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How the casino economy works: From bet to profit
The casino economy is a manageable pipeline of turning bets into gross margins and on into operating profits. Understanding each stage gives product, financial and marketing teams a common language and growth levers.
1) Core Value Chain
Bet/Wager → Handle/Drop → Gross Gaming Revenue (GGR) → Net Gaming Revenue (NGR) → Gross Profit → OPEX → EBITDA → Net Profit.
Handle (or Drop) - total rates for the period.
House Edge (HE) - mathematical margin of the game (on slots equivalent to 1 − RTP).
GGR = Handle × HE minus winnings (in reality: Handle − Payouts to players).
NGR = GGR − bonuses − jackpot deductions − jealous providers − payment commissions − game taxes.
EBITDA = NGR − marketing − salaries − rent/hosting − other OPEX.
2) Game math: HE, RTP and variance
RTP (Return to Player) - long-term share of returns to players (for example, 96%). Then HE = 1 − RTP = 4%.
Volatility/variance affects cache flow: Highly volatile slots create GGR peaks at the same HE.
Jackpots: part of each bet goes to the fund (contribution rate, e.g. 1-3% of the bet); increase engagement but lower current NGR.
3) How key verticals work
Slots
HE is fixed by rules; main drivers: spin frequency, denomination, jackpots, missions.
The cost of content is revenue share to the provider (usually 8-15% of GGR or NGR, depending on the contract).
Tables/Live Casino
The margin is closer to mathematical, but the skill of the player and the computer policy affects.
Higher OPEX (studios/dealers/streaming), lower betting speed than slots.
Poker/P2P
The source is a rake (usually 3-5% of a bank with a cap) or tournament fee.
The risk of payments is lower, but higher sensitivity to bots and collusion.
4) NGR structure: What "eats" GGR
1. Bonuses and promos - freespins, cashback, match deposit; consider Bonus Cost as% of GGR.
2. Jackpot deductions are reserve and progressive hedge.
3. Content providers are royalty/jealous cher.
4. Payments - PSP fees, cancellations, chargebacks; Approval Rate and Time-to-Payout are critical.
5. Game taxes/levies and licenses.
6. Other - anti-fraud tools, hosting, KYC.
5) NGR to Earnings: Operating Expenses
Marketing: CPA/Refshera, affiliates, media, CRM-mailings, promotions.
Wage fund: support, anticrisis, VIP hosts, analysts, studios.
Tech. infrastructure: servers/clouds, CDN, telecom, software.
Rent/capex (for offline), operation of IR (hotels/restaurants/events).
General and admin. (G&A): lawyers, audit, compliance, licensing.
6) Unit economics (simplified)
Let in a month:- Active Players = 100,000;
- Average turnover per player (Handle/Active) = $300;
- HE = 4% ⇒ GGR/Active = $12;
- GGR = $1.2M
- Bonuses 18% GGR → − $216k
- Providers 12% GGR → − $144k
- Payments 3% Handle (equiv. 2,25% GGR) → −$27k
- Gaming tax 20% GGR → −$240k
NGR ≈ $1 200k − (216+144+27+240)k = $573k
OPEX: marketing $220k, salaries $120k, hosting/infra $35k, other $40k
→ EBITDA ≈ $158k (EBITDA margin ≈ 27,6% от NGR)
7) LTV, CAC and funnel "health"
LTV ≈ ARPPU × margin after bonuses and payments × life expectancy (months).
CAC - cost of attracting a paid player; target LTV/CAC ≥ 2 ×.
Key - hold (D30/D90), session frequency and microtemp: they multiply GGR/Active.
VIP component: Right-handed spending allocation means 5-10% of players can give 50% GGR. Need VIP hosting, fast payouts and strict RG limits (limits/pauses).
8) Online vs offline: different margin contours
Online
Almost zero marginal cost of content, but higher share of payment/affiliate costs.
Quick turnover of bets, strong dependence on Approval Rate and UX check-out.
Offline (IR/Casino)
Multi-threaded revenue (game + hotel + F&B + events), above capex and fixed costs.
Dependence on traffic (tourism/MICE), but a strong "comp lever" and cross-sales.
9) Jackpots, limits and risk management
Jackpot engineering: contribution rate, hedge reinsurance, "cap & reset" rules, transparent receipts.
Rate and spin rate limits: affect short-term revenue, but increase access to white marketing channels and reduce regulatory risk.
Antifraud graph: multi-accounts, bonus abuse, payment schemes; device binding and behavioral analytics.
10) KPI frame for product and P&L
Before expenses:- Handle, GGR, GGR/Active, RTP/HE actual, Volatility Index.
- NGR, Bonus Cost % GGR, Provider Share % GGR, Payment Cost % Handle, Gaming Tax % GGR.
- CAC, Payer Conversion, LTV/CAC, Retention D7/D30/D90, VIP share of GGR, Churn VIP.
- Approval Rate, Time-to-Payout, Fraud-Blocked Rate, EBITDA margin, Net Debt/EBITDA (for offline networks).
11) Sensitivities: what drives profits the hardest
+ 1 p.p. HE/RTP (or transferring traffic to games with higher margins) gives a disproportionate increase in EBITDA with the same Handle.
− 3-5 p.p. Bonus Cost (through targeting and anti-abuse) often amounts to double-digit profit growth.
+ 5 p.p. Approval Rate on deposit/withdrawal → greater than Handle with equal marketing.
Reducing Payment Cost through local methods and provider aggregation instantly improves NGR.
12) Economy checklist "by default"
1. Rules in the code: limits, transparent odds, jackpot parameters with an audit trail.
2. Bonus economics: caps, throttling, non-stocking stocks, value-for-retention, not first dip.
3. Payments: local methods, cascades of providers, SLA by conclusions, anti-chargeback.
4. Content mix: volatility balance, jackpots, live games in prime time.
5. VIP service: fast payments, personal perks, RG frames and control.
6. Antifraud and compliance: graph analytics, device binding, KYC/AML without unnecessary friction.
7. Privacy and trust: Provably-Fair artifacts, readable receipts, on-device processing of sensors (in VR/AR).
13) P&L Mini Example by Game (Month)
Handle: $50m
RTP 96% → HE 4% → GGR $2.0M
Cons: bonuses 15% (− $300k), provider 10% (− $200k), payments 2% Handle (− $1.0 million equivalent? no → 2% Handle is read separately; allowed 0.6% Handle = − $300k; adjust for contracts), gaming tax 18% (− $360k)
→ NGR ≈ $2.0 − (0.3 + 0.2 + 0.3 + 0.36) = $0.84 million
OPEX: marketing $300k, salaries $120k, hosting $30k, other $40k
→ EBITDA ≈ $350k
(Approximate parameters; replace with your conversions/rates.)
The bet → profit path goes through four key nodes: game mathematics (HE/RTP), leak cleaning at the NGR level (bonuses, providers, payments, taxes), OPEX operational discipline and funnel quality (Retention/LTV/CAC). A casino wins steadily when margins are sewn into the product, frictionless payments, bonuses are accurate, VIP service is fast and responsible, and trust is ensured by transparent rules and provable honesty.