Want to watch the money go round?
In the early 1980’s, Paul Weller broke up the hugely successful new-wave/punk band The Jam to form the sophisti-pop/jazz-influenced The Style Council. One of the band’s most successful tracks was “Money Go Round.”
Weller sings,
“Watch your money-go-round; watch your money-go-round
They got it wrapped up tight; they got it safe and sound
Watch your money-go-round; watch your money-go-round”
It could have been written about the gambling industry as easily as about any other. Online slots and other casino games offer endless fascination for players and the potential for a rich income stream for casino owners. While players are always in with a chance of winning, ultimately, the biggest winners are the casino businesses behind the platform. When businesses get it right, the online casino game can be an incredibly lucrative business, but it might not be as easy a win as the headline numbers suggest.
Online slots are an entertainment favorite.
The US gambling industry has undergone incredible changes in the last decade or so. It is not so long ago that gambling was heavily restricted, but it is now legal in some form or another almost everywhere. While it is highly unlikely that Utah or Hawaii would ever sanction any form of gambling, other states are waking up to the benefits of a regulated market. States are raking in billions from slot machines, and players love them. However, at the moment, only seven states have regulated iGaming markets, but that could be about to change.
Where it is allowed, the online casino model is a winner because, when enjoyed responsibly, iGaming is relaxing and fun. It is literally people paying to play a game with the chance of winning some money. It does not require skill and is all based on luck. Sports betting and prediction markets require background research and applied knowledge. Online casino gaming is often approached much more casually. What matters is that players feel it is fair and entertaining.
Gambling growth
Gambling revenue reached an all-time high of £6.98 billion last year, and the growth is being fueled by the iGaming sector. For the first time, mobile casinos edged out land-based casinos in terms of revenue. Online slots and table games revenue was $2.88 billion. While poker might be popular, in comparison, it only netted $30.3 million. It is the casual games of chance that appeal to players.
Successful online casinos are not the only way for businesses to benefit from the iGaming model either. The industry sector has countless offshoots, including game development, live dealer operation, payment options, and compliance. In addition, there is a dedicated segment for reviewing and rating games and online operations. For example, Casino.org has been comparing online casinos worldwide for decades. To find verified online casinos by Casino.org’s experts, players can just head on over to their site. Getting a good score from their review team is a trust mark for players!
While the online casino is a large market, conversely, it operates in a small world. Word quickly gets out if a site is not up to scratch or is operating unfairly. It is pretty easy for users to find ‘avoid lists’. The best review sites not only conduct thorough independent research but also listen to player feedback. The best online casinos are verified by regulators and experts, have trusted banking options, great bonuses, and extensive game libraries, often featuring offers like free casino money no deposit that allow players to try the platform without financial commitment.
Barriers to entry
While it is an extremely profitable business for some, the online casino business is not plain sailing. When the market first showed signs of realignment, many established international online casino companies offered services to Americans. However, the fragmented market and high cost of user acquisition meant that many of them have now withdrawn. Barriers to entry are high, with state licenses costing between $ 5 million and $ 20 million, and some states require revenue sharing with land-based casinos.
So, while the American opportunity might appear attractive, online casinos for real money can only operate in New Jersey, Pennsylvania, Michigan, Connecticut, Delaware, Rhode Island, and West Virginia. Pro-gambling legislators in Illinois and New York are attempting to pass the necessary laws to allow casino gambling in their states, but it is not an easy battle.
In addition, the US market is dominated by a small number of enormous players. While the market has not consolidated in the same way in many other jurisdictions, the US iGaming market is largely delivered by DraftKings, FanDuel, BetMGM, Caesars, and Flutter Entertainment. Even international giants like 888 Holdings and Kindred Group beat a hasty retreat after finding it impossible to achieve the same returns on investment as they could in markets like Europe, Africa, and Canada. The US giants spend millions on customer acquisition and marketing.
Deep pockets required
Anyone wanting to compete in this market will need to have extremely deep pockets. Companies need to have significant capital and a unique niche. This is not the place for a low-cost start-up or a nationwide operation. Massive marketing budgets are essential. However, there are easier ways to be a successful iGaming company without competing head-to-head with the behemoths. Social casinos are much less restricted and covered by different rules and regulations (they fall outside of gambling legislation).
Watching the virtual money go round for real money rewards
Social casinos look and feel like gambling, but they are classified as purely entertainment because they do not involve wagering for real money. Users make in-app purchases for virtual coins, extra spins, boosters, and cosmetic upgrades. In addition, for a fee, they can enter special events or receive VIP packages. These are games played purely for fun, and there is no cash-out value for anything won. They are legal across all the states, and, with no regulatory payout, the margins can be huge. Compared to real money options, they have low operational costs – for example, there is no need for geolocation or AML processes. If platforms get the mechanics right, it is not unheard of to see profit margins (before interest, taxes, depreciation, and amortization) of upwards of 40%.
Looking at the business models, it seems that anyone wanting to enter iGaming to ‘watch the money go round’ might opt for virtual money rather than real money variants, as that could be where the possibilities lie.
