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How Do Casino Revenues Get Calculated

 

February 21, 2022 (Investorideas.com Newswire) The first venues that met the modern definition of the word casino showed up in 17th-century Venice, but it was not until the 1950s that they took the shape we recognize now. Per an analysis from Global Industry Analysts (GIA), in 2020, the European, North American, and Asian Pacific casino markets had a combined size of $116 billion. GIA projects that these territories will reach a total market size of $149 billion by 2026, growing at an annual compound rate of 3.7%.

Although hard to estimate, the most reasonable projections are that Europe is the most casino-heavy continent, with around 1,700 of these establishments. The Czech Republic alone has 299 locales, more than half of the US number (462). Nevertheless, US commercial casinos dominate all others, money-wise, pulling in around $44 billion in annual revenues, with Nevada adding almost $8 billion to this number. Of course, the state's top gaming/hospitality destination is by far the most massive US casino player, playing host to various spots from top-end brands like MGM Resorts, Caesars Entertainment, Las Vegas Sands, and others. These listed three entities are the world's leading casino companies, raking in $11.7 billion, $4.4 billion, and $3.6 billion per year, respectively. Thus, they significantly contribute to gambling revenues in the United States.

Players' chief allure concerning gambling is its wealth-generating potential, but the only ones that attain guaranteed profits from it are its organizers. That is so because they feature games whose odds favor them. According to the Center for Gaming Research, the average top-end Strip casinos earn over $72 million per year. Below, an explanation follows how this industry calculates its revenues and what/who produces them.

Gross Gaming Revenues Explained

In the gaming sector, the principal metric used to define the growth of this sphere is GGR, or gross gaming revenue. It outlines the difference between the sums of money players bet minus their winning amounts. In the UK, the term gross gaming yield gets utilized. For example, Britain's annual GGY stood at £14 billion before the pandemic hit. In 2020, it dropped to £5.9 billion.

For people unfamiliar with economic terminology, it is vital to differentiate that the revenue/yield is equivalent to the money flowing through the operator's hands, not its profits. It gets calculated using the previously mentioned formula, the amounts wagered, minus the winning payouts. The GGR margin measures gross gaming revenue as a percentage of the bet amounts. As a rule of thumb, this margin is more-or-less stable, showing minor deviations because players' luck can affect it. It gets calculated by dividing the GGR by the total amount wagered. Of course, a higher GGR margin is what operators want, as it signifies that they are retaining more funds relative to the sum of the bets players make. Yet, due to the nature of this industry, the GGR margin is rarely high because operators need to spend money to incentivize gamblers to bet. They do so via comps and providing games that boast high payout percentages.

What Casino Games Generate the Most Revenues

As discussed above, the gaming products that casinos feature have a built-in mathematical advantage (house edge) that ensures that businesses that offer these products do not lose money in the long term. In blackjack, by default, it is 2%, while in European roulette, it is 2.7%. Slots can feature one that goes as high as 25%. The latter gaming genre often gets mentioned as the most profitable, as it frequently gets stated that it generates around 60% of all casino revenues. That percentage is likely accurate, as per the American Gaming Association's Gaming Revenue Tracker, in Q4 of 2021, reel-spinning games had a GGR of $8.3 billion, more than three times the GGR of table games ($2.5 billion).

What also deserves mention is that the Center for Gaming Research recently released a paper outlining the evolution of casino game revenues from 1985 to 2019. It detailed that in 1985, blackjack accounted for 77% of all casino games and over half of all table games revenues. Also, in the mid-1980s, craps generated 28% of all table game wins, but in 2019, this percentage fell to only 11%. These are staggering declines.

How Much Money Do Online Casinos Make?

Pune-based market research firm Fortune Business Insights believes that the online casino market had a value of $66 billion in 2020. Thus, its monthly online revenues should come to around $5.5 billion. Since there are somewhere in the neighborhood of 4,000 gambling sites running, that means, on average, an online casino generates $13,750 per month. Logically, that is not an accurate assessment, as most of the Web's gaming weight gets pulled by less than a hundred platforms, whose total revenue numbers are anyone's guess because many of them are privately-operated entities.

About the Author

Shelly Schiff has been working in the gambling industry since 2009, mainly on the digital side of things, employed by OUSC. However, over her eleven-year career, Shelly has provided content for many other top interactive gaming websites. She knows all there is to know about slots and has in-depth knowledge of the most popular table games. Her golden retriever Garry occupies most of her leisure time. Though, when she can, she loves reading Jim Thompson-like crime novels.


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