What Affects a Casino’s Profit: Estimation of the Key Indicators

Working in the gambling industry involves interacting with large amounts of money. To manage financial resources properly and receive decent revenues, you should be well-versed in the main factors affecting the profitability of an online establishment.

The specialists of the Smart Money studio offer you to get acquainted with the main aspects that affect the income of internet projects. Order your gaming business from our expert team.

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Return to Players

RTP is a percentage that theoretically suggests how much money a punter can get back after a game session. As a rule, the average rate in casinos is 95%.

91% is considered a low indicator. A high RTP is 98% or more. The bigger this value, the more often and larger the winnings of the players. However, it is worth remembering that online slots work based on the random number generator. Therefore, it is impossible to predict accurately whether the next spin will be successful or not.

It should also be considered that the frequency of receiving prizes is also affected by such an indicator as volatility. This is the ratio of the amount and frequency of winnings.

• Most gaming solutions return users about 90–99.5%. This amount is called total winnings.

RTP = Total winnings of players / Total number of bets placed

• A hold is a difference between bets made by players and their winnings. The casino gets it.

Hold = Total amount of bets placed - Overall sum of customers’ winnings

• The percentage of hold to total bets is called margin.

Margin = Hold / Total Bets * 100%

The Calculation of a Gambling Establishment’s Revenues

In addition to RTP, operator costs also affect the profitability of a virtual establishment. The amount of expenses depends on the peculiarities of a particular project. Different regulators set specific tax rates. The cost of services from many providers can vary significantly. Therefore, spending on certain projects may differ critically.

How to Determine the Gross Revenue of an Entertainment Project?

This indicator does not show the net profit of a businessman, but rather the level of sales and the effectiveness of interaction with customers.

The simplest formula to calculate the gross gaming revenue looks as follows:

GGR = Total sum of bets - Winnings received

There are 3 key types of gross gaming revenue in the entertainment industry:

Theoretical indicator	The base of this rate is the sum of all bets made by customers minus the winnings received
GGR of a controlling body	Some jurisdictions create formulas for determining gross income to standardise taxation and reporting
GGR of a supplier	Gambling software vendors also create GGR schemes to regulate commercial interactions with entrepreneurs better

The second and third types represent a certain percentage of costs. Let us look at a few more interpretations of gross revenue in the entertainment business.

Considering Bonuses

If you provide additional rewards to your clients, a regulator may allow the amount of bonuses paid to be subtracted from the sum of the required tax deductions.

In this case, GGR will be calculated using the following formula:

GGR = Hold - Rewards earned by customers

Accounting Approach

Most modern software contains automatic systems of economic indicators reporting and calculation. However, some operators resort to the services of accountants to avoid inaccuracies in computations and control changes in key financial indicators personally.

GGR can be calculated with the help of this formula:

GGR = Initial balance + Players’ deposits - Withdrawn funds - Budget at the end of a certain period

The Estimation of a Gaming Site’s Net Income

This indicator significantly depends on the costs of an operator. Therefore, it is important to plan the expenses on purchasing software, maintaining the platform, paying taxes, and other important things very carefully and thoughtfully. It is also worth considering bonus payouts and players’ winnings.

Net Profit = Total Bets Made - Business Service Costs - Total Users’ Winnings

It should be understood that this is a very generalised formula. Each project has a specific list of expenses. You need to focus solely on the indicators of your business when calculating the net profit.

The Application of the Considered Formulas

Let us look at how to determine the key profitability indicators of an online gaming project using specific examples.

1. Imagine the total amount of bets made by an online casino’s customers in a particular slot per week is $125,200.

The players' total winnings amounted to $110,000. Let us calculate the hold:

$125,200 - $110,000 = $15,200

2. Consider a situation where a gambling project received $523,456 per month as a hold. The total sum of players' bets for this period amounted to $11,200,000.

Let us determine the establishment's margin for the time:

$523,456 / $11,200,000 = 0.046 * 100% ≈ 4.6%

3. Last month the casino’s hold got to $4,200,000. The total sum of deposits made by players was $7 million.

Users placed bets on $92,500,000. The operator paid out $300,000 to customers as bonuses. The platform maintenance fee is 3% of the hold. The cost of entertainment content is 14% without deducting bonus payouts.

The gambling project gives the payment service provider 5% of the total amount of bets. Tax deductions are 12% of GGR.

To determine net revenue, we are applying the following formula:

GGR - Tax deductions - Gaming platform maintenance costs - Entertainment content fees - Transaction processing fees

GGR = $4,200,000 - $300,000 = $3,900,000

Tax deductions = $3,900,000 * 12% = $468,000

Gambling platform maintenance= $4,200,000 * 3% = $126,000

Payment processing fee = $7,000,000 * 5% = $350,000

The cost of entertainment content = $4,200,000 * 14% = $588,000

The project’s net income = $3,900,000 - $468,000 - $126,000 - $350,000 - $588,000 = $2,368,000

The Main Things about Determining the Profit of Entertainment Start-Ups

Competent financial analysis will allow you to properly plan further expenses and calculate the potential revenues of your online establishment.

The key factors affecting the net profit of projects are as follows:

• GGR of a business;
• tax deductions;
• the percentage of RTP;
• payouts of bonuses and winnings;
• the maintenance of software and a platform;
• payment processing fee, and others.

To make calculations and plan the costs of your business correctly, seek the help of professionals.

The Smart Money team is ready to analyse the effectiveness of your start-up’s financial planning and create a unique expense and income strategy for the project. Leave a request to the manager to learn more about our services and conclude a cooperation agreement.

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