Alex Scott, Head of Poker at Microgaming, announced that the Microgaming Poker Network (MPN) will make significant changes to its cash game rake structure. The changes will come into effect at some yet-to-be-specified time in late October, and will initially affect only Euro-currency cash games. Rake will be increased at some stakes, but will be dropped for the very smallest stakes, both in proportion to the pot and maximum rake per hand. The new system will also take the number of players into account at all stakes, which was previously only the case at the highest stakes.
Why high stakes mean low rake
It’s pretty much an industry-wide standard that the higher the stakes being played, the lower the percentage taken by the house. This is true both online and offline, and in both cash games and tournaments. This is the natural way to do things, for a couple of reasons. First of all, the house’s overhead – whether in terms of operating servers or providing a dealer and a table in a physical environment – is essentially the same, regardless of the stakes. Secondly, higher-stakes games tend to attract tougher competition, which lowers the better players’ attainable edge; raking a high-stakes game at the same rate as a low-stakes one would therefore make it impossible for anyone to profit and rapidly kill the game.
Reducing the differential
Naturally, MPN’s changes won’t deviate from this basic structure, but will reduce the difference; as part of the site’s continuing efforts to favor newcomers and casual players over high-volume and high-stakes players, they are reducing the rake slightly at the smallest stakes, and raising it slightly at some higher stakes.
That’s how it’s framed in Scott’s blog post, at any rate, although a comparison of the old structure and the new shows that what we’re really seeing is a move from a simplistic system to a more nuanced one, with more differentiation both between stake levels and tables sizes. That means that the reality is a bit more complicated and hard to summarize neatly: for instance, at a full ring €0.02 / €0.04 table, the change is from 10% rake and a €0.10 cap to 5% and a €0.12 cap, meaning that at those tables, the actual effect will depend on the relative tightness or looseness of play, with the rake being halved for small-to-medium pots, but potentially up to 20% higher in larger ones.
Correction: The example provided in the paragraph above originally discussed 0.05/0.10 stakes, but was based on a misreading of the the information on the MPN site (confusion between “less than” and “up to”). It has been corrected to use 0.02/0.04 as the example. At 0.05/0.10, the cap has been lowered, but the percentage unchanged.
Regardless, Scott says that the changes are calibrated such that the total rake taken by the site should remain essentially unchanged if the volume of play at all stakes remains as it is and will only increase site profits if they increase overall traffic; as Scott puts it, “this change will only work for [MPN] if it works for players too.”
That’s a big “if,” of course. Generally speaking, poker players are more unhappy about rake increases than they are about decreases, and better, higher-stakes players are more conscious about it than lower-stakes, more casual players, so I have my doubts about how well-received this announcement will be in the immediate term.
If one thing didn’t work, try the reverse?
One pretty good argument in favor of MPN’s strategy is that last year we saw PokerStars do the opposite – raising the rake in microstakes games – and it seemed to work out very poorly for them. If turning the dial one way produced bad results for your competitor, fiddling it a bit in the other direction doesn’t seem like too bad a plan.
At the time of the PokerStars rake hike, I argued – in what was actually my first article here at PartTimePoker – that it might be the case that raising the rake at the microstakes could actually help recreational players by making those games less desirable for multi-table grinders. Given typical loss rates for casual players, it seemed to me that the presence of better players at the tables was a greater contributing factor to their losses than the rake. If greater rake forced winning players to move up and play fewer tables, that might therefore save the recreational players more money than the rake change would cost them. In reality, though, the short-term consequences for the site were (presumably) sufficiently horrible that they reversed the changes almost immediately and we never got to see what would have happened to player populations in the long run.
It would be overly optimistic to think that dropping the rake a little will produce a short-term boost in traffic of the same magnitude as the losses incurred by raising it. There’s a hysteresis effect at play when it comes to player acquisition versus retention; that is, it’s much easier to lose players through an unpopular change than it is to acquire (or re-acquire) them through an equivalently positive one. However, what Scott and the MPN are banking on is that the lower rake will turn enough slight losers into break-evens and break-evens into winning players that microstakes populations will grow over time due to increased life expectancies, and more players will be able to move up and populate the higher stakes games.
Will changeable screen names keep the sharks at bay?
The potential problem with the plan is the converse of what I predicted for PokerStars; lower rake at microstakes provides a greater incentive for players who are struggling at slightly higher stakes to drop down and multi-table. If that happens, it will negatively impact the weaker players at those lower stakes, probably to a greater extent than the lower rake helps them. All other things being equal, I would be likely to predict that the MPN’s strategy would backfire in the long run… but all other things aren’t equal, as these rake changes are being made within the context of another recent change, which is the ability for players to change their screen names, as we reported earlier this month.
The more tables a player is playing at, the less individual attention they can give them, and the more reliant they are on third-party tools. The ability for players to change their screen names partially undermines the efficacy of those tools, making automatic table selection, data mining and long-term player profiling all much harder. It seems likely, then, that these two changes were not decided on independently, but as part of a coherent strategy.
Naturally, it remains to be determined whether the screen name changes will be sufficient to avoid increased predation at the lower stakes as the profit margins become more appealing for high-volume, low-edge players… but it could work. As Scott points out, the MPN is one of the only networks that has been growing throughout a period in which the industry as a whole is contracting. Poker ecosystems are complicated, and it can be hard to predict what the long-term effects of any given change will be, but so far it seems that the overall strategy being employed at the MPN is working out for them, so it will be interesting to see how this plays out.
Alex Weldon (@benefactumgames) is a freelance writer, game designer and semipro poker player from Montreal, Quebec, Canada.