Online Casinos — How Do They Make Money?

The business of gambling is massive, and it has always been like that. No one can say that they’ve seen Las Vegas without thinking that the city is one of the richest in the US.

In recent years, another branch of the casino business has further increased the industry’s value — online casinos.

Together with online casinos, the revenues of the casino business surpass several billion every year. But how do they make them? In essence, their profit consists of winnings, i.e. the money they win from the players who lose in casino games.

Naturally, it’s not as simple as that, so we wanted to delve deeper to explain how this works and how casinos never fear for their profits even though they have great chances of losing big to the players.

It’s All in the Games

At a glance, it seems that casinos have as much of a chance to lose as the players. However, the reality is much different and safer for the casinos. Namely, each casino game is based on pure chance, meaning that the results are entirely random. This is enabled by something called a random number generator (RNG).

An RNG is a piece of code that ensures every outcome in a casino game is entirely random. However, that doesn’t mean that it’s equally random for the player and the casino. The casino benefits from something called the house edge. This edge is there to ensure that the casinos have a slightly higher chance of winning your money than you have of winning theirs.

It does sound a bit unfair, but it’s the only way to ensure casinos remain profitable. Just look at it this way — if casinos weren’t profitable, they wouldn’t exist. In that case there would be no casino games for you to play!

How Do Games Make Money for the Casinos?

Most people don’t know any of this. They wrongly believe that they have just as much of a chance of winning as the casino itself. However, when you look at it more closely, you realize that every casino game is made to offer slightly better odds to the house compared to the players.

Nowhere is this more apparent than in games like European roulette. As you probably know, this popular table game has 37 numbers, starting with 0 and ending with 36. Now, even though there are 37 numbers when the ball lands on the number you’ve wagered on, you will win 36 times the amount on the number, not 37.

In essence, if you bet $1 and win, the casino will pay you $35 and give you your $1 back. However, over the course of 37 spins, you would bet $37, but if you win once, as the odds suggest, you will get $36 while the casino keeps the remaining $1.

This is precisely how the casino stands to win from the game of roulette. The chances don’t mean much for one person, because you can always win several times during those 37 spins, but the casino is unlikely to lose so many times throughout thousands of spins with a dozen or so players.

The same happens if you make different bets, like betting on a color. The 0 is still there, and you lose either way if the ball lands on it. When you translate that into odds, your chance of winning with every spin is slightly lower than 50%. What’s more, the odds are even lower for American roulette games where there is both a 0 and a 00.

Now, roulette is not the only game that works like this. Every casino game has a similar feature due to which it becomes mathematically impossible for the casino not to obtain a long-term profit from their games.

However, that doesn’t mean a player like you can’t win big. You absolutely can, because it only takes one win with a larger wager for you to win thousands of dollars. But the casino doesn’t care. The casino will always make a profit because if you win big, thousands of other players would still have lost at least once, which is more than enough to result in a profit for the house.

The only exception to this rule of the house edge is poker. Here, players bet against each other, while the casino only makes a profit from the fee they charge for setting up tournaments.

What About the Expenses?

Unlike the profits, which are the same for both online and traditional casinos, the expenses are different. Traditional casinos have expenses for the premises they use, and the staff they employ, which online casinos don’t. So, in essence, with the expenses lower, online casinos tend to win more.

Online casinos don’t have to worry about paying for a lavish building and furniture, drinks at the bar, dozens upon dozens of workers, etc. They only have to worry about the website and a few other things.

Naturally, this is not inexpensive; it’s just not as expensive as brick-and-mortar casinos’ expenses.

An online casino has to pay for the servers on which its website is hosted, then for the licenses, the software deals that provide them with games, and the marketing that attracts players.

The marketing is an interesting aspect of any online casino’s expenses, as it’s probably the only expense that surpasses that of the brick-and-mortar casinos. Traditional casinos don’t need to spend on a wide variety of marketing campaigns; they rely on being physically located where they are. They only need to wait, and players are likely to arrive on their own without the casino investing heavily in advertising.

On the other hand, online casinos still have to pay for a wide variety of advertisements, and they have to offer bonuses, and so much more.

However, at the end of the day, the overall expenses are still lower for online casinos than they are for offline casinos.

How Much Do Online Casinos Earn?

There are a lot of crazy facts about casinos but when all is said and done, one crucial question remains — how much do online casinos earn?

Unfortunately, it’s hard to answer this seemingly simple question. First of all, online casinos are not listed publicly, which is why they don’t have to report on their income or their expenses. And if that weren’t enough, many online casinos also have sportsbooks, which makes calculating their revenues and profits quite hard.

Sportsbooks themselves tend to earn a lot of money as well. For instance, Bet365 had a profit of $896 million for the 2018/2019 fiscal year. They didn’t report how much of this was from casino games.

Even though we can’t calculate how much an average casino makes, we still know that the entire iGaming industry is worth around $40 billion, and that’s just the online casino industry with its casino games. This is clearly a massive number, but we still have to mention that some casinos make more than others.

A few software developers who both own casinos and develop casino games make the most, and these are Playtech, 888, Paddy Power Betfair, and a few others. Others are much smaller, and many of them earn a lot less but calculating that is, unfortunately, even harder.

Whatever the exact profits are for an average casino, it’s safe to say that the industry is incredibly lucrative, and we hope that now you have a clearer picture of how an online casino makes money.