Yes, I did say “one of the biggest” which means that there can be bigger fees. :-)

I was being somewhat sarcastic though since PlayTech thinks players should eat the fees of recruiting new players while they report huge profits.

But in the end, it’s somewhat of a bizarre argument to make. If the player came in via an affiliate then the licensee makes no more or less money if rakeback is being paid. The whole idea behind rakeback is that the room pays out 35% to an affiliate and the affiliate gives 32 or 33% back to the player. No money is saved by not saved having rakeback.

The problem for the networks is that they sign up some rouge licensee who decides that rather than investing in promotions and marketing, they try to steal customers from other licensees on the network. But that’s a 100% predictable behavior based on the current compensation system. And there are multiple ways the network could guard against it.

Let’s face it. Catching these licensees is pretty easy. The networks don’t do it though. Instead they declare all rakeback bad and try to scare their licensees into complying with the network rules. But this is big business. There are literally millions of dollars on the line so the hand slap $25K penalties for violators is a joke.

And even if you do go through the whole network licensee warning and punishment process and kick them off the network . . . they still have all the contact info for all of those customers! They just move them to a new network and keep raking in the profits.

The bottom line is that nobody is going to be able to stop rakeback. Networks that tie the hands of their operators are simply facilitating their own eventual doom. It’s a much better solution to prevent the thing that does make rakeback bad on a network which is the cannibalization.

Bill

You wrote that the network fee is one ofthe biggest costs for an operator. That is not true. Networks take less of your revenues than affiliates. I thought you knew that?
d

It’s hard to police because the player has no incentive to rat out the room trying to recruit him and even if he does report the room to his favorite site all they can do is complain to the network who will ask the offending site what happened and they’ll claim that the reporting site just has a grudge.

Your suggestion really won’t stop that. That’s because it’s usually going to be much cheaper to steal high-raking customers and take a very small percentage of the revenue than it is to spend money on marketing. The only thing that stops this behavior is to make it fantastically unprofitable to do so. You remove the incentive by paying the room a much lower payout on players who already have accounts on the network. Then there isn’t any huge incentive to steal. It’s more profitable for them to concentrate on bringing in fresh, new players.

** Edited to remove spammy link.

That’s what he just said, Bill. You misunderstand his comments. Rankeback hurts the bottom line of cardrooms. This is obvious and does not have anything to do with affiliate compensation.

Frishman’s comments are right on the money, and really nearly impossible to disagree with. Rakeback “reduces the bottom line to a minimum and does not incentivise loyalty.” Rakeback incentivises migration, and you have even written this yourself.