm getting both rakeback and decent bonuses (which many times don't count against your MGR).

Party will never get the market dominance like you are suggesting. The online poker market is just too easy to get into and the profit margins too high. Fish aren't as dumb as you think. Fish like stuff like bonuses too. They are aware party poker isn't the only poker site out there. Not too mention I've seen many fish on other forums claim certain sites are "rigged" so they won't play on them...

I will not make any site my main site without rakeback unless I feel the players so bad as to make up for the .5BB/100 of guaranteed income I make from rakeback. From what I've seen, that is not the case.

[jrz1972]

[ QUOTE ]
You are correct when it comes to economic theory. An important consideration here though is that the low cost producer always wins out. Right now, thanks to volume, Party is able to be the lowest cost producer.

[/ QUOTE ]

Low-cost producers normally win out because they can undercut their rivals' prices without losing money themselves. Note that Party isn't trying to undercut other sites. Rather, it's doing the opposite. Party's rake is substantially higher than many other sites (Stars, for example), and by scaling back on monthly bonuses it has actually *increased* its effective price even further.

That's the whole thing. Party is a pretty expensive place to play relative to other sites. Granted, it's games are somewhat softer than what you could find elsewhere, but they're not THAT much softer that players can't increase their earn through rakeback or bonuses above what they would get at Party just through regular poker winnnings.

If Party has a cost advantage, which I'm not really sure about, Party could crush its rivals if it openly allowed rakeback (like several other sites), handed out a bunch of bonus money (like Absolute), and slashed their rake (like Stars). Once other sites are out of business, Party would have this market all to itself, and network effects would make it quite difficult for any new rivals to enter the market to compete. Party is actually following the opposite strategy. It is allowing its rivals to increase their share of the "small time but still serious player" market by dramatically raising its price.

[Freudian]

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So even if Party feels it is necessary to demolish profits by giving HUGE bonuses and 50% of the rake back, they will be able to survive the longest, as all other little guys will start to fold first because they don't have the resources or money.

[/ QUOTE ]

I think it would be hard to steal a great deal amount of the casual players for Party. Many simply don't keep track of what alternatives there are once they found a card room. And they aren't really cost sensitive even if Party found a channel to communicate with them.

It's not like in many other businesses. A loyal Coke user still knows what Pepsi is and has tried it. Many Intel users have heard of AMD.

I think a lot of the smaller poker sites survive because people wander in more by accident than by an informed decision and enjoy it enough to not bother to shop around for something better. And some (like Expekts, Unibets scandinavian customers, Bodog customers) have faith in the brand name and don't care much about if the pokerroom is good or not.

I think in many ways online poker is a strange industry, both from the producer and the consumer side.

Sorry for rambling. My point is that I doubt any company will get a monopolistic grasp of the poker market. I think even 50% of the market will be hard to reach until the market has stagnated so much that consolidation is forced upon everyone.