Understanding the Poker Economy Part 2: Ecosystems Within the Ecosystem
This is part two of this series; you can read part one here.
Another aspect of the poker ecosystem people tend to overlook is the smaller ecosystems within the ecosystem. A poker ecosystem is a bit like a wildlife preserve, where some animals are more or less segregated from others. Sometimes this is done artificially as a safety mechanism, and sometimes it’s just the natural order of things as animals avoid one another. Below is an overview of how these mini-ecosystems function and how money comes into and out of each ecosystem.
*These are simply my general views of each ecosystem, and I didn’t list any stakes as I don’t want to quibble about the boundaries of each ecosystem.
The microstakes is one of the more fascinating ecosystems for the simple fact that the games are viewed as unbeatable because they have a much higher rake percentage. Because of this, you find very few settled players (experienced players who have found a comfortable game and stakes they like to play), and even fewer good players.
The microstakes tables are mainly populated by three types of players:
- New players with limited means who are looking to run up a bankroll so they can move up to higher stakes games;
- Higher stakes player on the verge of going bust who are trying to rebuild and move back up;
- Casual players who enjoy playing a little bit of poker but don’t want to risk very much money.
Most of the money coming into the microstakes ecosystem is through deposits, as well as some money trickling down from the second type of player noted above.
Money leaves the microstakes via the rake with stunning alacrity, as well as when a player goes on a little heater and has enough money to move up to higher stakes games – most microstakes players are movers, and are looking to leave the micros as fast as possible. Withdrawals are not common among microstakes players, and few players win money in higher stakes and bring it into the microstakes economy.
The low limit ecosystem is the most diverse. At these stakes you’ll find everything from brand new players, to settled players, to mass multi-tabling professionals grinding out a living.
Money flows into these tables from several sources. You have deposits from new players with a bit more disposable income; players moving up from the microstakes; and players moving down from higher stakes games to rebuild their bankrolls.
Money flows out mainly from the rake (which is still a substantial percentage, but far less than the micros); from players moving up to higher stakes tables; and unlike the micros, from a fair amount of withdrawals.
Most of the players in middle stakes games are serious about the game and they tend to be experienced players. Because of this, most of the money flowing into the middle stakes games comes from players moving up from lower limit tables and from higher stakes players moving down for bankroll or game selection reasons. Generally speaking, you won’t find too many people who just completed their first deposit sitting in a middle stakes game, but it does happen.
At the middle stakes you start to see a lot of the money leave via withdrawals. That being said, because the skill gap is closer in these games, the rake is also a factor. Some money also goes up, as players take shots at high stakes games, but you also have a lot of settled players, content to grind out their profits in the middle limits and not risk playing the super tough and volatile high stakes games.
The high stakes tables might be the domain of the professional, where the games are the most challenging and difficult to beat, but the high stakes ecosystem is actually the most basic to understand.
Because very few recreational players deposit enough money, or are comfortable playing for such stakes, most of the money in the high-stakes ecosystem has filtered up through micro, low, and middle stakes games.
There aren’t a lot of high stakes players, and the money changing hands is so pronounced that it doesn’t require more than a few optimistic players who are slightly worse than the regulars to keep this ecosystem running, and as we’ve seen, a single whale dropping a big number can have a years-long lasting impact on the high stakes economy (see Andy Beal at Bellagio or Guy Laliberte [allegedly] at Full Tilt Poker).
Since there is no place to go but down, virtually all of the money leaves the high stakes economy via the rake and withdrawals.
Where the system is broken
I’m of the opinion that the fundamental breakdown in the poker ecosystem occurred in the low stakes games. The low stakes tables used to be very similar to the micros, but because of the possibility to grind 20 tables and earn a decent amount of rakeback, the low stakes games have become what I’ll call a blocker level; a ceiling of sorts that prevents new players from going on good runs and continuing to move up ,or perhaps cashout and feel good about their experience on the site, even if they never win again.
My theory is that because of VIP rewards, rakeback grinders in low limit games are acting as blockers, preventing mobility for recreational players who are trying to double up and move up in stakes. But, because they run into this buzz saw in low limit games, their chance for upward mobility is severely degraded. So instead of a steady flow of recreational money trickling upwards to low limit and even middle limit games from -EV players on a heater, every table above this blocker level (generally on the low end of the low stakes games or the first limit beatable for about $20/hour) is almost exclusively regulars with an occasional moneyed depositor thrown into the mix. The fish on a heater stories from the early days of the poker boom are almost nonexistent as very few can be on the good side of variance when confronted with a table full of low variance rakeback nits.
By reducing rakeback rewards, and rewarding good play over volume, PokerStars and other sites seem to be banking on these 20-tabling nits turning into 4- or 6-tabling LAG’s. If they do, more recreational players can hit and run and keep moving up (or cash out here and there) as multitabling nits are their kryptonite, whereas they can get lucky against solid LAG’s over a small sample of hands and hit and run up to the next stakes level. LAG’s will win at a higher rate, but they’re style is higher variance.
This is what we want. We want players (winners and losers) to believe poker is fun, has the chance to be rewarding, and upward mobility is possible, even if it’s only short-term variance. We don’t want players to think the games are boring and unbeatable above the microstakes.
It’s not about prolonging play
There are other theories discussing ways to improve recreational players’ experiences at sites, and most focus on prolonging the amount of play they get for their money. But that doesn’t make their time any more enjoyable.
One alternative solution I’ve seen proposed is to lower the rake in the micros. The theory is that this will prolong a causal players time at the site. It won’t. What it will do is make micro stakes games beatable, which would attract breakeven low stakes players who would quickly clean out the typical microstakes players. Players would have even less mobility if this occurred as the blocker level would be even lower.
If the changes PokerStars plans to implement work, we should see the blocker level revert back to the middle stakes, because low stakes games will be far less profitable without massive rakeback rewards. As it currently stands, people will 20-table low limit games to make $25/hour, they likely won’t if the reward is $8 or $10/hour.
Furthermore, by bringing in new players who are essentially jackpot hunting, the low stakes tables should become softer and one would assume, more fun and a better experience, for everyone.
The poker economy is extremely complex, and difficult to wrap one’s head around. It’s also constantly evolving, and what may be needed now (less rewards and more promotional dollars to attract new players), may not be the proper model several years down the road.
Finally, I don’t have all the answers, and I don’t think anyone does, but these are discussions and conversations we need to have.