Although economic development is used by the casino industry and local governments to sell the idea of casino gambling to the citizenry, the degree to which the introduction and growth of commercial casinos in an area leads to increased economic development remains unclear. This $190 million is a cost to casino operators. Zero new money was. The size of the online casino market is roughly $40 billion or $50 billion a year. That’s about $4 billion a month. If we take the number of online casinos in operation, and divide that $4 billion by the number of online casinos in operation, we’ll have an estimate of how much an average online casino makes.
If you haven’t read part 1 of this series dealing with the dire importance of line shopping, we HIGHLY recommend that you take a quick minute and read through it. Not to sound overdramatic, but it is insanely important to your success as a sports bettor. Don’t worry; I will still be here with part 2 for you when you get back.
Now that we’re all on the same page, I want to continue our series on the costs associated with betting online versus placing your sports bets in a live, brick and mortar casino or sportsbook. Part 1 should be enough to convince you that you’re crazy to be placing your bets live, but for the stubborn ones, we’ve got a few more reasons we want to point out that are important.
Specifically today, I want to look at some of the hidden costs of sports betting that a lot of people don’t calculate into their profit line. Let’s use UBER as an analogy here. UBER is a ride-sharing company that allows people to use their own cars to operate as a personal taxi service. Let’s say you are an UBER driver and you get paid $2 a mile to drive someone. You get a customer that wants to go 5 miles. You handle the trip like a boss and drop off your customer. How much did you profit?
If you said $10, you’re incorrect. Did you get paid $10? Yes, but you didn’t profit $10. You have to factor in the costs of your insurance, the costs of wear and tear on your car, the costs of gas, the costs of the time it took to drive to this ride…I will spare you the mathematical breakdown here, but you can probably see that you definitely did not make $10 off that ride.
Sneaky Costs of Betting Live
You may be starting to see already where I am going with this one. Let’s take a look at an example like our UBER one, but this will be for placing a bet at the casino or sportsbook. To be as fair as possible to the brick and mortar locations, I am going to use someone that lives fairly close to a casino for our example. Let’s say our example lives 20 miles from the casino.
This person places a $50 bet on the Cowboys to win at -110. As expected, the Cowboys win (yes I’m a fan if you can’t tell) and they get paid $45.45 in profit. Here’s your chance at redemption from the above example. How much did they profit?
If you still said $45.45, you’re not paying attention and are getting a time out. If you said somewhere less than $45.45, you are correct. Here are the associated costs:
– Gas, oil, car insurance, wear, and tear, etc. The IRS gives a rate of $.53 per mile that is designed to cover all the costs associated with each mile you drive your car. So 20 miles there and 20 miles home is 40 miles.
40 miles @ $0.53 per mile = $21.20
– Parking at the casino is $5
– Babysitter for 2 hours for the kids @$9 an hour
2 hours @ $9 per hour = $18
– Slice of pizza at the casino = $6
Total costs = $50.20
Actual profit on your bet = (-$4.75)
You actually LOST money on your winning bet. If you skipped the pizza, you made $1.25. If you don’t have kids and skipped the pizza, you profited $19.25. That’s literally half of what you got paid out. We also didn’t include the fact that you then have to travel another 40 miles BACK to the casino or sportsbook to cash your ticket in. Add that into the mix, and even without kids or a slice of pizza, you’re losing money.
Here’s a complete list of additional hidden costs you might have to look at when betting in a live location. While this list is what we call complete, there are probably a lot of things we’re even forgetting.
Car Stuff – gas, oil, insurance, wear and tear
Public Transportation (if no car) – bus fare, train fare, subway fare
Parking or Valet fees
Road tolls
Food and drinks
Babysitters
Petsitters
Paying for something to appease your significant other while you’re gone
I could probably keep going on for a while, but I think you’re probably getting the idea here. There is a lot that goes into traveling to the casino or sportsbook, and that, unfortunately, is going to eat into your profits pretty significantly every single time.
Which of these costs do you incur when betting online? Well…you don’t have to drive anywhere, so that takes care of the car, public transit, parking or valet, and road tolls. You don’t have to leave your house so no need for a babysitter, pet sitter, or paying to appease your significant other. You can eat food you already have at home, so there go food and drink.
