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Why some casinos operate without profit in the early years
The myth "casinos are always in the black" does not stand up to scrutiny. Most new operators (online and offline) pass the unprofitable corridor from 12 to 36 months. The reasons are not a "weak product," but a cost structure and a slow return on investment: licenses and integrations, expensive marketing launches, bonus activation, payment rails, content and personnel, and on the ground - also CAPEX locations. Below is a system map of this "valley of death" and tools to pass it shorter and safer.
1) Early stage unit economics: LTV GGR = Handle × (1 − RTP) = Handle × HE At the start, the CAC is high, Retention is low, the Approval Rate of payments is not set up, and the Bonus Cost% is too high. LTV is still "short" (little retention), so LTV/CAC <1 first months is a frequent, almost inevitable scenario. 2) Where "burns" the most: early spending map 1. Marketing and affiliates - peak in D0-D90: channel tests, CPM/CPC higher than mature players; expensive "first deposits." 2. Bonuses and freespins - without a neat cap/wager, they turn into "discounts" rather than investments in iLTV. 3. Payments - low Approval Rate, high PSP rates and FX fees; lead delays → returns/chargeback. 4. Content and live studios - royalties 8-15% GGR (slots) and 20-35% NGR (live), MG/exclusives. 5. Licenses, audits, certification, lawyers - inevitable fixed costs; offline - rent, equipment, personnel, REIT/leasing. 6. Platform/RAM/hosting - fix + variable fee, SOC/monitoring, DDoS/anti-fraud. 7. Team - support 24/7, payers, risk/AML, CRM, studios. 3) Why revenue is "catching up" slowly Cohort inertia: LTV is revealed in 6-18 months; early cohorts are small. Optimization of the funnel takes time: CUS/payments/payments - each pp Approval Rate rises for weeks. Content and seasonality: The game/show portfolio finds "its" prime time and jackpots through experimentation. Onshorization: the transition to "white" rails increases conversion, but first - integration and audit. 4) Typical loss scenarios by model Phase 0-6 months: LTV/CAC 0. 5–0. 9; Bonus Cost 15–25% GGR; Approval 75–85%; p95 Time-to-Payout > 12 ч. Phase 6-18 months: LTV/CAC 1. 2–2. 0; Bonus Cost 12–18%; Approval 88–92%; p95 TTP <4 h. Break-even point: at NGR/GGR ≥ 55-65% and EBITDA/NGR 20-35%. САРЕХ/leasing eat up margins; project payback - 3-7 years. The key is MICE/ADR/RevPAR and local traffic. 5) Rank the levers that "flip" P&L the fastest 1. Payments: + 5 p.p. Approval Rate = + 3-8% to GGR with the same marketing; p95 TTP <4 h (VIP minutes) → Retention and Repeat Deposit Rate growth. 2. Bonus discipline: − 3-5 pp Bonus Cost% while retaining Retention = double digit EBITDA gain. 3. Content mix and missions: volatility balance, network jackpots, seasonal events → more sessions without overheating promos. 4. Affiliates: transition to CPA + RevShare with retention KPIs; a slice of "expensive" sources. 5. Onshore PSP/license: opens white channels and reduces Payment Cost/chargeback. 6. VIP processes: fast-lane payments, personal limits and perks within the RG. 6) Bonuses: how to turn a "loss" into an investment Rules "in the code": non-stocking promotions, cap bets/volatility, excluded games, net win vager, device/payment binding, velocity limits. Methodology: holdout tests on iLTV, not "whole LTV"; D30/D60/D90 horizons. KPI: Bonus Cost% GGR, Incremental LTV/Bonus ROI, Abuse Rate, Time-to-Second-Deposit. 7) P&L mini-model "as it is → as it should be" 8) Cash and Risk: How to Live the Valley Runway ≥ 12 months fix costs; reserve credit lines; scenarios 50/75/90% of GGR plan. Covenants and leases (for IR): agree in advance "liquid" periods. Payout control: SLA, VIP prioritization, anti-chargeback; do not save on speed - it will be more expensive. Regulatory/License: pass audits and certifications in a timely manner so as not to lose PSP and media. 9) Metrics checklist per weekly committee Handle, GGR, NGR, NGR/GGR% (take-rate), EBITDA/NGR%. Bonus Cost%, Provider Share%, Payment Cost% Handle. Retention D7/D30/D90 (paying/all), Repeat Deposit Rate, Time-to-Second-Deposit. VIP share of GGR, VIP churn, p95 Time-to-Payout (общий/VIP). Approval Rate (dep/withd) by Method/Country, Chargeback/Refund rate. Fraud-Blocked Rate, Abuse Rate, complaints/1k sessions. Uptime payments/providers, Error-budget, GGR/min alerts. 10) 100 Day Plan (Online) Weeks 1-2 - Diagnostics Cohort curves, hazard-efflux model; payment card (Approval by methods), bonus analysis (cap/stacking). Inventory of content and provider rates; "minus" campaigns - stop. Weeks 3-6 - Quick Wins PSP cascades, local methods, KYC auto-check; p95 TTP <4 h. Bonuses: non-stumbling, cap 2-5% GGR by game, missions with unlock. Content: network jackpots, seasonal calendar, prime time live tables. Weeks 7-12 - System CDP/CRM triggers (second-deposit nudge, winback playbooks). Shooting nets with providers, the first exclusives; optimization of aggregator tail. Dashboard KPI + alerts; weekly "margin review." 11) Why "loss first" is strategically rational Buying market share in onshore jurisdictions: access to "white" canals and banks of roads at the entrance, but reduces long-term CAC. Cohort return: honest payments and PF transparency increase trust → longer life cohorts → higher business multiplier. Network effects of content: the larger the base, the cheaper the exclusives and tir conditions. 12) Frequent Faunder Errors Pour traffic at Approval 80% and p95 TTP> 12 h - burn money. "Treat" retention with frispins without rules and anti-abuse. Count ROI promo without holdout and iLTV. Ignore pre-tax in the royalty formula for providers in high gaming tax markets. Early rebranding without value (payments/content/payments) - minus to trust. 13) Short P&L plan template (insert your numbers) Less: Bonuses.........; Providers.........; Payments.........; Gaming tax ………; Jackpots......... → NGR......... OPEX: Marketing.........; Personnel.........; Platform/Hosting.........; Other......... → EBITDA......... KPI-goals 90 days: Approval dep ≥...%; p95 TTP ≤ … h; Bonus Cost ≤ …% GGR; Retention D30 ≥ …%; LTV/CAC ≥ …× 1. Payments and payments without friction, 2. Bonuses as an investment in iLTV, not a discount, 3. Content/missions/jackpots for repeat sessions. Add onshore licenses, PF transparency and responsible UX - and the LTV curve will "collapse" CAC, and temporary unprofitability will turn into projected profit and capitalization growth.Basic formulas
Online casinos (regulated markets)
IR/Ground
It became (after 6-9 months):
Income and margin
Client
Payments and risk
Technique/Operations
Casino in the red at the start is not a coincidence, but a consequence of the industry's design: the high cost of entry and the delayed return of cohorts. Three disciplines accelerate profitability: