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Class aptent sociosqu ad litora torquent per conubia nostra, per inceptos himenaeos. In tempus, erat eget tincidunt elementum mauris quam laoreet erat.
A word generally used to refer to online gambling revenues and profits is gross gaming revenue (GGR). Another term widely used to refer to online gambling revenues and profits is net gaming revenue (NGR). What is the money generated by online gaming? The quantity of money created by company activities is, in essence, the amount of money earned. It refers to how much money a casino and/or sportsbook has made as a consequence of player engagement at their respective online sites. In this section, we’ll go over the meanings of both gross gaming revenue (GGR) and net gaming revenue (NRG) in more depth to provide you a better knowledge of how these online casino key performance indicators (KPIs) vary and how they may be used to measure your company’s income and profitability.
Gross gaming income, also known as “game yield” or “gross game win,” is the sum of all money gambled by players over a given period of time, and it is calculated as the sum of all money bet by players over that period of time. It is a critical measure for gaming businesses to consider. A net profit is defined as the difference between the amount of money that players gamble and the amount of money that they win (net profit), less the amount of tax that the firm must pay in connection with gaming supply. The gross gaming revenue (GGR) of an economy is a measure of income generated by the gambling industry (including online and land-based gambling). When seen from a strictly economic perspective, and when compared to the rest of a region’s economy, gross gaming revenue (GGR) serves as a measure of the genuine economic value that the gambling industry contributes. The gambling sector, like other industries, contributes to the overall functioning of a region’s economy by bringing in new customers. These advantages might include the following:
In the UK, for example, an estimated 46,000 people are engaged in the betting business as of 2019, with another 10,000 employed in the casino, bingo, arcade or internet gambling industries and a further 1,000 employed in lotteries, according to the latest figures.
Tourism is brought in – For example, Las Vegas had more than 42 million tourists in the year 2019.
In many jurisdictions, gambling activities are significant contributors to total government tax income. For example, in Macau, gaming taxes were 86 percent of all tax revenue received in 2019. Taxes levied by the government go toward upgrading cities, such as the construction of better schools and amenities.
There are, of course, two sides to every coin to consider. There are many supporters of the sector from an economic standpoint, but from a moral one, many argue that the cash generated by iGaming operators is immoral and does more damage than good by adding to people’s financial losses and worsening the issue of problem gambling.
To summarize, whether considered from an economic or moral perspective, it is critical to recognize that GGR does not equate “profit” or “profitability.” The phrase “revenue” or “sales” is used to refer to particular amounts of money.
Despite the fact that revenue and profit are both terms that relate to the money that a business generates, it is feasible for a corporation to produce revenue while still incurring a net loss.
The entire amount of income earned by the amount of money that players bet is referred to as revenue, which is also referred to as “sales.” No charges or expenses linked with the operation of the company are deducted from the taxable income.
Profits from gambling or casinos, often known as “earnings,” are the amounts of money left over after all expenditures, obligations, taxes, new revenue streams, and running costs have been deducted from the total amount of income.
The technique for calculating gross gaming income is pretty straightforward and does not need the use of mathematical wizardry. It is just the subtraction of player bets from player winnings in a single step (including the deduction of player bonuses and compensations when applicable).
The following is a straightforward method for calculating GGR:
GGR is calculated as follows: Amount wagered – Winning Payouts
Or, to put it another way,
Gross gaming revenue margin (GGR) is determined as a proportion of the total amount wagered and is expressed as a percentage of GGR. Generally speaking, the GGR margin is constant, with only tiny fluctuations caused by a player’s skill or luck. The GGR margin may be computed in the following ways:
Total Gross Gaming Revenues / Total Amount Waged = Gross Gaming Revenue Margin
The aim is to maintain a greater gross gaming revenue margin at all times since this indicates that your firm is keeping more money in proportion to the quantity of bets placed. In the end, the bigger the revenue, the better, since it will result in a more comfortable margin within which to operate.
As a result of the nature of gambling operations in general, it is normal for the industry’s gross gaming revenue margin to be in the low-to-mid teens on a percentage basis. Customers must be enticed to place bets, and one of the most effective ways to do so is for operators to give larger payout percentages than they otherwise would.
Example of Gross Margin (GGR)
Mary is considering launching an online casino and betting website aimed at the United Kingdom market. However, due to the fact that she only has a limited amount of funds, she will initially be able to provide just one sort of gambling product on her website. Mary gathered the following information after researching her competitors and assuming that the popularity of each product type (casino games or sports betting) would be identical on her site (i.e., the total amount wagered would be the same), in order to determine which product would generate the most revenue for her online operation.
