How Profitable is the Online Casino Industry?

The Online Casino IndustryHow profitable are online casinos? Well, the online casino industry has had accelerated growth in the past few months. And so far, federal, state, and local governments are experiencing substantial growth in revenues.

For instance by 2017, states in the U.S. made over $16 billion in gaming taxes annually. That does not include the revenues states got in the form of sales tax, income tax, and other taxes related to the retail and online casinos’ operations.

Furthermore, the tribal casino gaming industry supports over 635,000 jobs in the US. That translates to an economic impact of about $97 billion, according to the American Gaming Association (AGA).

The total revenue that goes to paying employee wages stands at over $33 billion. The tribal casino gaming industry alone is now worth over $30 billion, up from the $121 million in the late 1980s.

However, what will catch your attention is the U.S. casino industry as a whole. The US sports, retail, and online casino industry is valued at $240 billion, and it supports over 1.7 million jobs, in over 40 states.

But what has remained largely unnoticed is the profits online casinos are making. That has been partly due to the complex partnerships that make up online casinos. The partnerships often consist of government, tribal, retail, and online casino gaming corporations.

However, that does not mean the casino industry is completely opaque, as you shall see next. If you want to invest in the online casino industry, here is an overview of its profitability.

 

Sports Betting and Online Casino Industry 2020

The global online casino industry alone was valued at about worth $53.7 billion in 2019. And industry analysts projected it is likely to grow at a rate of 11.5% from 2020 to 2027, to reach a market share of $127 billion.

Most of the growth has been coming from desktop gaming devices, with mobile devices also showing strong growth.

They attributed the accelerated growth to increasing accessibility of smartphone and desktop gaming devices, celebrity endorsements, corporate sponsorships, and legalization. 

But among the five factors, it is expected that mobile gaming devices will drive the most growth and profitability.

Online Sports Betting

Companies such as BET365 are already offering gamers an opportunity to place bets, continuously from their gaming devices. Unlike in the traditional sports where the bets are locked after the game starts, Bet365 offers its gamblers “in-play betting.”

Players can continue to bet on other outcomes of the game’s events, as the game progresses. They can bet on events such as the number of corner kicks within the first 10 or 30 minutes, who will score in the first half, and other common game events.

Players can place those bets from their mobile devices, online. That has seen Bet365 become one of the most profitable gambling companies.

CEO Denise Coates and Family

It’s now the largest employer in Stoke-on-Trent, with over 4,000 employees in its payroll. And the owners of Bet365, the Coates family, are now the biggest tax payer in Britain, remitting over $785 million in taxes.

Furthermore, Denise Coates, who is the company’s co-CEO, was paid over $420 million in 2019.

That made her one of the highest paid executives in the world. The pay was several times more what her peers in the publicly traded companies earned in salaries, and about 17,000 times more, the average salaries of  Stoke-on-Trent residents.

Although that isn’t surprising, considering it was her idea to take Bet365 online. In many ways, at an estimated net worth of $6.4 billion, she is the force behind the company’s massive online gambling profits.

Problematic Gamblers Driving Profits

However, not everyone is happy with that growth. According to a report published by the House of Lords, over 60% of the online gaming industry’s profits are coming from 5% of the players.

While that means over 95% of players aren’t problematic gamblers, many feel online gaming is running the 5% of the population.

Fortunately, organizations such as Gordon Moody Association, are working to help the gambling addicts. And they say during the lockdown, the calls for help were on the rise. Victims said the lockdown didn’t give them an alternative to distract themselves from online gambling.

Interestingly, such claims support the recent spike in the profits made by online casinos, during the lockdown.

Michigan Online Casinos – US

In the U.S., online casino operators in the State of Michigan are among the most profitable. The states recorded over $ 109,083,638 in online casino revenues, out of which $18,317,351 went to state taxes.

MGM Grand Detroit led the four main online casinos operators, by generating over $38 million for January and February 2021 only.

And it paid about $7 million in taxes from those two-month revenues. MotorCity Casino was a close second, generating about $20.8 million during the same period. Bay Mills Indian Community came in third, generating over $19.9 million in revenue for the two months.

Greektown Casino was a distant fourth, generating over $4.7 million in revenues, in the two months. Those revenues are a clear indication that the online casino industry is highly profitable. However, it also indicates the revenues are concentrated in the top few casinos.

But for business analysts, this skewed distribution of online casino profits isn’t surprising. According to Pareto principle, it’s natural that the four casinos are generating the bulk of casino revenues.

Following the principle, it is natural that in most jurisdictions, 20% casinos are likely to generate 80% of the revenues.

Similarly, for the casinos, 80% of their profits are likely to come from 20% of their loyal online casino players. Only about 20% of the gamers are likely to experience problematic gamblers.

EU Online Betting and Gambling Market

As of 2018, the EU online gaming market was valued at over €22.2 billion, with an annual growth of 10%. Analysts estimated the revenues would grow to €24.7 billion by the end of 2020, but by the end of 2019, the market had already grown to €24.5 billion.

Majority of this revenue is coming from only four nations. Those nations are Italy, UK, Germany, France, and Spain. The same trend applies to the online gaming operators. In each country, only a handful of the operators are making a bulk of the profits.

In the UK for instance, the leading online casino operators are Casumo Casino, Bet365, Rizk Casino, 888 Holdings, and LeoVegas. The same trend applies across the other countries, where bulks of the profits are generated by the most popular online casinos.

In that regard, the leading online casinos in Europe are Bet365, 888 Holdings, William Hill PLC, GVC Holdings PLC, Betsson AB, and Kindred Group PLC. Together, they held the lion’s share of the €24.5bn market share in 2019.

Using Pareto’s principle, we can estimate they collectively generated over €19.5 billion, of the €24.5 billion.

To enhance their positions further, some less dominant players are opting for mergers. Such as the case when Betfair PLC merged with Paddy Power PLC, to form Paddy Power Betfair PLC.

 

Conclusion – Online Casino Industry Profits 2021

We estimate that the online casino industry will continue to be more profitable, as more players switch to online gaming. The use of mobile devices and social gaming will also contribute to that growth.

However, most of the profits will continue to go to the top few brands, which have earned the trust of the players. And trust is something that new online casinos or apps must establish to become profitable.

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