Gambling Industry Profits

The only casino property to show an increase in quarterly profits in the April/May/June 2019 period was the mighty Borgata, up 4.9% to $55.4 mm — nearly one-third of the profits for the entire Atlantic City casino industry. The outbreak of coronavirus (2019-nCoV) in Wuhan, China, is having a massive impact on the gambling industry. If you didn’t already know, Macau has closed its casinos in an attempt to prevent.

You need a strategy, risk management and discipline to make money in gambling. It sounds easy yet 90% of gamblers fail in poker, sports betting and casinos. Gambling is a 400 billion dollar industry. This means there are 400 billion dollars on the table to grab, placed by punters and bettors worldwide. That is the gambling pie. The $120 billion gaming industry is going through more change than it ever has before, and everyone is trying to cash in. 2019-10-01T13:56:17Z The letter F.

Gambling is good business, or at least a profitable one. According to the American Gaming Association, in 2012 the 464 commercial casinos in the U.S. served 76.1 million patrons and grossed $37.34 billion.

Each year gaming revenues in the U.S. yield more profits than the theatrical movie industry ($10.9 billion) and the recorded music industry ($7 billion) combined. Even the $22.5 billion combined revenue of the four major U.S. sports leagues is dwarfed by earnings from the commercial casinos industry.

Gambling is such good business that despite reported negative impacts — such as increased poverty and unemployment, higher crime rates, and decreased property value in nearby neighborhoods — the state of Illinois early this year passed a law to allow slot machines in all establishments that sell alcohol.

Gambling is not just common, it's also accepted. Despite the fact that for an estimated 4 percent of the population gambling represents a problematic and even pathological addiction, 85 percent of Americans feel that gambling is either perfectly acceptable for themselves or if not themselves for others in a country where more than 20 states now allow some form of commercial casino.

It's not too hard to see why casino lobbyists believe casinos make a positive contribution to the communities in which they operate.

It's far less easy to understand why so many Americans enjoy gambling even though it tends to result in the loss of money.

You lose, the casino wins

Gaming Industry Profits

As a general rule, we tend to repeat behavior that produces desirable results and avoid behaviors that result in loss. We repeat jokes that people laughed at, choose jobs that we enjoy and that pay the most money, and avoid behaviors that produce fines. Following this logic, one would expect a gambler to only play as long as they are winning and then cut their losses when they begin to lose.

Yet gambling appears to operate differently; players play faster after losses and bet persistently regardless of the percentage of payback, magnitude of return, or the lack of winning entirely. So what encourages gambling behavior if losing occurs more frequently, and payouts do not exceed buy-ins?

One explanation is that gamblers poorly judge the actual probability of winning, even as their pile of tokens and coins dwindles before them.

Some examples of this phenomenon can easily be seen in the language of gamblers. 'My luck is going to turn,' 'A win is coming,' or 'I am on a hot streak,' are all statements that speak to an over-confidence in one's ability to predict functionally random events.

Gamblers will often say these things after an unusual series of outcomes, for example, ten straight losses on red at roulette. The gambler may then proceed to bet more on red, in the false hope that the next spin is more likely to come up red due to the overall probability of the game (50 percent chance of red).

This flawed logic is called 'The Gambler's Fallacy.' It stems from a misunderstanding of how probabilities are assessed; in fact the outcome of the previous spin of the roulette wheel has no influence on the outcome of the next spin. The probability of red remains stubbornly fixed at 50 percent.

Missed it by that much

Another example of how gamblers misjudge losing outcomes can be seen when individuals respond to losses that are similar in appearance to a win. Receiving two out of three symbols necessary to win on a slot machine is a loss but players often respond to this 'near miss' with excitement, increased betting and more persistent play.

Winning and almost winning are such similar events to many people that they respond in the same way to both. People pause, for example, for longer after a win than a loss. This is known as a 'post-reinforcement pause.' People often pause for longer after a near-miss.

It's no accident near misses are pretty common on slot machines.Mark/Flickr, CC BY-SA

Winning and almost winning are so alike in gamblers' brains that research on the dopamine-transmitting pathways of anticipation and reward show remarkably similar activation patterns for a near-miss and a win.

Near-miss effects are not limited to outcomes that look similar to win. Outcomes that are closer to a win in a more abstract sense also cause a similar response.

For instance, the near-miss effect has been demonstrated in games where 'nearly winning' might relate to scoring a number that is close to a winning number, such as in blackjack.

Near-miss outcomes are not the only form of almost winning that contributes to the behavioral confusion faced by gamblers. Modern slot machines also present a myriad of features that are designed to confuse outcomes.

