The Rake

[Uglyowl]

If you are paying 5% rake first off, not to be mean, you are an idiot.

To single out Party is unfair, there are worse rake structures out there. For $2/$4 and above they are the industry average.

Back to my idiot comment, with bonuses and/or rakeback at worst you should be paying at most 3% rake up to being paid to play poker at some sites.

Averaging all my sites together I pay just south of 2% of my pot winnings in rake. I will only pay 3% for a good supply of fish (i.e. Party)

[KJ o]

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I do expect competition to reduce our effective rake, though. The margins must be awfully high at the current rake level in a space with low barriers to entry and low marginal costs.

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I am probably in a minority here, but I don't see the low barriers to entry. Writing a truly good poker client/server system handling 10K+ simultaneous players is not a walk in the park. And marketing costs are huge.

I do see the high margins and the low marginal costs, though.

[Rudbaeck]

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Writing a truly good poker client

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This bit hasn't even been done yet!

If the online casinos are making an overly large profit, which likely does seem the case, then over time, the amount being charged to customers will come down due to competition. Someone out there will realize they can steal customers away from the others by charging less.

However, as has been stated previously in this thread, this may well not be done by charging less rake, as the average player doesn't think much about this. Instead, they will have more bonuses, more freerolls, and after playing a certain number of hours, you get "free" cd's, dvd's, or more expensive items if you spend more. Partypoker now has some player's club which offers this, but they items they give you are not worth much at the moment. (Play 100 hours, get a free hat)

I do think that they will put effort into finding ways of keeping their "whales", which might best be done with substantial rakeback programs for high volume high stakes players, as I don't think people who pay huge amounts of rake care about free dvd's or stereos.

What do B&M casinos offer to their whales? I know they give them all the comps they can think of and treat them like royalty, but online, these sorts of comps wouldn't really work.

[Sciolist]

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The margins must be awfully high at the current rake level in a space with low barriers to entry and low marginal costs.

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I think the major barrier is that the big US-based media companies can't enter the business because they are worried about the legality. As soon as there's a court case regarding the legality of online poker in the US, if it's won, I expect a lot of the large media companies to join the market too.

Thanks for the intelligent feedback. I appreciate the complexity of running a poker site and of course the most important feature to a profitable game is to attract and retain the fish. However an overall lower rake will likely benefit the entire poker community, primarily by making everyone’s game more profitable. The poor players are not going to leave the game due to a higher competition among poker sites.

I do agree though that much of the promotion could take other forms than a direct rake cut, as pointed out by chris20202

Instead, they will have more bonuses, more freerolls, and after playing a certain number of hours, you get "free" cd's, dvd's, or more expensive items if you spend more.

How players get money back seem to take many new innovative forms like the website gamesgrid (http://www.gamesgrid.com/about_promotions_01.html ), with their offering

Earn a 1000% Bonus (that's 10x) on your first deposit, up to a maximum of a $5000 bonus on a $500 deposit… Every day, for every five FPPoints you earn, we give you $1 cash—making it among the fastest earned bonuses on the 'net.

This is to me becoming similar to the Internet boom in 99. With Party poker expecting to earn $400m in operating profits this year, many new entrants are drawn to set up competing sites. I do no agree with some of the post that claim that a more competitive environment would mean less fish. This is not player driven; it comes from the supply side. The business is too profitable and fairly low entry barriers make new sites pop up like mushrooms in the autumn. Off course most new sites will not be successful but they will help us make more money and the will bring in even more fish. Perhaps we will get to sources of income from poker, desperate sites with offerings that give out more then they earn and also the fresh fish attracted by these offerings which might be more profitable to play with then the almost seasoned party poker crew.

[Python49]

I'd love to be spending 1200 a month on rake. Theres people I see listed at where I get my rakeback who are spending 18,000 a month... i'm at around 5000.