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Greg Himmelbrand jumps feet-first into the ongoing conversation centered on rake and payout structure for low-stakes tournaments (following on from LoriAnn Persinger and Ari Engel). You can get involved in the debate by adding your comments underneath the article.
First of all, the disclaimer here is that it might seem like I’m kind of saying, ‘Hey she’s [LoriAnn Persinger] all wrong about this.’ That’s not what I’m trying to do. She’s bringing up a very important point that’s often overlooked when talking about low stakes tournaments, which don’t really get the attention and don’t have people advocating for what’s going on with them. That’s super important, so it is good that she brought that to light.
The argument I have is that I don’t like these click-baity, shock value-style opening lines or headlines. 'The organizers got the real first place because the rake exceeded what first place was,' - there’s no nuance there. The amount of rake taken in a tournament versus what is given out for first place – one has nothing to do with the other. Rake is calculated by what the organizers are trying to profit versus all of their operating expenses (staffing, marketing, equipment, etc.) You’re not comparing apples to apples here, that has nothing to do with it. It’s just one of those catchy things. If the same dollar amount was taken from the prize pool, but the payouts were flatter and it was the equivalent to 6th place, would that be any better or different? No, of course not… but it looks or sounds better?
Almost every year after the [WSOP] Main Event you’ll see one of these shock headlines: 'WSOP was the real winner because they took second place money' and every year I just don’t understand. This is not a valid comparison, they don’t have anything to do with each other. It’s just a catchy, gotcha headline that people click on and get riled up because they don’t take a second to think about how expensive this thing is to run. Casinos are in business to make money. Obviously, everyone knows that, but people don’t always think about that.
Costs aren't lower just because the buy-ins are
My other point is that in low stakes tournaments the operators still have similar operating costs to higher stakes tournaments. If you have a $100 tournament with 200 players you need dealers, you need floor staff, you need cashiers. All the fixed costs are still going to be there no matter what – whether it’s a $3,000 or a $100 tournament, those are all the same. So, percentage-wise, these low buy-in tournaments are always going to be high percentage rake. It’s not that they’re price gouging or ripping off the consumer, it’s just a necessity because these events aren’t big money makers for the casino to start with.
And, not only do they have to factor in operating and staffing costs, they also have to factor in all the money they’ll lose from not being able to rake cash games in the poker room. Or, if they’re doing it in a ballroom, what are they paying to rent that out and could some kind of convention be held there that might bring in more money? There’s all these outside variables that come into play and people are just like, ‘High rake, high rake, high rake!’ Ultimately, for a lot of these low buy-in tournaments, it just doesn’t make sense for the casino to run them because they’re usually not making any money off of them and, if they do, it’s very minimal.
The only benefit they have is getting people in the door and hoping they spend money elsewhere, and especially for lower stakes tournament players they probably have to wonder how much extra revenue they will bring in. Some might bring in a bunch, but I’d venture a guess that the typical person playing a $100 poker tournament isn’t going to drop several thousand on table games afterwards. More likely, if they did play, it would be at equivalent stakes.
So, running tournaments at a breakeven rate or even a loss in hopes of getting people in the door to spend money might work well when the tournaments are higher price points, but probably wouldn’t be worth it for the casino with the lower ones. Unfortunately for us (the players), it seems the only way to make the lower buy-in tournaments worthwhile for the casino to run, is to have a higher percentage rake to cover their costs and still put a few dollars in their pocket.
Vote with your feet
And, listen, sometimes they are raking way more than their neighbors. If that’s the case, call them out and don’t show up to their events. They’ll be forced to make changes and adapt to what the industry norm is. You make people change with your wallet, not by complaining. If you complain, but go and play anyways, they have no reason to change.
Again, you have to be realistic. If you’re seeing every $100 tournament raking 20% and think it’s ridiculous, well, that’s what they have to rake. It’s different if the guy down the street is only raking 10%, then it’s a good question to ask. It is very important that if someone is over-raking the industry standard, absolutely call them out, don’t show up, make them lower their fees.
There was a series just now on the East Coast (I don’t want to name names) and there were universal complaints that the rake was high - higher than it was anywhere else. People responded with their wallets and the series missed a few guarantees, even though it was run pretty well. Maybe next time they’ll think, ‘Hey, we stretched this too far.’ (Update! They actually responded to players and announced their reduced rake structure! I hope their next series is a success and I look forward to supporting them.)
An industry standard for payouts and rake would help
LoriAnn’s point about low min-cashes discouraging recreational players is a good one, that might not leave a good taste in these players’ mouths.
I would be super in favor of having an industry standard for payouts. Obviously, each venue could deviate as they choose. I think universally most people like around a 2x min cash. The TDA doesn’t recommend a payout structure, but it would be really good if they did. I totally agree with LoriAnn when she says that playing a $200 tournament for a $240 min cash is ridiculous – that should be stopped, that’s a very poor payout distribution, especially when these events are reentries and the average person is in for two bullets. I think in any format it should be as close to 2x as possible for the min-cash. When players do cash, it makes them feel better, even if it’s a small tournament, at least they’re doubling their money.
I think the TDA has a stranglehold on new things coming out and setting the norms. I think it would be really good if they got together and came up with a recommended payout structure. It doesn’t have to be a solid thing that every venue is forced to use, but something they could at least look at.
Again, these are separate issues from rake, but I also think an industry standard for rake would be helpful. The problem is that’s a little more difficult to do because obviously there’s different operating costs depending on the venue and location.
Images Courtesy of World Poker Tour/Joe Giron
