Why there will never be a rake war (longwinded)

[mbpoker]

Both Empire and PokerShare were parasites on their hosts. They didn't spend millions in TV advertising or other real marketing to attract recreational players. Their strategy will not work if they get their own real platforms.

[Greg J]

[ QUOTE ]
Recreational players don't play a lot. Party needs the winning players for their volume. If the rake goes up even 5% from what it is now, a lot of the grinders will have to find some other way to make money.

[/ QUOTE ]
Well, this is true, kind of. "Grinders" may be high volume, but that does not make them optimal customers. The sites would much rather have 5-6 recreational losing players that play less. I have tried to defend my argument on other posts in this regard (see my exchange with CrayZee).

You are right there are a greater spectrum of players than I initially gave credit for. I did that to simplify my post.

Thanks for the comments.

[grinin]

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Should Party buyout Empire AND replace their own marketing dept with Empire's, watch out as they will then have the knowledge to really damage the other rooms

[/ QUOTE ]

Could you please explain the above quote?
Me thinks Empire's marketing department sucks donkey balls and don't understand how anyone could come to such a conclusion. Maybe you mean some other department?

[Harv72b]

I agree with the conclusion, but not with all of the reasoning.

It's been mentioned before in this thread, but I believe you're pretty far off with point #3--the major sites need the high volume (and, typically, better) players. Why? Because they are high volume; they keep the games going by playing the tens of thousands of hands/month that they do. The recreational players? They are recreational. They play when they feel like it, typically far fewer hands than the sharks, and at any point might decide to just quit playing because poker represents a passtime for them, and not a profitable side business (or primary source of income).

Your point that the grinders are less likely to make more deposits on the site is also faulty--at least when you're talking about micro/small limit grinders, they probably tend to make more cash deposits (certainly more regular ones) in order to take advantage of various reload bonus offers. The typical recreational player probably does not bother with these bonuses, and only deposits when they run out of chips. That, of course, assuming that they decide to keep playing poker when this happens.

The poker sites also fully realize the need to keep their player base over time (which is why you see some sort of frequent player/rewards program on every online poker room). Simply put, the grinders are the ones who are most likely to stay put over time, especially if the site in question can also attract a large pool of donators.

What you are looking at is not a case of an industry ignoring the traditional conception of how market forces work--the market forces are working normally here, too. It's just that you're looking at it from the wrong angle. What the sites are attempting to do is find the perfect balance of the maximum rake they can extract from us (the grinders & winning players) while we still make enough of a profit from the fish to offset this rake and make playing on their particular servers +EV. Pacific, I believe, is an exception to these rules because, between the terrible software & the inability to multi-table, I doubt that many of these grinders & high volume players spend a lot of their time there anyway. If anything, Pacific is trying to carve out its own niche in the industry by being more friendly to the recreational players, by making it unprofitable for most winning players to play there.

What I think you'll see instead of a trend towards more sites carving out their own little niches, as was mentioned already, and more in the way of bonus wars and promotional gimmicks to attract new players.

Just my 2 cents.

One other point: for the regular players, such as most of us here on 2+2, who understand rake, one effect that increasing the rake will have is to drive us up in limits. The higher the limit, the less effect that rake will have on our profits. This also serves the poker sites well, as it means fewer sharks to clean out the new players on the smaller limits, which in turn makes it more likely that these new players will enjoy good enough results (even if it just means a steady but small loss rate) to continue playing.

[Harv72b]

[ QUOTE ]
Me thinks Empire's marketing department sucks donkey balls and don't understand how anyone could come to such a conclusion. Maybe you mean some other department?

[/ QUOTE ]

I think Empire's marketing department did an outstanding job. Their Royal Flush club is a great way to reward (and therefore keep) loyal high volume players, and they have some of the best stuff to purchase with their FPPs of any site I've played on. Far better than Party's selection, anyway.

I finally cleaned out my Empire account last week because it was just too difficult to find decent games there anymore, and I'll admit that it saddened me to do so. I have nothing but fond memories of my time there.

[grinin]

[ QUOTE ]
I think Empire's marketing department did an outstanding job. Their Royal Flush club is a great way to reward (and therefore keep) loyal high volume players

[/ QUOTE ]

This is not a good example of a great marketing plan. Although I am a also RFC member, the RFC club had nothing to do with why I played on Empire and obviously little to do with why you were playing on Empire, since as you mentioned you no longer play there. Most of the other high volume players were there because of rakeback and the ability to play against the fish that the Party marketing dept landed. As a matter of fact this is an example of a waste of marketing dollars since it brought in only minimal new business and did not provide much incentive to modify the behavior of the existing player base.

[Quicksilvre]

I think the reason for why rakes will stay the same is a little simpler.

Assuming reasonable consumers, as soon as the rake goes down at one site, players will flood that site and all the others would lose business. Therefore, all the other sites would have to cut rake, and there would be less profit for all. Obviously, then, rake won't go down.

If the rake goes up at a site, the other sites would simply keep their rakes the same, and the rake-boosting site would lose business. Obviously, then, rake won't go up. This sort of thing is very typical for oligopolies.

Of course, consumers are not reasonable. Still, there are enough sites out there, that if one site hikes the rake by a large degree, it would lose business.

[augie00]

nice post. i think the cliff notes version would say "fishies are dumb and don't even know what the rake is"

[Greg J]

I guess we'll have to agree to disagree on this point. I do appreciate the reply. One point I would like to clarify (not to get the last word in): I did not mean to imply market forces were not at work here. I think they are -- you are right. It's just that certain economic assumptions about what occurs to create a price war are not met. My argument is not so much "economic forces don't apply" as "certain traditional (academic) economic theoretical assumptions don't apply." (I'm sure you see the difference.)

[Greg J]

This is just some general comments of the feedback this thread has recieved about point three. First, my argument about how the poker sites view more serious players who play lots of hands is not the heart of my argument. It's number three because I thought it was the third most important of the three factors I listed (it just happens to be the most controverial). Second, on a player-by-player basis, most of you are correct. Any single high volume player is more valuable than and single recreational player. I was speaking more generally. A site would rather have 4-6 recreational losing players ("fish") than a single high volume, serious, winning poker player ("shark"). My argument implies they (the sites) are looking at this from a more "ecological" perspective.

Think of this for a moment, not player-by-player, but hand-by-hand. Okay, I beleive they perfer "fish hands" more than "sharks hands." The reason is that a "fish pot" is likely to have money that will eventually go to another player, from which the house will get a cut in the form of rake. Meanwhile a "shark pot" has money that will go towards that second Dell fp2001. I think that my discussion with CrayZee best laid out my argument.

Thanks for the intelligent discourse in this thread.