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Overplaying the Rake Card

Posted by : Charlie River | 1 Comment

01

Nov

Categories : Online poker

Bwin and PokerRoom veteran Kim Lund runs an interesting blog about the poker industry. He understands some things very well, and apparently has done some due thinking around these things.

But in his blog about the industry overplaying the skill card, the analysis is off mark, I feel. He seems to blame game theory for the fact that most players lose in online poker.

rake
The rake is killing you (Photo by Michal Zacharzewski)

Kim Lund:

“I often call it the greatest game on earth simply because of the depths achieved with such relatively simple game mechanics and rules. And I think it deserves that title. “

Agreed!

“But I also believe that some of the game’s magic has been lost in the online industry’s attempt to exploit one of the game’s most obvious advantages over other gambling games. Skill.”

I’m sure you’re right.

“Now, the problem with poker is that simple game theory will tell you very few players can win money long term.”

Now, this is just wrong.

It’s all about the rake

You’re right, poker is a fantastic game. The focus on skill is unfortunate, for reasons that I’ve laid out in a number of blogs and articles, for example here and here.

Poker is about fair competition and human interaction. Aspects that are missing in lotteries and casino games. This is what makes poker such a great game.

If 90% of the players lose long term, it’s not due to game theory. It’s due to the rake.

If it’s impossible to win, it’s because of the rake.

The rake in online poker is ridiculously high, you have to admit it. Particularly at the lower stakes where most losing players start and end their careers.

Poker a zero sum game

If it wasn’t for the rake, the share of winning players would be close to 50%, I’m sure.

Poker is a zero sum game and we’re dealing with reasonably normal distributions here, when it comes to aggregated results over time.

(Maybe Kim Lund has access to numbers that can prove this: I don’t, so forgive me some speculation.)

Hidden payments generate losers

If the industry doesn’t want to create an army of disappointed losers, they should find a better payment model.

Today, payments in online poker are deducted in a secretive way from players’ winnings. This is what makes a large share of the players feel like losers. This is what makes winning appear impossible.

If you lose 8BB/100 just by sitting at the table, it’s very hard to show a long term profit.

A reasonable payment model should make it clear what the cost is. The player should know how much he or she is actually paying to play online poker.

Then a player could show a small profit at the tables and if the monthly subscription brings her bottom line into the red, she’s still a winning player, psychologically and morally.

A story of greed

I guess online poker operators are a bit greedy. They don’t mind carving out unreasonable, short term profits from a seemingly inexhaustible player pool.

A similar subscription service in other areas would pay, what do I know, $30 a month? That’s what a winning player pays in 300 hands at the micro stakes.

The rest of the rake during that month is “unreasonable”, and if the user experience deteriorates, it’s because of the disproportionate but hidden cost of service.

Marketing poker as a lottery, as Kim Lund suggests, is a terrible idea. Instead, I suggest that the industry introduce a reasonable payment model.

In their marketing they should tell it the way it is: Poker is a mind sport.

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Comment (1)

  1. Kim Lund   December 30, 2010 at 2:39 am

    Hey Charlie,

    I’m sure I must have commented on a lot of this stuff on my blog around the time you wrote this. but since I see people still make it onto IEG via this article, I want to add some additional comments. Your words are well thought through and deserves all the response I can muster.

    Firstly, it was rash of me to conclude so categorically that game theory prevents a larger portion of players from winning. The effect various aspects of the game have on the winners vs losers ratio generate a complex matrix we’ve just begun to unravel since we started looking at it.

    It spawned, amongst other things, my article questioning why rake is 5% instead of 11% or 0.01%.

    But the reason I stated it so categorically is partly because it is not as much of a problem for me as it is for the majority of the industry. I accept that 90% may end up losing. It can be dealt with. But it can’t be dealt with if you as a provider get totally flustered and panicky about the fact that people will lose. Because if you panic over it, so will your player.

    That is the upper hand the lottery industry has which lead me to claim, for the sake of it, that poker should be more like a lottery.

    A lot of online poker providers invest heavily in poker schools tutorials and whatnot to help players be good enough not to lose. I say that’s the wrong way to go about it. Just let them lose. In an orderly fashion.

    “”If the industry doesn’t want to create an army of disappointed losers, they should find a better payment model.”

    This sentence really helps me explain my point. What part does the better payment model (which I agree with as such) fix? Does it make the losers less disappointed or does it make less losers? The latter obviously.

    But then you’re not gunning for the best of all scenarios. The best scenario is not to have less losers. The best scenario is to have less disappointed losers.

    I fully agree, which is evident from my blog, that the business models applied by sites today can be questioned for a lot of good reasons, but blaming rake for the current issue the industry faces with retaining players is dangerous because it only solves the lesser problem.

    And IF the object of one’s strategy was merely to improve the winners vs losers ratio, I can tell you that lowering rake actually isn’t necessarily the most effective solution.

    Thanks for inspiring me to write more on the topic!

    Br

    /Kim

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