Slot confusion

One feature present in almost every modern slot machine is the partial win or 'loss disguised as a win.'

Since slot machines have gone from the traditional 3-reel 1-line slot machine to the modern 5-reel video slot, often with 25 or more winning lines, near-miss outcomes have become almost unidentifiable from other losing outcomes.

By encouraging individuals to play on more than one line, casinos have created a scenario where players are awarded a win on almost every spin.

Despite the increased frequency of winning, the proportion of money returned is often far less than the entire bet, such as winning 10 cents on a 50 cent bet. This 80 percent loss is accompanied by the same sounds on the machine as a real win and occupies the same area of the screen that wins are reported in.

Since noticing near-misses on modern slot machines is difficult, game makers have incorporated other game features such as free-spin symbols, mini-games, and progressive awards, which create new near miss situations while often not guaranteeing any increased value of a win themselves.

For example, special symbols might be placed on the reels that provide 10 free spins whenever three appear anywhere within the game screen. These symbols will often make a special sound, such as a loud thud when they land; and if two symbols land, many games will begin to play fast tempo music, display flashing lights around the remaining reels, and accelerate the rate of spin to enhance the saliency of the event.

When you win these sorts of outcomes you feel as though you have won a jackpot; after all, 10 free spins is 10 times the chances to win big money right? The reality is that those 10 free spins do not change the already small probability of winning on any given spin and are still likely to result in a loss of money. For many games, features such as this have entirely replaced standard jackpots.

These features share one important characteristic: they allow the casinos the ability to provide more outcomes that feel like a win while not increasing the actual payout. The effect of these features is so significant that in 1989 the Nevada Gaming Commission banned algorithms that purposefully increased the prevalence of near-miss outcomes. Of course, this only applied to the intentional increasing of near misses when a loss is already determined, i.e. artificially producing a near miss instead of what the reels would have normally landed on.

Unfortunately, these laws do not preclude the intentional design of reel layouts that, without additional manipulation, produce frequent near misses and losses disguised as wins. These laws also do not apply to the newer game features which either highlight the near miss, such as accelerating reels, or create entirely new topographies of outcomes, as is the case with free-spins or mini-games.

While the question of how to best manage artificial manipulations of near misses may be a topic of future regulatory discussion, the decision to play games with these illusions will ultimately fall upon the end user.

As long as you are willing to expose yourself to the game in the first place, the casino need only sit back and wait. And with increasing availability of casinos across the U.S., they won't need to wait long.

The authors do not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article. They also have no relevant affiliations.

More from The Conversation US...

Gambling is a 400 billion dollar industry. This means there are 400 billion dollars on the table to grab, placed by punters and bettors worldwide. That is the gambling pie. Now, grab a spoon and read how you can take a bite.

First, let’s say a few words about how the big guys work in this business.

The gambling industry is mostly made up of sports betting operators, casinos and poker rooms. These are the industry’s big winners, due to how games are stacked against players. Bookmakers make money due to vig, casinos are guaranteed to profit due to the house edge and poker rooms receive rake from every pot.

If you want to win big and constantly, you need to start a gambling business. No other way around. You cannot take a bigger cut of the gambling pie unless you are one of these companies. Even the most successful poker players and sports bettors cannot compete them in profitability.

Yet, these businesses are not one-man shows. Plenty of people work in the gambling venues, from dealers and odds compilers to marketers and public relations staff. They are real businesses with business plans that guarantee them a profit for offering a service to the public. That service is entertainment. Because that is what gambling is.

Entertainment.

For all that people to work and get paid their salaries, gambling companies need big cheques and margins. Otherwise, their business isn’t sustainable.

There are two ways to accomplish that: by either having bigger-than-average profit margins or increasing their turnover. Usually, brand new gambling companies go for the former. As they build up their customer base, they reduce their margins to attract more turnover and compete with the big guys. By the time a gambling operator generates sufficient revenue and net profit every year, their business is safe, as long as they don’t fall behind to competition.

Then, it’s a matter of how many more gamblers find their service attractive. The more they do, the bigger the cut for the company.

Either way, gambling companies are after punters’ money. Those 300 billion dollars. Gamblers are feeding the whole gambling industry. Even in poker where at first glance whales (wealthy bad players) lose to better, regular players. Note “regulars”. Eventually, those regulars will keep playing, paying rake on a daily basis, giving a portion of their winnings back to the poker room.

So, here’s how to stop feeding the gambling industry.

