By Rocco Havel | September 18, 2009

Earlier this month, eGaming Review reported that Boss Media is taking a hardline stance on rakeback given by licensees on its International Poker Network (IPN).

Interestingly, it was an executive of a gaming company on a different network that best expressed why the management of many poker rooms are concerned about the ever-growing popularity of rakeback amongst poker players. William Hill Online COO Peter Marcus told eGaming Review that rakeback results in online poker room cannibalization. For the most part, poker players are not loyal to a particular room. They play somewhere if it is a profitable place to play. In many instances, rakeback makes a big difference to a player´s profitability. And if that player can get an extra couple percent by jumping from one room to another, he very well might do it. The great part for the player is that if he moves his play to another room on the same network, he will still play on the same tables, with the same people, and with the same software as he did before. Nothing changes except for his new, better rakeback deal.

Marcus believes that poker rooms, be they on iPoker, which is William Hill´s network, or a competitor´s network, must devise better marketing and loyalty strategies than rakeback. They need to find ways to keep customers long-term, rather than just poaching them from other sites with bigger and bigger rakeback offers. There will always be a site that is willing to cut into its profits just a little bit more by offering a better rakeback deal than the other sites, and this is a potential death spiral for poker rooms.

Boss Media feels this same way and this is why it is now instituting strict rules with its member poker rooms when it comes to rakeback. The players who tend to get rakeback are strong, high volume players, the “sharks.” For them, rakeback is a very big deal, since they contribute so much rake to the poker sites. Casual players, the “fish”, usually don´t care about such things. They just want to play. Thus, the higher rakeback percentage a poker room offers, the better players it will attract. These players drain the fish of their money, money which eventually gets cashed out. The poker rooms want the money to stay on the site and produce more rake. Therefore, the sites want more fish who will just recycle their funds amongst themselves.

So, Boss Media will calculate a payout ratio for each licensee each month. The ratio, which is total cash game winnings divided by cash game stakes, must not be greater than 99.8 percent in a given month. If it is, the poker room will be fined. This fine can be as low as half the site´s average daily gross rake and as high as three and three-quarters times the average daily gross rake. Those licensees whose payout ratio is under 97.5 percent will be the recipients of these fines, with those who have the lowest payout ratios getting the most money.

Boss Media is not the first online poker network operator to limit or eliminate rakeback. Most notably, PartyGaming eliminated rakeback on its network sites several years ago, and many people believe it was for the cannibalization reason. Party Poker did not allow rakeback, so players who still wanted to play at Party Poker´s tables did the next best thing: they signed up for rakeback deals at other PartyGaming network sites, such as Empire Poker, MultiPoker, Intertops, or Coral Eurobet. Other networks that do not allow rakeback are iPoker, Microgaming (it used to), and Ongame.

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