In this instance, sports betting has a larger gross gaming revenue margin. Consequently, it would generate a bigger amount of cash for Mary and would be the more sensible product selection for her first website launch.
Net gaming revenue is the amount of money that an online gambling site really earns after all of its expenditures have been deducted from the total income. It is often used in the analysis of firm performance, dividend payments, and other financial transactions. In essence, net gaming revenue (NGR) is a measure of a gambling establishment’s net income after deducting operational expenditures such as:
In most cases, net gaming revenue (NGR) is computed at the end of a financial month and enables iGaming operators to measure their profit and loss, as well as other important data such as total payments, which includes wins, and total spending from providing new customers welcoming incentives. Essentially, it is the most important indicator of how well a gaming enterprise is doing.
The formula for calculating NGR is similar to the one used to calculate GGR. It is used to calculate the basic earnings share earned by a gambling business at the conclusion of each calendar month.
Example of a basic NGR calculation formula: The following is an example of a basic NGR calculation formula:
Amount wagered minus winning payouts minus all bonuses minus all taxes equals Net Gaming Revenue (NGR).
Or, to put it another way,
NGR is equal to A – B – C – D.
For the sake of illustration, we’ll utilize the hypothetical United Kingdom online casino “Big Chance Casino” once again.
Big Chance Casino is based in the United Kingdom, where the government regulates online gambling and levies a 15 percent tax on gross gaming revenue.
It was estimated that gamers at Big Chance Casino placed a total of £6,000,000 in bets throughout the course of a single year, and that they received a total of £3,000,000 in wins. During the same year, the casino received a total of £800,000 in incentives in different forms.
The values of A and B are £6,000,000, £3,000,000, £800,000, and £450,000, respectively (£3,000,000 multiplied by 15%).
During the year, the Net Gaming Revenue (NGR) of Big Chance Casino was £1,750,000 (A:£6,000,000 – B:£3,000,000 – C: £800,000 – D:£450,000).
It is critical to remember that, while net gaming revenue (NGR) is an excellent metric for expressing an analysis of a casino’s or sportsbook’s success rate, it is not as straightforward as gross gaming revenue (GGR) because there is no standardized method for measuring the net gaming revenue metric. For example, while calculating NGR, expenditures like as operational, marketing, and other related costs may or may not be deducted from the total amount of bets placed. Because of this, it is critical that you and your team agree on the specific NGR formula that you will use throughout your business planning process.
Please keep in mind that the numerical examples presented in this article are just intended to demonstrate how to calculate GGR and NGR calculations. This information is not intended to be a representation of real online sports betting or online casino revenues or profits.
Improve the consumer experience by making it more interesting – Keep players engaged with welcome offers, ongoing promotions, loyalty/VIP programs, and other incentivizing gamification features such as encouraging players to complete missions and other challenges in order to climb leaderboards or reach new levels in order to earn virtual currency and/or other special perks.
Following the current trends and technological developments — If you want to be successful, you must update your brand and guarantee that you are giving the most cutting-edge games on both desktop and mobile platforms.
What Is the Difference Between GGR and NGR?
Although gross gaming revenue and net gaming revenue have some similarities, they are ultimately two quite distinct key performance indicators, as you can see in the chart below (KPIs).
Generally speaking, gross gaming revenue (GGR) is a financial statistic that refers to the amount of money a gambling facility has earned from players’ activity, less any payments made to players, but excluding bonus and tax payments.
The net gaming revenue (NGR) of a gambling institution is calculated by subtracting all payments to players, bonuses, and tax deductions, and then subtracting operational expenditures.
In contrast to GGR, there is no widely acknowledged method for determining a company’s net income margin (NGR). The primary aim of this indicator is to assess corporate profitability; however, it is not related to any mandated payments. Therefore, it is critical to develop an NGR formula for your firm and adhere to it during the course of your business planning, as previously indicated.
Conclusion
If you want to run a successful long-term online gambling operation, it is critical that you understand the meaning of gross gaming revenue (GGR) and net gaming revenue (NRG), as well as how these two key performance indicators (KPIs) differ in relation to online gambling businesses. Additionally, determining which casino software provider to engage with in order to assist you achieve your business objectives is necessary to ensure success. TCS offers you with a wealth of information on the top software suppliers and solutions in our in-depth reviews and articles to assist you in your decision-making process and beyond. Get started with your search with us, or reach out to us for support at any point!