That really only leaves you paying for the internet and having a computer or smartphone. The thing is, though, most people are going to have these already so it’s almost unfair to count them in as a cost. Basically, placing your bets online from home are free.
Overview
Hopefully, you’re starting to see that unless you live at the sportsbook or casino, it can get fairly expensive to make a trip there to place a sports bet and to return to pick up your winnings. I’m not trying to say that betting live is always a bad thing. Personally, when I’m in Vegas or at a casino for other reasons, I love placing my bets there. That is, of course, if I’m going to be there when the game ends so I can pick up my winnings without having to make a special trip back. As someone who has lived in Vegas, I can’t tell you how many people have had to mail me sports betting slips so I could cash them and mail them their money. Not only is sending cash and betting slips through the mail unsafe, but it costs money for them to mail certified.
Hopefully, Part 1 of our series put you over the top about where to place your bets but if not, hopefully, the information here did. AND if you are extra stubborn, we do have a final Part 3 that will be coming out soon that should be the nail in the coffin. I feel kinda like an online salesman but only want you to realize what is best for you and your wallet.
Please enable JavaScript to view the comments powered by Disqus.Let’s start by calculating the costs of running an Internet casino each month. The biggest expense most online casinos have is software related. Almost all gambling sites lease their softwarefrom one of the big 3 casino software providers:
- Playtech
- Microgaming
- Net Entertainment
I’ve seen estimates that claim these 3 companies power 60% of all online casinos.
All of them have one thing in common:
They’re expensive.
All of these providers charge $11,000 or $12,000 a month to lease their software. They also get a 15% cut of the casinos’ winnings. That’s a pretty big expense right out of the gate.
But that’s not the only expense. Almost all online casinos run an affiliate program in order to drive business to their site.
Here’s how that works:
A webmaster runs a gambling information portal or site. He signs up for a casino affiliate program. He advertises the casino in exchange for a commission on each player.
This commission usually takes 1 of 2 forms:
- A CPA (cost per acquisition)
- Revshare (revenue sharing)
A CPA is a flat amount that the casino pays the affiliate for each player who signs up and makes a deposit at the casino. This amount can range from $25 to $500, depending on how much volume asite is able to send a casino.
With a CPA arrangement, the casino risks paying more for the player than the player loses to the casino. But it’s okay, because over a large number of players, a casino has an idea of what theaverage player is going to lose. That amount is always more than the CPA.
I’ve heard from reliable sources that the average online casino gambler is worth at least $1000. That takes into account the low rollers who only deposit and lose $25, but it also takes intoaccount the high rollers who deposit and lose $10,000 a month for months at a time.
The other arrangement is called revshare, or revenue sharing. In this arrangement, the casino pays the affiliate a percentage of the players’ losses for the lifetime of the player. This amountvaries, but it hovers around 25%. Big affiliates can demand higher revshare percentages.
So if an affiliate refers a player who deposits and loses $10,000 a month, he gets $2500 in commission each month.
But affiliates on revshare also have to take into account the amount of money their referred players win. If that $10,000 a month high roller gets on a hot streak, he can wipe out the earningsfrom the other dozen or 100 players the affiliate has referred.
So far we have a flat fee of $12,000 a month going out the door. We’re also seeing 25% of the casino’s wins being paid out in commissions, and we have 15% royalties going to the softwareprovider.
Casinos also have to pay for customer service and hosting. Let’s assume you can operate a world class customer service department using offshore labor and spending only $5000 a month.
Let’s also assume that a casino is using its own secure server. I don’t have a lot of experience with Web hosting for sites with this kind of traffic or that sites that use so much bandwidth byhosting games, but I’m going to assume it’s expensive, but not too expensive. I’m going to call it $2500 a month. And if I’m way off on that estimate, let me know in the comments section.
So now we have almost $20,000 a month in fixed expenses, and we have 40% of player revenue accounted for on top of that. So just to break even, an online casino needs to earn enough money so that60% of its earnings equate to $20,000 a month.
Player Development Casino
So we’re looking at a minimum casino win of at least $33,000 a month just to break even.