目錄
Online casinos have certain expenses or overhead to handle each month. This article shows how operators make money from casino games and poker games.
An old saying in gambling is “the house always wins”. No matter what casino games you play, it will make money.
But exactly how do online casinos make money? We’ll talk more about it here at Xgtiger.
Revenue Models of Online Casinos
Let’s start by looking at the sources of income that an online casinos has:
House Edge
The house edge is the amount the casino expects to earn from each bet made on a particular casino game.
For example, if the player bets $100 on red playing roulette there are 18 red slots, 18 black slots, and 1 green slot. 18/37 times the bet wins, netting the player $100. However, 19/37 times the bet would lose, meaning the player lost their $100 bet.
To find out the expected value of making a bet we use this equation: EV = ($ win x probability) + ($ loss x probability)
Plugging that equation in with our numbers, it looks like EV = ($100 x 18/37) + (-$100 x 19/37)
EV = ($48.65) + ($51.35)
EV = -$2.70
We can see that the expected cost of making this $100 bet is -$2.70, which means the house edge on this bet is 2.70%. That 2.70% is what casinos earn in a day.
This equation can be used to figure out the house edge in any casino game and will give you an idea of which games are best to play. Not all casino games have the same house edge and not all bets on the same game have the same house edge. Here are the lowest possible house edges for the most popular casino games (assuming no advantage games):
- Blackjack house edge – 0.5%
- Baccarat house edge – 1.06%
- Craps house edge – 1.36%
- European Roulette (single zero) house edge – 2.70%
- American Roulette (double zero) house edge – 5.26%
While these edges may not seem like much, in the long run they really add up. Take our roulette example, from a $100 bet their expected value is $2.70. Say the total amount of red/black bets made on roulette for one day is $1,000,000 – their expected value is $27,000. That’s just for one game bet type!
Poker Rake
Another way a casino can make money is by hosting a poker game. When a casino hosts a poker game they charge a fee for doing so and this fee is called the rake.
Payment can be taken in different ways depending on the type of game played. In cash games, they take a small percentage of each pot played or charge players a certain amount of money every half hour if they want to continue playing. Rakes are similar to vigs in the sports betting market, which is a cut on a bet. Just like how sportsbook operators use vigs to make money, poker operators make money from rakes.
The typical rake structure you will see is 5% capped at $7. This means that when a poker hand sees the flop, the casino will take 5% of the total pot, with a maximum of $7 taken from a pot.
For example, if a $70 pot is played with this rake structure, the casino will take 5% of it, which is $3.50. However, if a $700 pot was played with this rake structure, then 5% of that would be $35, which is over the cap, so the casino would only take $7.
In tournaments, they keep a percentage of the advertised buy-in as rake and add the rest to the prize pool.
For example, if the tournament buy-in is $100, it will usually be advertised as $85+$15 – meaning $15 will be taken as rake for hosting the game and $85 will be added to the prize pool that players can win .
Again, these numbers may not sound like much but if 500 players enter that $100 tournament the casino takes $7,500 in rake!
How Online Casinos Continue to Profit
Since we now know that the online casino will always win in the long run if we play their games, how can they keep us playing?
Free Online Slots
One way they do this is by making some of their games, such as slots, free to play. Now, you can’t win money from these free games but the hope of the online casino is that you hit a “jackpot” in this game and think to yourself “if only it was for real money”, which then tempt you to play slots with real money.
It’s easier to get burned with fake money than real money, and it’s common for players to overlook their losses when they play for fun and only think about the “jackpot” they’ve won. By the time they start playing for real money, they quickly realize how many rounds they have to get through before they hit their jackpot.
Online Casino Bonuses
Another way casinos attract players is by offering attractive bonuses. Offers like bet $10 get $50 free, or bet $20 and get 100 free spins, which on the surface seem too good to be true. Unfortunately, it often is.
