Today we will consider two crucial money-related key performance indicators (KPIs) that speak of the online casino profits: Gross Gaming Revenue (GGR) and Net Gaming Revenue (NGR).
What is the difference between these KPIs and how to calculate them, you can find out in the material prepared by the experts of Slotegrator.
GGR is a financial indicator that shows the amount of money gained by the casino as a result of players' activity, but before deduction of additional casino expenses. It has a simple formula:
GGR = A - B.
NGR is a financial figure that determines the basic profits share collected by the casino at the end of the month. It is defined by the following formula:
NGR = A - B - C - D.
A – total amount of all bets placed by players;
B – the sum of all payments to players;
C – the sum of all bonuses received by players;
D – the total of all taxes.
GGR does not include bonus payments and taxes. Therefore, this indicator is often used in calculation of tax deductions. As a rule, the amount of tax is a given percentage of the GGR.
NGR is a measure of a gambling establishment's net revenue minus all payments to players and tax deductions, but excluding operating expenses. It is usually used to analyse business profitability, dividends payments, etc.
However, there is no generally accepted approach to the definition of NGR. It has to do with the fact that this indicator is used in monitoring business profitability but has no ties to mandatory payments. For example, operating, marketing and other expenses may or may not be deducted from the total amount of bets when calculating NGR. Therefore, throughout the business planning, it is important to decide what formula to use.
For better understanding, let's look at some fictitious online casino, Good Luck, registered in the UK. The given jurisdiction regulates online gambling with a 15% tax on GGR.
In the span of a year, the players of Good Luck made bets on $5 million, and won $2.5 million. At the same time, they received a total of $700,000 as various bonuses.
Thus, the value of A = $5,000,000; B = $2,500,000; C = $700,000.
GGR = $5,000,000 – $2,500,000 = $2, 500,000.
The value of D, according to the specified tax rate, will be equal to the tax base multiplied by 15%.
D = $2,500,000 * 15% = $375,000.
NGR = $5,000,000 – $2,500,000 – $700,000 – $375,000 = $1,425,000.
Net Gaming Revenue of the online casino Good Luck totals $1,425,000 for the year.
Here, NGR does not include operating expenses as royalties to providers, payments to affiliates, commissions of payment systems, staff salaries, etc.
Despite being at its nascent stage, the online gambling industry shows the essential rates of growth. And the market, according to experts, has great potential. The Slotegrator experts admit that there are more and more entrepreneurs willing to start own online casinos today.
By taking a decision to kick off own online gambling projects, many investors focus only on total deposits and winnings of players. However, there are other indicators to analyse the gambling project performance. Therefore, for your project success, it is important to understand the difference between those KPIs, the purpose of each, as well as to conduct an in-depth analysis.