I want this post to be user friendly for the uninitiated so I'm sorry to you avid poker stars out there who will be reading some basics that you already know.
My beef this week is with internet poker and the rakes they charge. What is the rake you ask? I'll tell you what it is. It's the fee collected by the house from every winning poker pot. This is a system that's been in place in casino poker rooms for years. The rake is what pays dealer salaries, justifies the space in the casino, and pays for all of those free drinks, pretty pictures on the walls, and shareholder dividends. In the bricks and mortar casino, I have no problem with the rake. Without the rake, there is no game. No game means no fun and/or money for me and that's just no good.
Now, in internet poker the rake bugs me. A standard internet rake pricing model is 5% of every pot up to $3. A lot of players barely notice this coming out of the pot, because they just won the pot! Who notices $3 if you just won $45? Well let me tell you, if you do the math on it, you would. Take for example a good friend of mine who has often played on Party Poker since October. He's played approximately 28,000 hands. His rake in that time (thanks Poker Tracker and add-on) was $3250.19. That's $3k that could be in his pocket but it isn't.
Why do the internet rooms need this rake? Mostly, they don't. These guys have a lot more tables. The games go faster. There's no dealers to pay and no buildings to maintain. They have tremendous economies of scale, yet they still charge a large rake. It's a great business model for the sites but it's bad for the players. Lower limit games are very tough to beat with this form of taxation going on. This bugs me.
It also bugs a guy that I generally don't like,
Dutch Boyd. You might remember Dutch as a member of "The Crew" from the 2003 World Series of Poker.

Anyway, Dutch is starting a site called
rakefree.com. While something of a misnomer, the model trounces the current model as far as the players are concerned. His model would take something like $30/month per player. You wouldn't pay up front though. It would just use the conventional model until you reached $30 in rakes and then you wouldn't be raked any more. This could literally make a break-even player very profitable. My aforementioned friend would have more than an additional $3k in his pocket if he were playing at rakefree.com instead of Party Poker. I have to think that this business needs some pricing competition. If it's not Dutch that brings it, it will be someone else. Dutch already had a failed online cardroom, so his rep isn't the best. His idea though, is completely beautiful. That's what you get from a guy that starts college at 12 though.
Anyway, as I feel passionately about this. I wrote to one of my favorite poker players/bloggers/guys,
Josh Arieh. Here's an unedited transcript of my note to Josh:
From: Chris Milone
To: josh@josharieh.com
Sent: Friday, May 06, 2005 2:03 PM
Subject: Internet Rake
Josh,
What do you think about Dutch Boyd's concept for rakefree.com? Do you think it's inevitable that the online rake will have to come down at some point and sites will compete on price? It seems insane to me the rakes they charge. I'm sure the sites are killing casinos in poker profits because they can play so many tables at once with no real dealers to pay, no space to maintain, etc. It only makes sense to me that, due to this cost savings, the rake should be much lower than bricks and mortar rooms. What do you think?
Here was Josh's unedited reply to me:
A rake war could be the end of online poker as we know it. In essence, a plae could show profit raking .25c a hand, but they dont do it becuase then another place will rake .24c a hand
Just be thankful that you can play from the comfort of your own home and make it a point to improve your game a tad to cover the big rake.
Josh Arieh
http://www.atlantapokerschool.comwww.Bodog.com/pokerYou have to love Josh for taking the time to answer my question.

He answered it about an hour after I sent it to him. This is one busy dude too. I can't say enough about him.
However, I respectfully disagree with Josh. I'm not happy with this pricing model, and many others aren't either. I think a price war is an inevitability. I don't think this would be the end of online poker as we know it, any more than Wal-Mart was the end of retail. It's just a lower cost outlet. A lower cost site is great for the players and that's your market if you are an online poker room. If given the decision of paying $40/night to play or $30/month, my lifetime numbers are looking a lot better with the $30/month and so are everyone else's.
Hurry up Dutch. I've got at least a crisp $100 bill with your name on it if you are still seeking investors.