INDUSTRY FORUM

Comments

  • bsm726

    We all know a rake is necessary, but how much is too much? Consider a large, live poker tournament in Las Vegas with a $1,000 entry fee. It’s reasonable to assume that a 10% rake, while still a bummer to have to overcome as a player, is appropriate to cover the costs of running the tournament like paying the dealers, coordinators, space, and even profit pocketed by the casino. There are logistics that just aren’t free. So the players can swallow the $100 and tell themselves that they are good enough to beat the rake. Someone has to pay these dealers, right?

    Now consider a Draftkings GPP. This Thursday night’s NFL $5 entry Kickoff Special guarantees $600,000 and will host 138,000 entries and guarantees a 1st place prize of $50,000!! Sweet, right? But wait…138,000 x $5 = $690,000. So DK will pocket $90,000 for “running” this tournament. That’s 180% of 1st place prize money!! Does that seem excessive? It sure as hell does to me.

    This is the case for nearly ALL of Draftkings tournaments. It almost feels like a slap in the face that they actually win every tournament to the tune of a whole hell of a lot more than the actual “winner”. While I acknowledge there are costs to running Draftkings (I don’t know the numbers), and that they are a business out to make money in a free market (which I am perfectly fine with, yay capitalism), the logistical challenges of “running” each tournament do not compare to those of the Vegas poker tourney. Therefore, this level of rake seems unwarranted and greedy. Now, again, they are allowed to charge as much as they want in the beautiful free market of the USA, and the invisible hand of the consumers should dictate an appropriate rake, which I happen to agree with, but is the general player pool aware enough to react and make an impact? I don’t think so. It’s no secret that they are printing money. We can see that by the MASSIVE ad campaign we see every time we turn on our TVs, but I don’t think most players realize just how much DK keeps every time they buy into a contest. Further, shouldn’t DK, Fanduel, etc, as fellow fantasy lovers, cut out some of the greed and give some back to the players? Is 180% of first place money too much to keep EVERY day? I think so, and I think the first step to making an impact is raising awareness. Am I wrong here?

  • footballfplyer55567

    As I just posted this in the other no rake thread, FantasyUp offers no rake.

  • ponzicrash

    They need that money more than any poker site ever did.

    They aren’t printing money. They are using that rake and then some to run those ads.

    Its a little different with DFS because they can get outside funding more than poker sites could, but it is still similar. Up until a certain point rake actually helped poker sites because it gives them money for marketing.

  • texasboss302

    Last week DK actually lost money off the Thursday night kickoff. The GPP was $1,000,0000 and they only brought in $996,760.

  • JaNelson38

    Running and maintaining these websites arent free. What, do you think they run themselves? Have no employees? No costs for purchase, upkeep and maintenance of equipment? No need for things like lawyers and accountants? Costs eaten for banking transactions/fees? And Im not even going into the costs of employees OTHER than salaries, like benefits, taxes, etc. And then after all of that, hope to break even or maybe make a little profit to make your investors/bank happy, as most businesses of any appreciable size have a large amount of credit with banks (money that you’re paying interest on – another expense).

    In all seriousness, there are SO MANY people ignorant to the costs of actually doing business in this country, because they’ve never made a payroll or never been involved in the finances of a company. There’s a hell of a lot more to a business than just money in, money out.

    These places charge ~10% rake because they need to in order to remain solvent.

  • biggiesmails72

    @footballfplyer55567 said...

    As I just posted this in the other no rake thread, FantasyUp offers no rake.

    How does that work? I know they did last year as a promo but they are still doing it? I cant see how they are making money unless they have ads all over their site

  • tyrant1014

    The problem is, they are a private company running on VC funding. Because we aren’t the VC guys we can’t look at the books like we could if they were a public company.

    Before I jump to any conclusions about the rake being too high, I personally would want to look at the books.

    Another thing to consider (playing devils advocate here) how often on their sites are the contests losing money, probably more than we would come to think. It could potentially be to a point where it balances out to a net zero. But once again, I would want to see the books first.

  • whybore

    Be thankful they aren’t the same as low buy-in live tournaments. If you’re playing $100-200 tournaments the going rake is $30-40 which is 20-30% and sometimes they also withhold part of the prize pool (3-5% isn’t uncommon).

  • cccalloway

    @whybore said...

    Be thankful they aren’t the same as low buy-in live tournaments. If you’re playing $100-200 tournaments the going rake is $30-40 which is 20-30% and sometimes they also withhold part of the prize pool (3-5% isn’t uncommon).

    This is wild speculation and completely untrue.

  • cccalloway

    Right now, I’d rather pay higher rake to pay for the attorneys they need to hire to make DFS legal. Got to remember, these companies aren’t making any money right now due to advertising spend and now future legal costs.

  • NCRick

    If the rake is so high that the best players lose money more slowly, is it still a game of skill? Where do you draw the line? If the top 5% of the field has an EV of +2%, is it really still a game of skill? is there an accepted legal cutoff for calling it a game of skill?

  • whybore

    @cccalloway said...

    This is wild speculation and completely untrue.

    Was talking specifically about live poker tournaments.

  • bsm726

    I admit I don’t know the numbers and would like to see the books as well, but I made the comparison to a poker tournament because it seems that a lot of DFS costs would be fixed once the site is up and running, but I don’t know. And I never saw online poker tourneys charge more than 10% rake, while DFS actually regularly charges 15%. Why so much more? Just seems excessive. More evidence is their ability to support the biggest ad campaign around right now. And as for their losing money when contests don’t fill, that happens WAY less than them filling, and that loss is covered by the guarantee serving as a great marketing/advertising tool. But, the post was to raise the question really, and to bring awareness. Didn’t mean to jump to conclusions. But I do like to see competitors offering no rake contests. I also saw Draftpot is now offering no rake heads up contests. That’s the kind of free market competition consumers like to see. Hopefully time will bring rake to a market-dictated level, whatever that may be.

