Online Poker - Free Market or Cartel?

Haven't you ever wondered why the sites seemingly have their rakes pegged at their current rates? In the SNGs for example, its normally somewhere around 10%.

To the best of my knowledge, it has been like this for the past couple of years and some sites like Party Poker even have it higher. If I recall my economics lessons back in college, shouldn't a free market exert downward pressure on the rake as more and more of these online sites battle for a limited number of customers. Consider the fact that US customers are banned from certain sites, then the effort to draw customers should be even bigger. Why aren't the sites killing each other with some kind of reduced rake to get your business?

Well, one could argue that these sites need a big amount for their investment. But think about it, they're basically operating servers in some remote island in Gibraltar or in the mountains of Kahnawake. How expensive would it be to maintain ? Also, they have huge economies of scale. As more and more customers patronize their sites, fixed costs are spread out and cost to serve one customer becomes smalller and smaller. Their monthly costs are basically electricity & other utilities, customer service & IT staff, endorsement deals with the pros and probably the rent of the small office where the servers are located.

I think its common knowledge that the online poker sites are making huge amounts of money from the rakes. So why couldn't an upstart company suddenly decide. "Hey, why shouldn't I compete based on lower price. Let me reduce the rake to increase customer inflow."

Like what Sun Cellular did in the telecoms industry. Before they came in the market, our usage rates for text messaging and calls were high. But Sun competed based on price in their various promotions and at the end of the day, Smart and Globe had to reduce their rates to be competitive as Sun was slowly eating away their customer base.

That is the concept of competition and consumers benefit from it.

So why is the same thing not happening in the online poker industry. Sure, they give out bonuses, rakeback and such which in effect reduces part of the rake. But its all indirect. If you think about it, it should be easy for a newcomer site to make an immediate impact by offering 9 person $10+0.50 SNGs. I for one would jump at the opportunity to play at a site which offers lower rake and even at half the rake, I believe they would still be making a profit.

So again, the question is WHY. And the only thing I could come up with is they have some sort of informal cartel which controls this amount. Parang why kill the goose that lays the golden egg? If the big sites can come up with some kind of gentleman's agreement to keep the rake at a certain level and only compete on promotions. Then every site is happy. Only the players are being fleeced and they're all degenerate gamblers anyway who would still play even if we peg the SNG rate at 20% just to get their thrills.

Heheh... another example is The Metro. Before they came along, the other poker organization was cheating the players during the big tourneys by pocketing the excess buy-ins beyond their guarantees. Now they're forced to "moderate the greed". =)

Just something to think about.

Superstitions

Nothing much happening in the poker front. Was up a few hundred dollars playing SNGs in FTP the whole of February. Then went on a ridiculous downward spiral in March losing half of the gain. Stopped for a while and played at Pokerroom, tightened my game a bit, got a few wins going. Went back to FTP and I end up winning 4 in a row. Is poker great or what ?

I usually change sites when I'm on one of the funky downswings. Again, no scientific basis at all. It's just one of those things. I feel like its a new start and all those previous losses don't wear down on me so much. No pressure to gain back what was lost and voila, I play better.

Another thing that I do which is totally unscientific is I sometimes withdraw money from a site where I am on a losing streak. Like in the case of the above, in my disgust at my March results at FTP, I just withdrew $300. No reason, just something to say fuck you to the site. I didn't even transfer it to the debit card, just kept it in Click2pay. I'll probably redeposit it again sometime soon.

Petty things, I know, but it keeps me sane and with the feeling of control especially when bad beats keep coming even though you know you are making the correct move percentage wise.

I am also secretly hoping that some smart programmer might have built in some kind of detection mechanism which makes you win after a sudden withdrawal to encourage you to deposit again. Heheh ... pretty farfetched??

In other news, Ultimate Bet gave me $10 free since I haven't played in their site for a while. So thank you. They do this every once in a while and is the only site I know which actually gives you cash.

Oh, just a note, the low limit SNG tables at Party Poker are pretty soft. Played a few games and Party Poker account was immediately up more than a hundred dollars.

It's also Bonus time at both FTP and Pokerroom so gotta get back to the tables. Thanks for dropping by.