Gambling is one of the world’s favourite pastimes and its overall popularity continues to rise. In fact, thanks to technological advancements and the rise of the internet, which have created the conditions for online casinos to flourish, the popularity of gambling online is growing at a record rate too. The development of the online casino all but eradicated the need for potential participants to leave their house or go to a land-based casino to gamble. While land-based casinos are still incredibly popular, the availability of online casinos has meant that a new generation of casino goers has come to fruition.
The Topic At Hand
With more and more people looking to recreate the feeling of being on a casino floor in Las Vegas online, the age old question of whether or not casinos ever lose money has once again made its way into popular conversation. This question has both a simple answer and a not so simple answer.
Firstly, the simple answer is yes. There are of course occasions when a casino loses money. This is proven by the fact that people regularly win. So when it comes to a well-functioning gambling establishment or website, it is possible to win. However, this is where the not so simple answer comes into play. Naturally, casinos need to ensure that they make a profit in the long-term in order to keep their doors and/or websites open. In order to facilitate this, casinos need to make a profit as well as give players the opportunity to win.
This is done in a multitude of ways and ultimately, math is at the core of all of them. This article has been constructed in order to further explore its title question and in order to do so, we will take a closer look at how a casino loses money while still being able to stay open…
A Game of Chance
Casino games, including slot machines, blackjack and roulette, can be described as games of chance because their outcome is determined by luck rather than pure strategy. You play these games against the casino itself rather than against other players and while the casino will always have a slight advantage, regardless of your skill level, there is still a chance that you can win.
What is Random Number Generation (RNG)?
The landscape of casinos completely changed in the 1980s and it was triggered by a single event, slot machines moved from being mechanical devices to being electronic devices. In order to make this transition, a new computerised process was introduced in order to ensure randomness, which determined the outcome of each spin.
This new computerised process utilised a Random Number Generator (RNG). An RNG is a programmed algorithm that generates a sequence of random numbers. In a sense, you can think of this program as a virtual dice or flipping a virtual coin and depending on the outcome of this event, you either win or lose. Now, let’s take another look at how casinos approach randomness…
What is Return to Player (RTP)?
The outcome of fair casino games is determined by chance. However, this does not mean that the casino does not have an advantage over the player.
In order to fully understand why some games offer a better chance of winning than others, we need to understand what Return to Player (RTP) is. In essence, it is the long term percentage of wagered money that you can expect receive from the casino in the form of wins.
In order to fully explore this concept, lets return to the idea of randomness in the form of a coin flip. There are two possible outcomes when you flip a coin, heads and tails. Thus, everything time you flip a coin, there is a 50% chance that it will land on heads and a 50% chance that it will land on tails. So if you flip a coin one hundred times, you should more or less expect it to land on heads fifty times and tails fifty times. This is because heads and tails are equally likely every single time you flip a coin.
What is The House Edge?
If we imagine the coin flip as a hypothetical casino game, it is clear that it is a statistically fair game. This is where the house edge comes into play. Let’s say you make a wager of one Canadian dollar and select which side of the coin, heads or tails, it will land on after being flipped in the air. If you are correct, you will win even money and receive one dollar in addition to your wagered dollar. In this scenario, the return (RTP) is 100% and the house edge is 0%. In the long run, you will neither win or lose as each outcome is equally likely to occur.
For a casino, this is clearly not a sustainable business model as they would never make a profit from the outcome of their casino games. So, let’s imagine the casino chooses to only pay you 90 cents for each one dollar you wager. This would result in the RTP being 95%, giving the casino a house edge of 5%. This means that the casino has a built-in advantage over the player and in mathematical terms, the house edge is the casino’s average profit on every wager that an individual makes.
What Does All of This Mean?
Well, if we return to the original question, “Does a casino ever lose money?”, and apply what we now know to it, we can better understand why there is both a simple and a not so simple answer. Yes, casinos do lose money, and there a millions of verified stories to confirm this. But also, casinos have a house edge.
However, the fact that casinos have a house edge should not be the only determiner when it comes to choosing to play casino games or not. If we consider the alternative, the elimination of a house edge, casinos would not exist. The house edge is important to understand and it should form the foundation of your overall decision to play casino games responsibly, but it should not mean that you can’t have fun playing these games. Our advice is to adopt a healthy attitude towards casino games, understand what you are doing and let the fun start from there…