  • whybore

    @bsm726 said...

    I admit I don’t know the numbers and would like to see the books as well, but I made the comparison to a poker tournament because it seems that a lot of DFS costs would be fixed once the site is up and running, but I don’t know. And I never saw online poker tourneys charge more than 10% rake, while DFS actually regularly charges 15%. Why so much more? Just seems excessive. More evidence is their ability to support the biggest ad campaign around right now. And as for their losing money when contests don’t fill, that happens WAY less than them filling, and that loss is covered by the guarantee serving as a great marketing/advertising tool. But, the post was to raise the question really, and to bring awareness. Didn’t mean to jump to conclusions. But I do like to see competitors offering no rake contests. I also saw Draftpot is now offering no rake heads up contests. That’s the kind of free market competition consumers like to see. Hopefully time will bring rake to a market-dictated level, whatever that may be.

    To be fair in that regard the ~15% is if a tournament completely fills. In poker that wasn’t an issue with their guarantees being so far overshot that there was almost never an overlay. So I understand why in a GPP they need more upside because they are risking some too.

  • carney259

    • 147

      RG Overall Ranking

    • Ranked #20

      RG Tiered Ranking

    We don’t have access to their books, but people in the know have said the big sites haven’t turned a profit yet, which wouldn’t surprise me. Obviously the smaller sites that overlay their big tournaments regularly on top of overhead costs are running at a loss. Hopefully FD & DK will reduce their ad volume. Does anyone really not know about DFS at this point? At the least maybe it’ll be enough to offset paying teams of lawyers at $1000+ an hour without taking a hit to the bottom line.

  • tyrant1014

    At this point, I am with everyone else as well. With the global player dropoff due to the negative stories. I will pay that extra rake to make sure they keep their doors open. Sure, I play to make money, I also play for the fun of it, and if you make money, you get free entertainment. I play a lot less during hunting season though.

  • ponzicrash

    Poker sites had the benefit of a large amount of their revenue coming from small stakes cash games where the rake was and still is really high.

    In fact, tournaments weren’t a major part of offerings until pokerstars came along and saw they could grab marketshare by being THE “tournament site”.

    Don’t look at MTTs taking 10% in poker and think that’s normal for poker. Its not. MTTs have the lowest rake(in comparison to winrates) of any form of poker.

    DFS sites don’t have as many different offerings and thus have to be higher across the board. Also, effective rake will go down just like it did in poker.

  • bsm726

    Thanks for the points and discussion guys.

  • SEAHAWK03

    The extreme overhead costs of the “BIG 2” is a good point when considering the high rake associated with the majority of their contests. It is refreshing to see some of the smaller guys as the aforementioned Draftpot’s rake free heads up contests as well as Fantasydraft.com which is offering 4 NFL GPPs with ZERO rake.

  • catfish_tx

    One big issue with trying to make a comparison between a casino running a big poker tournament and these sites is the difference in available revenue streams.

    Casino operators aren’t as dependent (if at all really) on a poker tournament filling and allowing the rake to cover their operating costs of that tourney. They’re still going to have other customers who do not play poker at all play other games and lose money in the long run. Not to mention food/drink sales, hotel rooms, spas, shows, etc. Yes, it’s a big operation, but the rake off 99% of poker tournaments is a drop in the bucket to them.

    DFS sites are highly, if not 100%, dependent on rake for revenue. When the potential of losing thousands of customers overnight could happen in pretty much any state, it shouldn’t be a big surprise that rakes (margin) will increase in the current conditions.

  • cardsharks

    The rake is way to high. In poker its not easy to profit on 5% rake. And poker sites are doing fine. Dfs wants to be stubborn and stick to 10% rake charge and we have to pay taxes. If its not profitable for people to play which it is not right now at these charges dfs will crumble. The site needs ot make money but so do the players and without players there is no business If they drop down to 5% they will get way more traffic and no more commercials. They are a waste of time and money. Commercials cost them milions of dollars. Everyone knows about dfs now. We don’t need a loyalty program just give rake back if you wont cut the 10% rake to players who play cash game tournaments every day in a certain amount of volume. Those loyalty programs for dfs are terrible. If they say play 30 cash games and 5 tournaments of your choice every day you get 30% rake back I guarantee the traffic and the action goes up. I seen a lot of poker sites to stubborn to change things around go completely out of business and I have a feeling dfs site are going to do the same. You have to have a Ceo like Amazon has Besos who doesn’t mind losing money to monopolize the market to take all the profit in the long run. Thats what it takes these days to make money. If your not willing to do that another dfs site will start one day and will take all the traffic and maybe lose money for a year or 2 but monopolize the industry and get rich.

  • johnnyj580

    The rake in tonight’s Shot & Slam on FD? 17.6%

    UN.REAL.

  • MrFantasy

    No still 15% @Johnnyj580

  • danilo

    @MrFantasy said...

    No still 15% @Johnnyj580

    actually, Mr Fantasy you are right if using the gross as a basis that it is 15% but the initial post would have been 15% on the amount paid out:

    $600,000 and will host 138,000 entries and guarantees a 1st place prize of $50,000!! Sweet, right? But wait…138,000 x $5 = $690,000. So DK will pocket $90,000 for “running” this tournament.

    So things have definitely changed towards higher rake

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