Although these bonuses look attractive, there are terms and conditions that are not as lucrative as they look. They often have a “wager requirement” attached to them, meaning you can’t just deposit your $10 and withdraw $50 – you have to play the “free” money they give you before you can claim it . Many times these wagering requirements can be as high as 40x or 100x your bonus!
This means that if you get your $50 free after betting $10, you have to play at least $2000 before that money is available to cover. Thanks to this very high demand, bonuses are powerful promotional tools that encourage patrons to spend money on their casino games.
Online Casino Affiliate Program
Affiliate programs work in a similar way to bonus offers but instead of the casino running the promotions, they encourage players to do it for them. They will give the player a special offer on a bet or improved odds on a particular line and encourage them to encourage their followers to sign up to take advantage of it. An example is the Lucky Cola Affiliate program that pays its partners every 1st of the month.
The casino increases its revenue as it gets more players to sign up and the affiliate wins as they get a cut of the casino’s revenue from the players who sign up. Even players win a level as they benefit from a special offer.
Online Casino Costs
Although online casinos seem like a license to print money, they incur huge costs.
License Fees
In order for an online casino to be reputable and offer real money games in some jurisdictions, they need to be licensed. These licenses don’t come cheap either, and the more reputable a license you want, the higher the cost.
For example, obtaining a PAGCOR license (one of the more reputable gambling commissions) will set an online casino back between $30,000 and $70,000 depending on the type and structure of the company. This license is good for five years and also requires an annual renewal cost of $2,800 – not the kind of thing you can start from your bedroom!
Hosting Fees
The website on which the online casino is operated is equivalent to a storefront. A shiny, eye-catching site will draw in players and convince them that this is the right site to spend their money on, whereas a dodgy, half-finished site will immediately make players click away and find something else.
There are many costs that go into setting up a site as they include design, front-end development, backend development, software integration, and web hosting fees to worry about. Online casinos like to view their site, it costs them more – but they consider it a worthwhile investment.
Software Fees
As well as building and hosting a website, an online casino needs to think about its software platforms. They need to be able to host a wide range of games to attract players, they need to look attractive to play for a long time and they need to accept different payment methods.
Some companies will design their software from scratch, some will buy a software framework and then add their themes on top, and others will buy so-called “turn-key” software ready to use. -deploy immediately.
The choice online casinos make in this regard will have a significant impact on cost but will also affect how much they are able to modify the software.
Wages
Although many of these online casinos seem to run themselves once they are set up, they require a large amount of manpower to keep it going. They need to have software developers in case there are any major bugs/glitches on the site, technical support to help players if they have any queries, marketers, management, accountants, and more!
Some of these jobs are highly skilled and require large salaries to attract the best employees, and if they want to be one of the most popular sites they can’t afford to skimp on any of these areas.
Taxes
The amount that an online casino will release in taxes depends on the jurisdiction in which it operates. Different countries have different attitudes towards gambling tax and corporate tax and that difference can add up to tens of millions of dollars for an online casino.
For example, the Isle of Man has a very attractive 0% corporation tax rate but the casino will be required to pay gambling duty which can be between 0.1-1.5% depending on the total revenue earned that year. Malta also has an attractive tax law. Operators operating their business within this jurisdiction can count on a small 5% gaming tax.
However, in PH, Lucky cola online casinos currently have to pay 21% of their gross income as tax (as of October 1st 2019).
As you can see this is a big difference so casino operators need to consider if the additional income of the PH market is worth it before offering real money games there.
Marketing
Online casino marketing may not be as easy as you think. Many websites/TV channels refuse to host ads for gambling companies on moral grounds, meaning a large number of online casinos are forced to compete in a smaller space. Therefore, being able to outspend your competition can make a big difference in how well your brand name is recognized.
Online casinos can market through regular advertisements, sponsorship of sporting events/teams, or affiliate marketing. The more eyes they want to see their product, the more they will cost some online casinos who pay millions of dollars in sponsorship every year.
The answer to the question “how do online casinos make money” is by offering games that give them a small, but visible edge augmented by large volume.
Conclusion
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