Mark-up is the premium charged on top of a tournament buy-in to account for the skill of a player. To purchase a piece of top players you should expect to pay a high mark-up, whereas less well known players can be available for a lower rate.
For example: 1% of a player in a €1,000 tournament at 1.2 mark-up will cost €12. A more experienced player might be available at 1.5 mark-up and will cost a higher price of €15 for 1%. It is important to note that mark-up is paid upon the purchase of the action and not on the payout. In the above examples if these players each cashed for €3,000 then investors would receive the full €30 for each 1% of action they held. The player with the lower mark-up would yield a greater profit for an investor as a % would have cost less to buy.
We can work out if a player is a profitable investment by estimating their Return On Investment (ROI) in a tournament and comparing it to the mark-up charged. If a player is available to buy at a mark-up of 1.25 (25%) but you think they have a ROI of 50% (their average cash will be 1.5x the buy-in), then this is clearly a good investment. Another player who had the same ROI of 50% but a higher mark-up of 1.5 will be a break even proposition.
Players at both high and low mark-ups can provide profit for investors and even players at mark-down could still represent value. Lesser known players who are under the radar could yield the best source of profit if you invest in them before they have their break out score. In contrast - established players should provide a more consistent and reliable source of results but you will likely pay a higher mark-up for the chance to buy a piece of them.
What factors influence mark-up?
There are a number of considerations when determining the mark-up of a player. Some of the most important ones are:
Ability of the player – Some players are better playing live and others excel online. Some are Holdem specialists and some are skilled in mixed games. Some players have a track record of keeping cool and making good decisions deep in big tournaments and others are lacking experience.
'Softness' of tournament – Tournament fields containing lots of satellite winners are generally weaker as many players will have qualified for much less than the buy-in. Bigger fields are generally 'softer' and offer greater potential returns, though they will also have more variance. Tournaments that attract amateur players 'taking a shot' such as weekend WSOP events should provide good value. High and Super High Rollers can be unique as they can contain a mix of elite players and rich amateurs who like to play with pros. A High Roller field with a good composition of 'recs' and 'regs' could be softer than tournaments with a much lower buy-in.
Tournament structure – A well structured tournament with long levels and gradual blind increases should benefit a more skilled player and therefore allow a higher mark-up to be charged. A turbo or hyper tournament, either live or online, allows less chance for the skill factor to come into play and offers smaller edges.
Live vs Online - Live tournaments are usually softer than equivalent online tournaments of the same buy in and should have higher mark-ups.
Location of event – Certain countries are known for having a higher quality of average poker player. A tournament in Scandinavia will likely have a much tougher field than a similar event in a developing poker market. Some locations (eg Vienna) have a high concentration of pros or 'regs', others attract a higher number of recreational players (eg Monte Carlo). A number of countries have a dedicated group of amateur poker players with large disposable incomes who like to gamble, whereas other places have virtually none.
Choosing your investments
Setting mark-up is not an exact science. Your skill as an investor lies in your ability to determine inefficiencies and inaccuracies in the market and use them to your advantage. Investors should be looking to find players who are undervalued, whilst avoiding players that are overrated or overpriced.
Quite simply, if you believe the ROI of a player is greater than the mark-up charged then that makes them a good investment. Of course, in the short-term a player can run good or run bad and this variance is one of the reasons why players sell action in the first place. By spreading risk across a portfolio of skilled players at reasonable mark-ups an investor can negate this variance and hopefully achieve profits in the short and long-term.