Running a casino is a lucrative business. It has a huge upfront cost but an even bigger profit margin. Millions of players flock to online casinos every day to test their luck. Behind the massive jackpots, free games, high-RTP slots, and generous welcome packages, there is a well-oiled machine that keeps casinos profitable. Here at Gambling Zone, we have reviewed and talked with a large number of casinos and happen to have some deep insights into how the game works.
So, if you are wondering how do casinos make money, you have come to the right place. We are going to explain the mix of carefully crafted business models, strategic partnerships, and an in-built advantage called the house edge we are sure you have already heard about. Without further ado, let us get started!
The House Edge
Historically, casinos have had a built-in advantage. From the time of the older gambling parlours to the neon-lit streets of Las Vegas, the house edge has single-handedly been the biggest driver of profit and income for casino stakeholders and operators.
The house edge is the edge a casino has against the player. When you are playing a game in a casino—whether it is a poker hand or a slot machine—you are playing against the banker or casino. This banker or casino has an edge. More often than not, it will win against you. This house edge used to be quite big in the earlier days of gambling compared to today as casinos shift from a “big house edge, fewer players” mindset to a “smaller house edge, more players” one.
Let us take a more relatable example.
A slot game like Mega Joker by NetEnt has a 99% RTP. This means that the player is technically going to get 99% of their money back over a very long term. The house edge is 1% in this case. Table games often have a house edge under 5%. For example, the house edge in blackjack with liberal Vegas rules is 0.28% whereas the Ante & play house edge in Three Card Poker is 3.37%.
Slot games tend to have an RTP of 96% (or a house edge of 4%) today. Just a few years ago, this number was closer to 85% (15%).
The game mathematics and slot design are done in a way that you cannot win more than you lose over the long run. And this is what makes casinos their money. This small statistical advantage ensures long-term profits for online and physical casinos.
Game Selection & Software Providers
Online casinos often include anywhere from several hundred to several thousand slot games. These are the biggest money-printing machines for casinos. But traditionally, the games are often created by third-party companies, not the casinos directly.
Land-based gambling establishments used to contract slot machines from companies like Aristocrat, for example. Today, online casinos (which are remarkably higher in numbers compared to land-based casinos) also do something similar. They have to power their platforms with game providers or software providers.
Leading game providers such as NetEnt, Microgaming, IGT, Red Tiger, Evolution Gaming, Play’n GO, Pragmatic Play, etc. create slots and live dealer games. The casinos then integrate these games into their platforms and allow their users to play them. This is a symbiotic relationship and both sides win.
The revenue model of the software providers is adjusted to allow the casinos to make a profit. And a casino is incentivised by its players to offer more and better games, for which it has to include multiple providers. The providers, in turn, need to create better and more enjoyable games to stay ahead of the competition. This is a self-fulfilling cycle involving the player, the casino, and the game provider.
The end result?
Game providers incentivise online casinos to include their games (or more of their games) on their platforms. This is a solid income stream for online casinos. If they cannot incentivise a casino, for example, the casino will simply remove the games from their platform. If enough casinos in a region do this, the provider will become irrelevant there.
Playing Casino Online
Bonuses & Promotions
Running an online casino has been reduced to a pure number game. Every casino is chasing after getting more and more members. Attracting new players has become the #1 priority for casinos to increase their profits. And to do that, they give bonuses and promotions.
Most notably, a lot of online casinos offer a generous “welcome bonus” or package. This is a matched deposit. For example, let us say the bonus is 100%. This means if you deposit $100, the casino awards you 100% of this amount, or another $100, to play with. On paper, it looks fantastic. But this is another way casinos make money.
Once you have signed up, you cannot just use this bonus amount normally. It is subject to a wagering limit. Let us say the wagering limit is 40x. This means that the bonus amount of $100 must be played through 40 times for any resultant winnings from it to be added to your cash balance that you can withdraw.
In simpler terms, you must wager a total of 40 x 100 = $4,000 on the casino to convert your bonus winnings into withdrawable cash.
Note that in some cases, the wagering applies not only to the received bonus amount but the total of your deposit and the received bonus amount.
None of this is a new invention by recent online casinos. Wagering limits and welcome bonuses have been a part of gambling for a very long time. But at the same time, there are always shady casinos and bad actors trying to exploit gullible, unsuspecting players with predatory terms on their bonuses. Always be careful, read the terms and conditions, and read our in-depth reviews where we take this stuff apart.
Back to the point, how does this help the casino make money? Well, whereas you might have only spent $100 or a little more on the casino, due to the wagering limit, you are more likely to wager at least $40,000 on the casino. And the more you wager, the more money they make thanks to the house edge.
Other lucrative promotions meant to keep you playing on the casino such as cashback, reload bonuses, free spins, etc. all carry similar terms and are meant to make you wager more. VIP levels are also directly tied to your total wagered amount—so that is another way the casino makes long-term, loyal customers who will keep spending money.
Online Casino
Wrapping Up
The house edge, game provider partnerships, and bonuses are the key ways using which online casinos make the most of their money. This is more than enough to operate a gambling platform. But there are other channels as well, of course.
Ultimately, a casino wants to get more players and they have a lot of tricks up their sleeves to do that. To answer the question of how do casinos make money, we only need to look at one metric—how much are they spending on attracting new players?
Today, gambling operators can be seen on jerseys and billboards all over the world. They are signing deals with the biggest athletes and governments in the world. It is all being done to get more players and make more money through their house edge.
