All of a sudden there has been a ridiculous amount of money being added to poker tournaments in the UK and very recently in Newcastle. It is a bit of a concern to me that this is going to have some long term problems.
I’ve always been in massive favour of having poker tournaments with guarantees instead of added money mainly because i’m thinking of the business side over the selfish poker player side.
To me, adding money to poker tournaments is very similar to a business just simply reducing prices in order to generate business. This is just a lazy, uncreative way of marketing a product and I believe has big negative effects on a business.
What I see happening now, in particular in Newcastle but also noticed in other cities where there are casinos competing is that they are simply adding more money then their competitors in order to get customers. This is the equivalent of undercutting competitors on price.
I’ve never really understood why poker tournaments have needed added money in order to succeed. Look at all the big tournaments and you’ll see that none of them add money usually just have a decent guarantee. They add a guarantee because they are confident that they are producing a good product that players will want to play in. Adding money is just an insecure way of promoting a product because a casino thinks they can’t provide anything else of value.
The UK seems to be the only place in the world that adds so much money to tournaments. Why?
The problem is that when there is short term success such a good turnout, they think that this is the solution and continuing to add money will produce the same results. Well yes it might continue to work but this is just false information.
I’m not a parent but I know that if you keep giving your child sweets all the time without any reason then that child is going to expect to get those sweets. Then you get spoilt children and no one wants spoilt children unless you are up your own arse.
The same can happen to a business. You can spoil your customers by charging too cheap prices which makes it impossible to raise your prices because that is beyond their expectation. You’re never going to buy a sofa when there isn’t a sale on.
This is what is happening to poker players. They are ridiculously spoilt customers for no reason whatsoever, in just a vain attempt to gain more business. In the end you just get poker players expecting added money or they won’t play. Casinos compete against each other so there is too much choice which dilutes the fields and starts losing money. Casinos can’t continue to add money so it stops and the problem is never solved.
I know people will disagree with me and give me the ‘add money and they will come’ crap. Good, because I want people to disagree with me and i’m interested in hearing other thoughts.
{ 2 comments… read them below or add one }
Wellllllll
you’re right. Kinda. Let me explain how I see it:
1) Adding Money is basically a way of undercutting competitors.
Well, it is, of course as you well deduce, but it’s also a form of price discrimination. In reducing the price for all competitors equally (at some point making the reg fee nil or even negative!) the casino is able to attract customers it wouldn’t normally attract OR increase engagement and attendance from current customers.
In a basic example, imagine that we have 5 players playing a game with a £1 reg fee. All of a sudden, the casino adds £10 to the prize pool. As a result, they need to add £5 players just to break even. In fact, it is the 11th player who brings the profit and the 16th player who brings them more profit than they would have otherwise had just based on the reg fee alone. Additionally you can calculate for food/drinks/brand loyalty cost/gambling volume/whatever which might reasonably turn that 16th person into the 6th person, or even, optimally, the 5th.
So this is why casinos add value. It can increase revenue for them.
2) If casinos stopped adding money, players wouldn’t come.
I don’t think this is at all true. Poker as a good is relatively demand price inelastic when supply is basically fixed (live poker). People want to play and the cost of doing so doesn’t really affect the games that much. People talk about the reg fees (the price of playing poker, like the interest rate is the price of borrowing money) causing the downfall of the ‘old’ G. Whilst i commonly believe this to be horseshit of the highest order, it’s easy to see that price competition in fixed markets can be almost impossible.
3) Poker Players are spoiled customers.
All customers are spoiled, delighted, enthralled, whatever. It’s Adam Smith’s invisible hand. People will generally gravitate towards the best deal as long as it’s not too much effort.
4) Conclusion
I get what you’re saying, that adding money isn’t sustainable. But it doesn’t need to be. It needs to get customers in and spending money until games are established. Imagine that I add £500 to one game for three months and (£30 game) on average 63 players play this game per week.
I’ve generated £189 in average reg fees, so my outlay on average is £311/week.
Now I say, OK! with just 50 players, I’ll guarantee the pot at £2000 because the game is now established. My weekly average outlay is now 2000-(63*30)=£110 which is almost a third of my previous offer. The prizepools are basically the same, too.
Adding value is a way to get people in the door to check you out in what can be a very competitive market. Once done, you can tweak the deal to suit.
-huzz
Cheers for the in depth comment and very interesting comments.
I think adding money is generally targeted towards those who don’t visit often like the value hunters, more experienced players etc. Then there’s those who don’t really care and will play anyway if they want a game.
So the very customers you are targeting to get through the doors are the ones who will turn away once it goes. If it’s just there to generate revenue then it would have been done much more before. Only now it seems to have become a lot more competitive with it looking more desperate for custom.
One thing for sure is that the first half of next year is going to pretty tough for most people in the UK. I’ve nee idea how some people have got money to play poker because soo many people must be losing.
I’m going to be very interested how things turn out and of course I hope things turn out better and i’m sort of proven wrong but i really wouldn’t be surprised if we end up worse off than before.