Why is 5 the magic number?

I'm going to start this blog with a question. A beast of a question. Why 5%? Rake is the revenue generator in cash games across all the top rooms in the world and the general rule is it's always more or less 5% (disregarding the effects of tax in some markets). But why? Why isn't rake set at 11%? Why isn't it 0.0001%? Why is rake capped? Why are caps set the way they are?

These questions are so fundamental that they may appear silly, But I don't think they are. I've been part of the industry since it really took off. And I'm sure I would have picked up on any general discussions on pricing. Sure, the industry has seen several attempts to launch rake free rooms fizzle mere minutes after launching, but why 5%? We take pride in the fact that poker employs a business model that generates revenues under the hood where most customers are barely aware of it or care about it. That's fantastic! But why 5%?

Is 5% the magic amount someone has figured out is the maximum that can be removed from a pot before players become intuitively aware of money gone missing thus creating a negative playing experience?

Is 5% the perfect amount to balance between players' ability to win and companies ability to make money?

Is 5% the absolute maximum one can take out of the pot before the rake causes effects that basically sidelines certain strategic elements of the game?

Is 5% just a number someone adopted from the offline world and got used to? Is 5% simply a number certain opinionated and powerful customer segments find acceptable and do what they can to keep in place?

Is 5% simply a result of a silent industry price fixing? Is the cap where it is and because it is industry standard to have it there and if so, who decided that industry standard and what were the motives?

Why, if the current rate is what it is for good reason, were some many operators so keen on putting the tax burden on players when France opened up? Didn't that break the holy equation then?

Competing on price isn't necessarily about just lowering the price and hope to starve your competitors out before you starve yourself out of business. It is about developing a different understanding of the customer, how the price affects the spending habits of the customer and setting a different price as a result. And this goes for setting a generally lower as well as a generally higher price.

I read a story once in a sales training book about a woman in a cruise destination in Mexico whose jewellery shop was failing. The competition was fierce. The street was riddled with identical outlets also selling silver jewellery to American cruise ship passengers. I can't remember the details, but essentially, while the shop owner was away, her stand-in raised the prices of the jewellery by mistake which created a surge in sales.

The reason behind the surge was essentially the higher prices convinced the passengers that this was the one shop that didn't sell rip-off or fake jewellery. Since rake is so unison across the industry I cannot help to think there must be some kind of fundamental logic behind the current rate. In my discussions with various industry experts, we've come some way in understanding the impact of various factors, but the question as a whole remains unresolved I feel.

What do you feel? To comment on this article and read more blogs from Kim Lund go to www.infiniteedgegaming.com