Gross Gaming Revenue (GGR) and Net Gaming Revenue (NGR) are terms commonly used when referring to online gambling revenue and profits. What is iGaming revenue? In essence, it is the amount of money that is generated from business operations. In other words, the amount of money an online casino and/or online sportsbook has gained as a result of player activity. Here, we’ll explore both the GGR meaning and NRG meaning in detail to provide you with a greater understanding of how these online casino KPIs differ and how they can help you track your business revenue and profits.
What is Gross Gaming Revenue (GGR)?
Gross gaming revenue, also known as “game yield” or “gross game win”, is the gaming sales that encompasses all money wagered by players over a specific period of time. It is a key metric used by gambling operators. It represents the difference between the amount of money players wager minus the amount that they win (net profit) and the tax the company pays in relation to gaming supplies.GGR is a measure of revenue in the gambling sector (online and land-based gambling) of an economy. When analyzing it from a purely economic viewpoint, compared to the rest of a region’s economy, GGR provides a reflection of the true economic value that is added by the gambling sector. Like other industries, the gambling industry contributes to the overall performance of a region’s economy. These benefits can include:
- Improved employment rates – For instance, as of 2019, an estimated 46,000 people are employed in the UK betting industry, with another 10,000 working in casino, bingo, arcade or online gambling sectors, and another 1,000 employed in lotteries.
- Brings in tourism – For instance, Las Vegas attracted over 42 million visitors in 2019.
- Gambling operations are big contributors to overall government tax revenue – For instance, in 2019, gaming taxes accounted for 86% of all tax revenue collected in Macau. Government taxes contribute toward improving cities, such as building better schools and facilities.
Of course, there are two sides to every coin. The industry has many proponents economically speaking, but morally speaking many believe the revenue that iGaming operators bring in is unethical and causes more harm than good by contributing to people’s financial losses and exacerbating problem gambling.
With all that said, whether viewed from an economic or moral standpoint, it is imperative to note that GGR does not equal “profit” or “earnings”. The term refers specifically to “revenue” or “sales”.
What’s the difference between iGaming revenue and profit?
Although revenue and profit both refer to the money a business earns, it is possible for a company to generate revenue but have a net loss.
Revenue, which is commonly referred to as “sales” is the total amount of income that is generated by the amount of money players wager. It does not deduct any costs or expenses that are associated with operating the business.
Betting or casino profits, also known as “earnings”, is the amount of income that remains after accounting for all expenses, debts, taxes, additional income streams and operating costs.
Formula for Gross Gaming Revenue
The formula to calculate gross gaming revenue is fairly simple and does not require mathematical genius. It is a simple subtraction of player bets from player wins (including the deduction of player bonuses and compensations when applicable).
The simple GGR calculation formula is as follows:
GGR = Amount Wagered – Winning Payouts
Or more simply put:
GGR = A – B
- A: The total amount of all money collected from players’ gambling and/or betting transactions
- B: The sum of all money paid out to players for winning
We’ll use a fictitious UK online casino “Big Chance Casino” as an example*.
Over the course of one year, the total amount of bets made by players at Big Chance Casino was £6,000,000 and the amount of winnings paid out was £3,000,000.
The value of A = £6,000,000 and the value of B= £3,000,000.
The GGR of Big Chance Casino for the year is £300,000 (A:£6,000,000 – B:£3,000,000).
Calculating GGR Margin
Gross gaming revenue margin is calculated with GGR as a percentage of the amount wagered. Usually, the GGR margin is stable, with only minor deviations due to a player’s skill/luck. GGR margin can be calculated as follows:
GGR Margin = Gross Gaming Revenues / Amount Wagered
The goal is to always have a higher GGR margin because this is an indication that your business is retaining more money in relation to the amount of bets made. Ultimately, the higher the revenue the better, as it will mean a more comfortable margin to operate within.
That being said, due to the overall nature of gambling businesses, it is common for the industry’s GGR margin to hover around the low-to-mid teens. Operators must incentivize customers to make wagers and one of the ways to achieve this is through the offering of higher payout percentages.
GGR Margin Example
To put this into greater perspective, consider this GGR margin example*.
Mary is interested in starting an online casino and betting website for a UK audience. However, as she only has limited capital, initially she will be able to introduce only one type of gambling product on her site. Investigating her competitors, and assuming the popularity for each product type (casino games or sports betting) would be identical on her site (the total wagered would be the same), Mary gathered the following data to determine which product would generate the highest revenue for her online operation.
| GGR Revenue | Casino Games | Sports Betting |
| Total Wagered | £1,246,323 | £1,826,456 |
| Winning Payouts | £1,115,003 | £1,541,624 |
To discover which product would generate Mary the highest revenue, the GGR margin of each can be calculated as follows:
Casino games:
GGR = £131,320 (£1,246,323 – £1,115,003)
GGR Margin = 10.5% (£131,320 / £1,246,323)
Sports betting:
GGR = £284,832 (£1,826,456 – £1,541,624)
GGR Margin = 15.6% (£324,832 / £1,826,456)
In this case, sports betting has a higher GGR margin. As a result, it would bring in a greater amount of revenue for Mary and is the more logical product choice for her initial site launch.
