New Online Gambling Bills Not as Good as They Appear?

[AndreS]

While much of the online casino industry considered this week a huge step forward, with the release of US legislation to license and regulate Internet gambling, there are some rumblings about the potential tax structure. The bills by Barney Frank and Jim McDermott include measures to tax online gambling sites two percent of gross revenue and to assure all winnings are taxed as income.

Online Casino Advisory reports...

"A major reason people play online slots is because the payout is so advantageous to land casinos," says a long-time online gambling insider who insisted on anonymity. "Now, government gets involved, and jacks the cost of running Internet casinos up, to where the return on machines has to be lowered."

What's going to end happening is the taxes are going to be so high that is going to ruin the industry. This is because the advantage right now is that online casinos can set their payout percentages higher, which people win more at online casinos than ones in Vegas or Indian casinos. But with the heavy tax burden, those payout rates will decrease to similar 83% rates as in Vegas. This could ruin the fervor of online casino gambling and actually cause a decrease in overall profits. I mean, perhaps, I thought this would be good issue to discuss anyway.

[LiveCasinoPartners]

With proper regulation you will see multiples of current revenue streams. A meager 2 percent is extremely low to the benefits of the increase in market share.

Regulation is going to have an associated cost. I'm surprised it's going to be as low as it's proposed. You'll more than likely see a much higher administrative costs in meeting the regulations than the tax itself.

[slotplayer]

yes, I posted some excerpts back in april - post #6

https://www.gpwa.org/forum/frank-int...ll-180334.html

[Puma]

What's going to end happening is the taxes are going to be so high that is going to ruin the industry. This is because the advantage right now is that online casinos can set their payout percentages higher, which people win more at online casinos than ones in Vegas or Indian casinos. But with the heavy tax burden, those payout rates will decrease to similar 83% rates as in Vegas. This could ruin the fervor of online casino gambling and actually cause a decrease in overall profits. I mean, perhaps, I thought this would be good issue to discuss anyway.

Do you really honestly believe that a casino has as high of a payout % as they say they do? How can a casino advertise a 97% pay out of all money that comes into a casino and yet pay all the bills and pay affiliates as well as create a profit?

$1000 comes into the casino
$970 goes back to players as winnings
So the casino has $30 to pay what I stated above? I think not.
Regulating online gambling and taxing it will be just fine in my books.
As affiliates do we really wants payouts to be high anyway?

[slotplayer]

Do you really honestly believe that a casino has as high of a payout % as they say they do? How can a casino advertise a 97% pay out of all money that comes into a casino and yet pay all the bills and pay affiliates as well as create a profit?

$1000 comes into the casino
$970 goes back to players as winnings
So the casino has $30 to pay what I stated above? I think not.
Regulating online gambling and taxing it will be just fine in my books.
As affiliates do we really wants payouts to be high anyway?

Dont' supermarkets operate off a 3% margin?
Perhaps much of that $970 is won but not necessarily kept by players.

I remember on some of land casino slots if you accidently kicked the door it would print out an audit report.

[AndreS]

Online casinos have ridiculously lower overhead compared to a land based casino, that is why they are able to set their payout percentages higher. So that 3% margin seems small, but there is greater profit in it than you think. Also, online sites don't have other entertainment options to offer patrons, like free drinks, live shows, restaurants, etc., that is why they set their payouts higher. In order to keep players coming back they have to win. That being said, I don't think any are still at 97%, I think once the UIGEA passed the online industry lowered their rates to like 90%. And I believe that once this 2% revenue hits they will lower them even more. Also realize, that is 2% off total revenue, not total profit.

Why this is bad for affiliates is because if a casino has low payout rates, than they will do more shopping around for better software. This means if you get a player at casino x, he won't last long there, will search for a new place to play and you won't see revenue from him anymore. Also, he may get fed up quicker and quit playing online casino games all together.

Of course the counter discussion could be that there will be such a greater amount of players in the market that revenue will still increase dramatically for operators and affiliates.

[LiveCasinoPartners]

Do you really honestly believe that a casino has as high of a payout % as they say they do? How can a casino advertise a 97% pay out of all money that comes into a casino and yet pay all the bills and pay affiliates as well as create a profit?

$1000 comes into the casino
$970 goes back to players as winnings
So the casino has $30 to pay what I stated above? I think not.
Regulating online gambling and taxing it will be just fine in my books.
As affiliates do we really wants payouts to be high anyway?

Pumacat, I feel I should jump in and help you on this one. 97% payout does not mean 3% revenue. The 97% payout is based on a global per bet payout percentage. Commissions on credit card transactions are far more than this alone.
in this scenario of 97% payout is that 97% of every bet is redistributed. In theory the deposit would be lost in about 33 bets. Given variance, you will have winners and others will lose quicker, but that's the overall theory.

At LuckyLiveCasino, they offer blackjack with early Payout, which yields a whopping 99.4% payout. This means that the players win more, and are engaged more, while maintaining revenue for both the casino and the affiliate.

[wagerprofits]

And the throw in 15 -18% network fee and the 3% does not loo very real......

Shaun

[raphnix]

The lawmakers sure does have the advantage over the online gambling legalization. That's why I feared that they will get back through high taxes. Should the dealing with huge online casino companies be that tight?

[TheCPA]

How can a casino advertise a 97% pay out of all money that comes into a casino and yet pay all the bills and pay affiliates as well as create a profit?

Pumacat, I feel I should jump in and help you on this one. 97% payout does not mean 3% revenue. The 97% payout is based on a global per bet payout percentage.

That's correct. Also known as the "Churn".

Last I knew, I think the Casinos generally manage to retain around 75% of all deposits. That could be a little off, so someone in the know from the casino side can correct me on that if it is.