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#1
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Re: Why is rake so high, and why isn\'t competition driving it down?
[ QUOTE ]
Has anyone here even taken econ 101? Please define "barriers to entry". [/ QUOTE ] Lemonade is easier to make than rocket ships. |
#2
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Re: Why is rake so high, and why isn\'t competition driving it down?
So if you played at a site with no rake, you'd probably be complaining that they don't offer any bonuses right?
Also, zerorake (a site that charged a low monthly fee), tried this and failed miserably. The fish/casual players don't care about the rake (the rake was the least of my concerns when I first started out -- I had much bigger leaks to fix first). |
#3
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Re: Why is rake so high, and why isn\'t competition driving it down?
When you provide a forum that allows people to make money you can generally get away by charging those who profit a pretty high percentage and they will pay it if they are able to continue profiting from the provided service.
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#4
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Re: Why is rake so high, and why isn\'t competition driving it down?
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I imagine you could profitably run a site with 1/4 the rake or less, especially if you get massive volume like Party. [/ QUOTE ] How do you think they got that massive volume? Gobs and gobs of marketing, all paid for by that "excessive" rake. It really boils down to the fact that they will charge what the market will bear. The 2+2 community is a drop in the Party bucket (and that's a good thing). As long as the fish will pay the rake, so will we. Look at it this way, you are paying extra to have the privilege to play against such bad players. As long as the extra rake is less than the extra money you take from the fish, it's all good. |
#5
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Re: Why is rake so high, and why isn\'t competition driving it down?
We're forgetting the billions they must be spending to pay the genius programmers to keep the site unproveably "rigged". [img]/images/graemlins/tongue.gif[/img]
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#6
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Re: Why is rake so high, and why isn\'t competition driving it down?
the OP's original question is very simple, and noone has really addressed it:
Poker sites have a huge profit margin, why hasn't competition driven down our cost to play? -Partygaming posted net profit of $350.1 million in 2004 and revenues of $601.6 million. -In the first quarter of 2005 net profit was $117.4 million and revenues were $222.6 million. i don't know how the other medium/big sites are doing financially, but you can bet your ass that big companies in other industries (General Moters, Dell etc) don't have profit margins like this. Why? Because competition doesn't allow it. That leads us back to the same question, why hasn't this happened in the online gaming industry yet? |
#7
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Re: Why is rake so high, and why isn\'t competition driving it down?
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That leads us back to the same question, why hasn't this happened in the online gaming industry yet? [/ QUOTE ] Because a critical mass of players is required to be able to offer a wide variety of games available anytime you want to play. It is not quite the same, but it is related to the network effect that keeps margins high at eBay. There are many other factors. A key one is that players are relatively price-insensitive when it comes to gambling. Rather than lower rakes, sites will instead spend the money on promotions and other marketing. Look at Las Vegas. Casinos do not win by offering better gaming odds (ie: less rake). They win by offering WORSE gaming odds, but providing the nicest gaming experience, best comps, etc. As for the market overall, it is still growing. Only when things start slowing down will price wars become a serious possibility. For the reason I mention above, though, things like giveaways and promotions are more likely to happen imo than major rake reductions. In the end, most people just don't really care about rake. |
#8
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Re: Why is rake so high, and why isn\'t competition driving it down?
[ QUOTE ]
[ QUOTE ] That leads us back to the same question, why hasn't this happened in the online gaming industry yet? [/ QUOTE ] Because a critical mass of players is required to be able to offer a wide variety of games available anytime you want to play. [/ QUOTE ] And because (if I understand correctly) legal barriers in the US prevent the big US gambling companies from branching out into online gaming. |
#9
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Re: Why is rake so high, and why isn\'t competition driving it down?
[ QUOTE ]
the OP's original question is very simple, and noone has really addressed it: Poker sites have a huge profit margin, why hasn't competition driven down our cost to play? -Partygaming posted net profit of $350.1 million in 2004 and revenues of $601.6 million. -In the first quarter of 2005 net profit was $117.4 million and revenues were $222.6 million. i don't know how the other medium/big sites are doing financially, but you can bet your ass that big companies in other industries (General Moters, Dell etc) don't have profit margins like this. Why? Because competition doesn't allow it. That leads us back to the same question, why hasn't this happened in the online gaming industry yet? [/ QUOTE ] Is it possible that the massive influx of people playing online poker don't see/aren't concerned with the rake? Blockbuster got away with charging their late fees for almost 20 years before they ran into any problems. This may seem like a simplistic answer, but they charge it because they can. Perhaps there will be a point where there are so many players and good, competing sites, that the competition will drive the fees down. But I think the sites are of the same mind set that we (winning players) are: as long as the boom is going, try to squeeze as much profit as possible. |
#10
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Re: Why is rake so high, and why isn\'t competition driving it down?
I don't think competition will drive down the cost of playing until market growth slows down. At the moment the sites are competing for new players not existing players at other sites. By defintion new players know nothing about rake and are more interested in free money, cheap chances at a big score and cute graphics.
When a sites growth depends more on increasing it's share of the existing player base than attracting new players then we may have competition and all the benefits that brings. That day is a fair way off. |
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