How Online Casinos Make Money From Poker

Every casino is driven by the pursuit of profits. In every game, be it table games or pokies, the casino enjoys a built-in advantage known as the house edge. This advantage, typically a few percentage points and varying between games, ensures the casino’s long-term financial gain and thus stability. However, poker stands as an exception to this rule.

Whether played online or in person, poker doesn’t pit players against the house. Instead, participants compete against each other, with winnings and losses exchanged amongst players themselves – not directly involving the casino. The casino assumes a neutral position regarding the game’s outcome, and the dealer’s role is limited to card distribution and overall game management. Thus, one might wonder, what is the casino’s motivation in hosting poker games in the first place?

In this guide, we shall delve into the mechanics of how both land-based and online casinos are still able to generate revenue from the fascinating world of poker.

Rake: The Basics

Casinos are fun places, but they can be one’s direct enemy as well. Visitors are playing against the house and both are after a profit. When it comes to profitability the house is always on the winning end. Poker minded Kiwis will now ask themselves how this works in a game of poker as players compete against each other instead of the house such as a new casino. The casino still earns itself a favourable economical position via the magic word: RAKE. In the poker game, this word stands for the money the house retains from every cash game or tournament. Consider it an entry fee for those who want to join the poker action. 

Fixed Percentage Rake

In a cash poker game the casino deducts the rake from the prize pot after which the final prizes are awarded to the winners. This is basically the net amount after taking away the casino’s earnings from the rake (excluding other income sources such as drinks and snacks). The rake amount is usually a percentage between 2% and 10%. 

However, it’s important to note that both the lower and higher ends of this percentage spectrum are relatively uncommon. In most games, players can expect to encounter a more standard rake rate, usually falling within the range of 3% to 5%.

Some casinos work with a max cap that can be taken as a rake. This cap is established based on the specific rules of the casino. The necessity for such a cap becomes evident when players sit with deep stacks, often exceeding 500 big blinds or more. In situations where two such players engage in an all-in scenario, a lack of a maximum rake cap could lead to significant costs for those involved.

Hourly Rate

Some casino establishments prepare an hourly rate which works differently from the above mentioned rake. In this case you will need to pay a fixed fee per hour to be allowed to participate at a tournament. It’s important to recognise that neither option holds an inherent advantage over the other. Instead, they should be perceived as distinct models, each with its merits. Being aware of the existence of this alternative fee-based structure allows players to make informed choices and appreciate the variety of options available in the poker landscape.

Tournaments

Unlike cash games, where chips hold immediate monetary value, tournaments do not facilitate rake collection in the same manner. With tournaments, the casino makes sure the rake gets collected with the player basically buying their way in the tournament. For instance, in a let’s say $100 tournament, players might pay a buy-in of $110 or $120, with the additional $10 or $20 representing the rake, separate from the prize pool.

This rake amount is used by the casino to cover the expenses associated with the overall organisation of the tournament. The idea behind this is quite logical – online platforms incur fewer overheads when hosting tournaments. Live venues bear additional costs, including staff salaries, floor space, table setups, and marketing activities. This will need to be paid for by someone which explains why the house charges so-called rakes.

Beyond Rake

Whilst rake remains the primary income source from poker games, it’s important to note that the profits derived from these games are not as substantial as those from other casino offerings. Surprisingly, many casinos tend to be satisfied with breaking even when hosting significant tournaments, as they benefit in other ways. One crucial aspect is that tournaments often serve as excellent feeders for cash games, particularly for casinos with expansive poker rooms. Cash games, in turn, prove to be more lucrative for the gambling operator, as extended sessions can yield considerable profits without much risk or exposure. This presents an effective means to generate additional revenue for the casino.

In the end, many visitors attending the tournaments aren’t exclusive poker players; they are likely to explore other casino games, such as table games and pokies. Over the course of a few days, the casino accumulates substantial extra revenue from this group of extra players. Furthermore, casinos offer a range of supplementary services, including food, drinks, and accommodation, which also contribute significantly to their overall earnings. 

Online Poker Rooms

As you’ll now understand, online poker operators enjoy significant cost advantages compared to their brick-and-mortar counterparts. Running a poker room online eliminates the need for numerous dealers to manage tournaments with thousands of participants. Additionally, the absence of physical space requirements means there’s no need to allocate substantial space. One of the most important factors for online casinos to be successful is to have enough web traffic.

Even without players diverting their attention to other casino games on offer, the online poker platform can generate ample income to cover operational expenses and still yield profits, provided there is sufficient player traffic. Today, a lot of online poker rooms have also combined their offer with casino games which is actually the way brick and mortar casinos do it as well.

Final Note

The term rake isn’t as difficult as it first seemed, we hope you have come to this conclusion after reading our guide about how casinos make money from poker. Both online casinos and offline settings want to make money and we can’t really blame them as we’re dealing with businesses rather than charity. For players looking for operators with a poker offer it is important to understand the concept of rake. It is also crucial to understand what rake is fair to be able to choose the tournaments or cash games you are interested in. Taking rake into account can make a substantial difference in your bottom line as a complete poker player. Try to choose for games with lower rakes if you’re a beginning player whilst considering the level of other participants as well. This in combination with your own skills and experience should make the difference in the end.

References

• https://en.wikipedia.org/wiki/Rake_(poker)
• https://www.history.com/news/where-did-poker-originate