Online casinos were some of the first online gaming sites to emerge in the mid-1990s and have grown strongly since then.
The online casino market in the EU 28 countries was estimated to be worth approximately €2.5bn of GGR in 2013, up 6.0% versus 2012 and it is forecast to reach €3.3bn by 2018, implying a compound annual growth rate of 5.4%. In the US, regulation of online casino games has been adopted in New Jersey while other states are considering a similar move. Despite an absence of widespread regulation, the US online casino market is predicted to reach €2.2bn by 2018 as more states are expected to regulate, implying a CAGR of 32.2%.
Source: H2 Gambling Capital, March 2014
How online casino works
Casino players play against the house and so player liquidity is not as important for delivering an enjoyable player experience as it is in peer-to-peer games such as poker. The house has a statistical advantage over the player (the ‘house edge’) which varies with different types of casino games. Typical games offered by online casino operators include blackjack, roulette, craps, baccarat, video poker and slot machines.
While player liquidity is less of an issue in casino, scale is important as it means that operators can offer larger jackpot prizes that are a major attraction for casino customers – offering the opportunity to win large amounts with a relatively small bet. At bwin.party we offer some of the largest jackpots on the internet: our Melon Madness slot, which was developed by our in-house team, re-seeds at $1.5 million after the jackpot has been hit. In 2013 our biggest ever jackpot was hit on Melon Madness, resulting in a win of $7.5 million.
Despite playing against the house, casino games can also be multi player. Multi player casino games make it possible for several players to sit around the same virtual table to play and socialise (through online chat features) replicating the experience of a land based casino.
Even though casino games tend to command a greater proportion of ‘high rollers’ than other games, average gross win margins from casino games are relatively stable when compared with other games such as sports betting. This is due to the fact that online casinos tend to operate with appropriate risk management systems in place, avoiding large exposures through hedging or player limits and because they tend to offer a broad variety of different games that are played by a large and diverse player base, thereby spreading any associated risks. The long term profitability of an online casino operator depends on maintaining a large betting volume across its product base whilst managing its risks and controlling marginal costs.
All market data supplied by H2 Gambling Capital, March 2014