Stop gambling!

If you have been gambling, stop. Unless you are a winner, you need to stop. And since you are reading these lines, you have been losing money. So, stop losing money!

So simple.

Now that your bankroll stopped depleting, it’s time to understand the ins and outs of the gambling industry. That is known as the iGaming industry if you are gambling online.

In gambling, someone has an edge. It’s either you or the man on the other side of the betting line. That usually is the house, standing for bookmakers and casinos. That edge is either predetermined (think of roulette, where you are paid 35-to-1 on a 37-number wheel) or fluctuating (think of betting odds that move up or down).

The best way to comprehend the edge is a coin toss.

Imagine you bet on a coin flip, at less than even odds. No matter your choice of heads or tails, you are going to lose money, in the long run. You are betting on a 50-50 chance but only get paid less than double your money on each coin flip! Depending on how much less you are getting paid, your bankroll will withstand a certain amount of bets.

So, if I’m offering you 1.90 (decimal odds) for each coin flip, your money will end up in my pockets after 200-300 coin flips. That’s how you have been feeding the gambling industry. And that’s what the house edge is all about.

But how do I know how big is your bankroll?

Risk management in gambling

Before you even think of beating the casinos or the bookies, you must understand risk management. Also known as bankroll or capital management, risk management will be the decisive factor in your success. No matter how much edge you gain over the gambling companies, bad risk management will make your betting bankroll evaporate.

Gambling Industry Billion

If you are going to remember one thing from this article, note this:

Always risk maximum 1% of your gambling capital.

That’s easy to remember, right? Set aside a specific amount of money for your gambling habit and split it into 100 parts. No matter your gambling medium, you should risk no more than one part on each bet you are placing.

That’s pretty much it!

That would also get you in a safe distance from disastrous staking plans, like martingale systems. When the time comes, you’ll move up to more advanced staking strategies than flat betting, such as the Kelly staking plan. Until then though, stick to risking 1 per cent of your bankroll and you’ll be fine.

Remember that this rule applies to small and big bankrolls alike! So, your bankroll’s size doesn’t matter when it comes to risk. Size only determines how much money you will make or lose in currency terms.

Find a gambling system

Now comes the really tedious task of creating a profitable gambling strategy. Finding an edge in the market isn’t easy, I’ll tell you that. If it were that easy, and given the simple risk management rule I explained, everyone would be a winner. But you already know that only 5% or so of gamblers can make it pay.

In order for you to make money, someone has to lose. It’s a zero-sum game, where gambling operators also get their cut. Thus, we need to exploit the market, looking for leaks and biases, like the favorite-longshot bias . The average gambler follows specific betting patterns. You mustn’t do the same. Always do something different, always think different.

Be the first to … or be the best in exploiting a known fallacy.

Oh, and if you do, don’t let the world know unless you are after fame and reputation. Otherwise, your edge will diminish as more people will imitate you, and market finds its new balance.

Finally, don’t worry if your first betting system fails!

Be disciplined, stay on your toes and avoid burnout

So, by now you should have a viable system and know how much to bet on the next game. You are on your way to becoming one of the elite professional gamblers. What can go wrong?

First, you may not be disciplined enough to follow your own rules! Wouldn’t it be pity to lose money, after all that research and study? Yet, even reputable and notable sharp bettors may lose their discipline after a long losing streak.

Sports Betting Industry Profits

Don’t be that guy.

Trust your proven strategy, stick to your risk management plan and always be prepared for variance. Embrace the drawdown and never question yourself at tough times, as long as you are doing everything by the book.

By the time you experience several months or years of successful gambling, there’s a big chance you feel… bored! Yes, believe it or not, no matter how much money you are making, doing the same, dull thing every single day, will get you bored. At first, making money from gambling seems like a dream. But like in every other business, routine will take the pleasure away.

Uk Gambling Industry Profits

Find the missed fun, by exploiting new markets, trying something new or improve your methods.

Finally, burnout is a serious hazard in all kinds of successful gambling. Take breaks, go on holidays, and enjoy your profits and hard work. Don’t let gambling consume you, no matter how big you are winning.

Enjoy life, because in the end, isn’t that the meaning of living?

Let’s not hurry things up though. Most probably, you’re having a difficult time to break even to say the least. Winning in the long run seems too far away at the moment. Don’t despair. Stop gambling your money away, find an edge, forward test your system in paper and when you feel ready, do not risk more than 1% of your bankroll. I am sure, we’ll be hearing from you soon!

Below, you can find the five most recent articles I wrote about gambling.