The taxing issue threatening to wreck online poker in France
The Vice President of the Bodog Poker Network writes exclusively for Pokerjolt on the implications of ARJEL's tough tax rules for the French online poker market...
|by Jonas Odman||July, 8th 2010||
Above: Pokerstars.fr has upset players in France by passing on the tax
The French Online Gaming Authority, ARJEL (Autorité de Régulation des Jeux En Ligne), have given eleven licensees an online poker license in France. The eleven licensees are BetClic, Bwin, Partypoker, Everest, Chilipoker, PMU, Partouche, Pokerstars, Sajoo, Eurosport, and Winamax.
These companies will be taxed two per cent on all cash game pots and tournament buy-ins (including rebuys and add-ons, where applicable). There is a €1 cap for cash game pots but there is no cap for tournaments. Cash games pots where there is no flop are also taxed - including when everyone folds to the Big Blind.
Poker companies can then choose whether to impose this tax on their customers by increasing the rake and tournament fees, or take the tax from their own margins.
Poker industry leader Pokerstars have choosen to impose everything on the players, and this has caused a big stir among players. It even lead to a three hours long “strike” on Sunday evening with players sitting down at cash game tables and then sitting out to block the seats.
What impact would that extra two per cent rake have on the poker players? First of all, it turns most winning players into losing players but from a poker site’s perspective, but that is not necessarily bad. The bread and butter for all poker sites are the net depositing players. What is bad though is that it gives all players a worse user experience.
Without rake poker is a zero-sum game. The rake makes an average poker player a losing player, and an increase of the rake will make an average poker player lose their money quicker. We ran a query for one million NL Hold’em hands played on Bodog on $0.10/$0.25, $0.25/$0.50, $0.50/$1 and $1/$2 to see what effect an increased rake from 5% to 7% and an increased cap to $3.5 (this is exactly the rake structure Pokerstars.fr use, but in Euros) would have had. The rake would have increased with 36.7 %. (Without the rake on pots without a flop the increase would be 33.6 %.)
This increased price would give an average player 26.8% less hands before he runs out of money. The “little” 2 percent extra rake may not sound as much, but 26.8% less entertainment paints a more troublesome picture. Casual players typically do not understand or care about the concept of rake, so it will not have a negative effect on sign-ups but the decreased entertainment value per Euro will have a significant negative effect on the churn rate.
Another EU country, Sweden, chose another path when they introduced online poker through the Government owned Svenska Spel in 2006. Advised by poker professionals, they chose to offer 50% lower rake than the industry standard.
Svenska Spel have 6,758 betting shops, slots machines at 2,187 locations, and invest roughly 100M Euros per year in marketing (including sponsorship).
The combination of this strong brand and low price for poker, Svenska Spel had an instant success on the poker market.
In 2007, Svenska Spel averaged 3,000–3,500 players per day - quite remarkable, especially they only accept Swedish customers. However, after only a few years their poker revenue is dropping and in 2009 their net gaming revenue from poker was 22% lower than in 2008. There are many possible explanations for this: the player pool in Sweden may not be big enough, the marketing has not been good enough, or the poker boom is simply over.
It will be interesting to see how fast the French online poker market will rise and fall with the opposite price strategy, and if any poker company will manage to be profitable in that environment.