‘The casinos always wins’ is a general concept that blankets an entire casino and encompasses all the games and players that ever played there. Somewhere in this world is a person who unwittingly ended up at a casino, or played at a casino online real money, hit a jackpot and never returned. This player definitely beat the house, which means that the casino did not win in terms of this player.
When we say that ‘the casino always wins’ we mean that it makes a profit over a period of time. As with most businesses, the profits are used to continue operating and pay investors. The costs of operation for online casinos include paying staff, gaming providers, internet providers, web developers, casino regulators, and more. The casino business does not sell products. It makes a profit by supplying entertainment while making use of the house advantage.
What is the house advantage?
We are accustomed to seeing online casino websites proudly displaying their payout rates. The payout rates of trusted online casinos are usually well over 90%. On the other side of the payout rate is what is called the ‘house advantage.’ A casino that has a payout rate of 95% has a house advantage of 5%. On slot machines, the house advantage is set by the gaming provider.
This is done without compromising the randomness of the outcomes. The games are random but over time the casino will make a profit on the machine that is roughly equal to the house advantage percentage. This brings up a question. How do casinos guarantee a house advantage on table games without rigging the outcome? We can look at a roulette example to gain insight into how the house advantage works on table games.
Roulette house advantage
Real money online casinos gain a house advantage on table games by paying out less than the true odds. It’s no secret, and players intuitively know this. We write it off as entertainment costs paid to the casino for hosting the games. After all, it’s a business and needs to make a profit. Consider the following:
- There are 37 pockets on a European roulette wheel
- Each pocket represents one of 37 outcomes
- You place one chip on a number, which means the odds of winning are 37 to 1
- The ball lands on your chosen number – you win!
- You receive 36 chips, including your original chip
- The casino has given you 35 chips for your win
- You beat the odds of 37 to 1 and you were paid 35 to 1
The difference of 2 chips went to the casino. That’s the house advantage on roulette. It can be calculated as:
Basic roulette house advantage = 2 ÷ 37 = 5.4%
Of course, there are more outcomes to be considered such as red, black, and so on, but you get the idea. The actual house advantage at most trusted online casinos is less than the 5.4% calculated in the simple model above, but there will always be a house advantage.
Slots and progressive jackpots
Slot machines at trusted casinos usually have a payout percentage of around 95%, which means they have a house advantage of around 5%. You can find the payout rates of the slots by looking at the casino’s certificates. Companies like eCOGRA test and audit casinos and display their certifications on their website.
An eCOGRA certificate displays the casino’s payout rate and gives a breakdown of the payout rates for the different games. If you look at a certificate, you will see that the house advantage varies considerably among the different types of games.
Casino games that offer the highest payouts, such as slots, also give the casino a bigger house advantage. This is what is referred to as the volatility of the game. A game with high volatility usually has a higher jackpot, but the high jackpot will pay out less frequently. People do win jackpots all the time, so many players prefer playing progressive slots because it’s more exciting and more rewarding if they win.
On progressive slot machines, if a player wins a jackpot that is very high, the payout rate will increase to over 100%. In this instance, the house advantage is negative. Over time it will even out again, as the slot machine veers back towards its programmed payout rate.
Statistical Probabilities and Time
Realistically, a casino will always take in more money than it pays out because mathematical laws of probabilities play out over time. To understand how the probabilities work in the casino’s favor, the law of large numbers and the law of averages needs to be understood. A detailed explanation of these laws can be found in Britannica.
Basically, the more you do something, the more chance there is that the average of the outcomes will be certain. An example of coin tossing is often used. Even though each coin toss is random, if you toss a coin 10,000 times, it becomes likely that your average will lean towards 50% heads and 50% tails.
Payout Rates and the Return to Player
The payout rate is also known as the return to player percentage, or RTP. If a player has $100 and plays a casino game with a payout rate of 95%, why does the player not end the game with $95? The RTP is calculated on the total amount wagered, not the initial size of the bankroll. For instance, a player with $100 is unlikely to place 5 bets of $20 and then leave with whatever winnings those 5 bets accumulated. In most cases when players win they will continue playing, so the initial deposit of $100 creates a much higher wager value.
Assuming that the player plays out the entire $100, the luckier the player is, the higher the wagering value of the $100 is. The player might turn the $100 over 30 times, which is equal to $3,000 wagered. This goes to show that if you play the right machine at the right time, the value of your money can actually deliver hours of entertainment.
The flip side is that you could play at a machine that literally pays out nothing for those five $20 spins. The fact that the house advantage varies from game to game means that there are ways to minimize the effect of the house advantage on your bankroll. Sticking to games like blackjack and baccarat will help if you know the rules and play strategically.
Choose Not to Lose
Gambling is a double-edged sword. Players can attempt to slowly build up their bankroll, or try their luck at winning a coveted jackpot on a volatile slot machine. It all boils down to player preference. A casino profit of around 5% is not an absurd amount if you compare it to certain products and services on the market, and the profit margins that those companies are making.
When you view it in that respect, playing at a casino, or an online real money casino, is a very affordable form of entertainment, as long as players have realistic expectations and are able to set an amount of spend that they are willing to write off as the cost of entertainment.