Every trade requires a business model. However, very few business models are as dependent on theoretical mathematics than the casino business. This does not include data analytics, predictive analytics or revenue figures. Stats and percentages are all common to all industries. It is much more than that. Here’s an introduction to the casino business model, keeping in mind three of the most important aspects of the sector.
The House Edge
The house edge is a key factor in casino revenue generation models. A percentage or ratio is used to determine how much advantage the casino has over a player each time they place a wager. The house edge is not an absolute number. It can vary from one game to the next, even within the same land or online casino.
The house edge in blackjack and roulette is different within the same casino. The UKGC now has limits on the house edge or advantage that a casino can offer its patrons. This varies depending on the game. Casinos can still make a profit within the permitted maximum edge, but it is important to balance the following two factors.
It can’t be so low that the casino loses its profit after expenses.
It shouldn’t be too high that players lose enthusiasm for playing at the casino.
THEO
The Theoretical win or THEO, is a number that indicates how much each player should win for the casino. This number can be highly variable as it is dependent on:
The amount of money that a player has staked.
This is the casino game being played.
This is the house edge for that particular casino game.
The business model of a casino that cannot calculate, determine, and keep profitable while still offering fair theoretical wins will fail. They will either lose money or fail to build a solid player base. For maximum success on both these fronts, you can see this post for how theoretical wins (THEO), should be calculated.
Compliance
Gambling is an legal business sector within the UK. Therefore, online and offline gambling houses must have licenses and permits in order to operate in the country. The Gambling Commission’s process for evaluating gambling business applications is . This process can be found in Section 69: Gambling Act 2005. Although there is no guarantee that the UKGC will accept your application for a gambling license, it will be greatly improved if you submit a properly prepared and legal compliant business plan.
The ability of a casino to remain profitable and honest depends on its ability to understand and apply the chance theory. Although mathematics isn’t all there is to it, it is the most crucial part of making gambling work.
