How much money gets an online casino?
Many investors, who had learned about the casino business, decided to open their online casino. Their calculations are based only on the simple numbers: how much money the players will win and lose. As a consequence, a large part of the beginners closed during the year. In this article, we will discuss the “pitfalls” and business plan and answer the question: "How much money gets an online casino?". We will examine the opening of licensed white-label online casinos as work on the franchise is much more affordable, and the quick option of opening their own gaming houses, and the scripts go in the past.
Let's define a few terms that will be used in this study:
- The deposit is the amount which the player puts into his account. The payout is the amount which you get for a player’s payment system.
- GGR is the total income that is calculated as the deposits’ sum without the payments’ sum. At the same time, no matter what costs are incurred by the operator. Also, this option does not differentiate between the rates of the bonus and real money. As a rule, the game developers need to pay their percentage from this parameter.
- NGR is the net player’s income. This parameter already takes into account the costs. It is calculated as (total deposits) - (amount paid) - (bonus amount) - (amount of admin Fee (as a rule, the amount paid payment systems)).
- Royalties to the provider (franchise). This is done every month.
- A negative balance means a situation when the players have won more than lost and you get a net loss. If you have some small players and one big this situation happens very often. In the case that a major will be lucky and he won't lose all the winnings back, in fact, you will pay not only for the payment systems and royalties for the franchise but the player of its own money.
- Affiliate is the sites on the casinos that earn with the affiliate programs. You will attract the new players into your casino with their help. The flows of the players call the traffic. In 2017, many affiliates require you a fee for adding on the website (300-2000 Euros).
Before you start
The main costs that you must pay before you begin the work:
The payment for the establishment of a casino (about 15,000 Euros. This includes two providers of the games.). The payment for a unique template’s design (about 5000 Euros). The payment for each additional provider games (Netent, Microgaming, Yggdrasil and so on). The price varies, but we can say that the large operators will cost you (on average) for 5,000 Euros (the small - 2,000 Euros). The insurance payment, which the franchise owner will cover the winnings of the players. This amount can vary from 5000 to 10000 Euros. In total, about 30 000 Euros you will have to pay before the work begins. It should be noted that the part of franchise owners require the opening of the official firms for the calculations, and the part is ready to send the money to your personal Skrill. The firm will cost you about 3,000 Euros per year.
During the work
The part of these costs becomes apparent only after signing the contract. So you must carefully read the information and incorporate it into your business plan to the open online casinos. During the work you will continue to pay:
- The royalties for the white label. The franchise owner will charge you a monthly payment, which will depend on your results but has a minimum threshold. As a rule, you'll pay 6 to 9% from GGR, but not less than 3000 Euro. An important remark is that even in the case of the negative results (the players won more than lost) you will have to pay a minimum amount of royalties (3000 Euros).
- The royalties for operators. The creators of the games maybe are probably the best position in this “food chain”. They take from 10 to 20% of the players’ GGR. Also, the payment occurs once per month. Everything is a bit more honest here: the negative balance is transferred and taken into account in the next month. Although, many factors depend on the franchise.
- The payment system. This is probably the most important item in your financial business plan for opening an online casino. It is important to note that, the payment systems (Skrill, Neteller) take about 3-4% of the entry money and 1-2% for the payment. The recharge with a credit card will cost you 2.8% of the amount.
- The payments affiliates. In March 2017 the average percentage of payments on a white label for the partners is 50% of the NGR. The site's major affiliates will require either a fixed payment (€300-2000) or increased percentage from NGR (60%+).
- The payment to the employees. This includes support, development of the promotions, search the referrals and so on. The affiliate for the manager you will have to pay 1500 Euros per month.
The business plan for opening a casino
Now let's try to calculate how much money gets an online casino. Assume that your main goal will be the CIS market. The payback of the project will deliver the year and calculate how much money needs to lose players in a month to fulfil these conditions. To simplify the model, we'll put a fixed affiliates’ payment and conditionally assume that they agree to add you to their sites with a commission of 50%. They will ask for a higher percentage and to demand money for adding. Encourage you to experience the reality of this business plan:
- The cost of the opening. The opening of your casino, including a company in the offshore, is 33 000 Euro.
- The payment of affiliate manager for 12 months (minimum 1500 Euros per month) is 15 000 Euros.
- Assume that the players will make deposits from different payment systems will never win and will not withdraw money. The calculation will take an optimistic 15% on this position since the players will win (on average) 50% of their deposits and withdraw them, then recharge again.
- The royalty will give us 6% (for the franchise) and 20% (for creators of the slot) = 26%. For ease of calculation assume that you will have no deposit bonuses. Please note that, until you reach the value of 50 000 Euros, you will pay the minimum cost of a franchise to 3,000 Euros, regardless of the percentage.
We need to compensate for 48 000 Euros for 12 months. At the same time, of the net income, we will pay 15% (for payment systems) + 26% (for creators of the slots). Even half of those amounts you give affiliate - 30% of gross income. Let's count: 41% for the costs and 30% for the affiliate. About 30% will remain to you. These 30% (in fact slightly less) will be earnings of your casino. For zero output, you need to players lost 145500 Euros that is around 12,000 Euros per month. Add to this the blocking of websites and the creation of mirrors and overhead. In total, the breakeven point will be somewhere between 15 000 - 20 000 losses in a month. Here will be taken into account and the minimum payment for the franchise and (indirectly) increased costs in the payment system.
The risks which will have to add money
In this case, you receive the following risks which you will have to add their own money in the project for the opening of the casino:
- If one of the players will get lucky and he will win big, then you have to report the money to pay this winning. It is important to understand that the high-variance slots from Netent can issue EUR 100 000 at a rate of 25 Euros.
- If you do not earn anything or the balance is negative, the holder of the franchise will require the payment of the minimum payment of 3,000 Euros for each month.