What is Net Gaming Revenue (NGR)?
Net gaming revenue represents the real profits an online gambling site makes after the total revenue is cleared of expenses. It is commonly used to analyze business profitability, dividends payments, etc. In essence, NGR measures a gambling establishments net revenue, excluding operating expenses such as:
- Player Bonuses (welcome bonus, no-deposit bonus, free spins, cashback, etc.)
- Payment system fees
- Payments to casino software solutions providers
- Payments to partner companies
- Licensing fees
- Good and services taxes (tax that may be levied on all the operator’s gaming supplies
NGR is typically calculated at the end of a financial month and allows iGaming operators to track their profit and loss as well as other key figures like total payouts including winnings and total expenditure from offering new customers welcome promotions. It is the biggest indication of how a gambling business is performing.
Formula for Net Gaming Revenue
Like GGR, the formula for calculating NGR is a simple one. It determines the basic profits share collected by a gambling operation at the end of the month.
An example of a basic NGR calculation formula is as follows:
NGR = Amount Wagered – Winning Payouts – All Bonuses – All Taxes
Or more simply put:
NGR = A – B – C – D
- A: The total amount of all money collected from players’ gambling and/or betting transactions
- B: The sum of all money paid out to players for winning
- C: The sum of all bonuses received by players
- D: The sum of all taxes
Once again, we’ll use the fictitious UK online casino “Big Chance Casino” as an example*.
Big Chance Casino is registered in the UK, where the jurisdiction regulated online gambling tax on GGR is 15%.
Over the course of one year, the total amount of bets made by players at Big Chance Casino was £6,000,000 and the amount of winnings paid out was £3,000,000. At the same time, the casino received a total of £800,000 as various bonuses.
The value of A = £6,000,000, the value of B= £3,000,000, the value of C = £800,000 and the value of D = £450,000 (£3,000,000 x 15%)
The NGR of Big Chance Casino for the year is £1,750,000 (A:£6,000,000 – B:£3,000,000 – C: £800,000 – D:£450,000).
It is vital to keep in mind that although NGR is ideal for expressing analysis of a casino’s or sportsbook’s success rate, it is not as straightforward as GGR because there is no unified way to measure the net gaming revenue metric. For instance, expenses such as operating, marketing, etc. may or may not be subtracted from the total amount of bets when calculating NGR. Since this is the case, it is important to agree on the precise NGR formula you will always use through your business planning.
*Note: The examples that have been provided in this article are only meant to illustrate GGR and NGR calculations with numbers. The figures used in the examples are not a reflection of actual online sports betting or online casino revenue or profits.
How can you improve your NGR?
There are several factors that can lead to a reduction in profits, among these include:
- Customer insecurity (e.g. worried about fraud or casinos cheating them out of money)
- Competition from other sites
- Increase in government taxes
Improving your online casino profit margin is all about using strategies to improve customer retention and getting the most out of player lifetime value (PLV). Consider the following tips:
Offer a more engaging customer experience – Have welcome offers, ongoing promotions, loyalty/VIP programs and other incentivizing gamification features such as encouraging players to complete missions and other challenges to climb leaderboards or reach new levels to earn virtual currency and/or other special perks, to keep players interested.
- Localize your offering – Tailor your site to suit the interests of the region and demographic your targeting, including local payments, currencies, language, game trends, etc.
- Have transparent terms and conditions – Make the T&Cs of your bonuses fair (low or no wagering) and easy to understand.
- Partner with reputable affiliates – Affiliates help to spread the word about your business and can send relevant, valuable traffic to your site.
- Have reliable and responsive 24/7 customer support – Players need to know that they can have their questions or concerns answered quickly and issues resolved promptly.
- Prompt payouts – Choose trusted payment providers with quick deposit and withdrawal times and avoid implementing long casino pending times. Customers should be given access to their money as quickly as possible.
- Keep up with the latest trends and technology – If you want to be competitive, you need to evolve your brand and ensure you are providing the most cutting-edge games on desktop and mobile.
GGR vs NGR: What’s the Difference
As you can see, gross gaming revenue and net gaming revenue have similarities but are ultimately two very different key performance indicators (KPIs).
To sum it all up:
- GGR is a financial indicator that refers to the amount of money a gambling establishment has gained from players’ activity minus payments to players, but excluding bonus payments and taxes.
- NGR is a measure of a gambling establishment’s net revenue minus all payments to players, bonuses and tax deductions, excluding operating expenses.
Unlike GGR, there is no generally accepted approach to define a business’ NGR. This indicator’s main function is to monitor business profitability but is not linked to mandatory payments. For this reason, as previously stated, it is important to establish an NGR formula for your company and stick to it throughout your business planning.
Conclusion
Having a clear understanding of the GGR meaning and the NRG meaning and how these two KPIs differ in relation to online gambling businesses is important if your intention is to run a successful long-term iGaming operation. Knowing which casino software company to partner with to help you make your business goals a reality is also important. Casinnovate provides you with plenty of information about the best software providers and solutions in our in-depth reviews and articles to help you get going. Start your search with us or reach out for assistance anytime!
