Online casino business, how does it work?

Industry of gambling entertainment has long been one of the profitable and successful businesses due to its wide popularity with people who like ‘easy money,’ though actually cash earned this way does not always come with little efforts. At least it may turn out true to those who lose their money in your favor. And while the game process that brings profits to one of the participants (either a casino house or a player) is nothing of abstrusity and more of luck all the arrangements that make the gambling excitement possible may be time and labor consuming and, which is more, rather expensive. If you want to earn as a casino owner you must be ready to incur significant expenses before you start profiting. Still there are many opportunities today to make gains with little investments into the business. Whatever your decision may be you need to have a comprehensive knowledge of the casino industry before you rush into this whirlpool.

As the title of the article prompts we are going to talk here about a special type of gambling which is online casino. How can you open your own online gambling business and what would you need for this? And if you don’t have enough money to create your own Internet casino how can you avail of other ways to grab some piece of this big pie? Follow our narration below…

As an introductory word

According to the casinoadvisor.com the origin of online or virtual casino was aggregated by three different processes. The first one is gaming software that was eventually penetrating land based casinos in the mid of 1970s. At that time electromechanical slots were gradually replaced by the software based slot machines. In the 1970s professional card counters developed software for blackjack strategy. But that was just the beginning.

With the Internet era it became possible to interconnect different computers to a nodal server and use the gaming applications stored on that server. That was a second important milestone which greatly contributed to the improvement and upgrade of the casino world.

What online gambling lacked was a regulatory system which in turn appeared in 1994. “The tiny island state of Antigua and Barbuda enacted The Free Trade and Processing Zone Act that permitted it to issue gambling licenses. Thus the first online gambling jurisdiction was born. Under this Act the Directorate of Offshore Gaming was constituted. It is this body that receives applications from licensees, scrutinizes them and grants licenses if the application is found fit. Antigua and Barbuda still remains one of the more popular and respected jurisdictions. This law provided the fillip that was required to create online casinos.”

Now with all the three components of the puzzle set together the industry needed several more tools to run at full speed. Those were financial instrument to accept and process transactions and online security. The blank was made up for by online gambling software leaders like Microgaming, Cryptologic and Playtech.

You can learn about each of these casino software manufacturers later and now let us slightly touch upon the types of Internet based gambling categorized according to their interface. They are three: web-based casinos, download-based casinos, and more recently live casinos.

Web-based online casinos

Web-based online casinos are websites where users may play casino games without downloading software to the local computer. Games are mainly represented in the browser plugins Macromedia Flash, Macromedia Shockwave, or Java and require browser support for these plugins. Also, bandwidth is needed since all graphics, sounds and animations are loaded through the web via the plugin. Some online casinos also allow gameplay through a plain HTML interface.

Download-based online casinos

Download-based online casinos require the download of the software client in order to play and wager on the casino games offered. The online casino software connects to the casino service provider and handles contact without browser support. Download-based online casinos generally run faster than web-based online casinos since the graphics and sound programs are located within the software client, rather than having to be loaded from the Internet. On the other hand, the initial download and installation of a download-based online casino client does take time. As with any download from the Internet, the risk of the program containing malware does exist.

Live-based casinos

Live-based casino gaming allows web players to interact with games played in a real world casino environment. Online players can see, hear, and interact with live dealers at tables in casino studios worldwide.

So how can you ‘flow’ into this stream of money-generating excitement?

Software developer, licensee, sublicensee and affiliate

You can design and offer your own software for an online casino and ecommerce structures related to the business. But, as one reference media says, you should remember that starting this business will require you millions of dollars. And once again we should say ‘but’! in this case you will have a full control of the site, and full knowledge of the software source code. Moreover, you won’t pay any royalties to a software development company. Usually the Online Gambling Software Provider charges a software licensing fee. Most also take a percentage of the take for each month's revenues of the casino as well.

Become a Licensee of an Online Gambling Software Provider. This is a far less expensive option and the client receives all the software and sometimes even the equipment necessary. It is also the most popular option for both licensed land-based establishments as well as entrepreneurs. Costs range from USD $ 30,000 to USD $ 350,000 (some ask as high as USD $1 Million). The average licensing fees are around USD $150,000 (this usually includes marketing costs). In most cases a royalty is paid to the software provider as a percentage of the monthly "take" or "drop" (gross profit). Usually the software provider has payment processing (merchant account providers) already set up for a turnkey operation.

Sublicensee of a Licensee. This is the least expensive option. Costs range from USD $ 0 to USD $ 60,000. Being an affiliate is basically the same thing as being a sublicensee with no up front costs. The sublicensee must do all the marketing and receives a smaller percentage than a full licensee, because royalties paid to the licensee are much higher.

Another option is to sign up with a casino webmaster affiliate program. An affiliate program is designed as a revenue sharing model: A webmaster receives a percentage of the revenue from another casino for every gambler he/she refers. In some cases, this extends for the lifetime of the wagers from that individual. For example, a gambler goes to your website, which is affiliated with CCCCasino. The gambler clicks on the CCCCasino link and signs up for an account with CCCCasino (this is called a "conversion"). The gambler loses $1000 in wagers over the course of the month. If the program paid 25%, the casino would mail a check for $250 to the affiliate (webmaster). Usually there are no upfront costs associated with this. These business models require an extreme high level of trust on behalf of the casino.

Well, if you decide to become a licensee of a larger software manufacturer and open your own online casino using all the technology provided by the third parties, you should know main players in the market which were already mentioned above. Here you can learn more about the pioneers in online casino software development.

Titans of casino software

As of 2008, there are over 160 companies providing online casinos with the software solutions that make Internet gambling possible - a figure that is steadily growing along with the industry itself. But we are not able to cover each of them and thus we’ll speak about just three of them, namely Microgaming, Playtech and Cryptologic.

Microgaming Software Systems Ltd is a privately held Isle of Man based software development company that was established back in 1994 when it released its first online casino. It is one of the leading software providers to the online gambling industry, with just under 100 casinos listed on its website. Online casino operators such as the Carmen Media Group, Fortune Lounge Group, Ladbrokes, 32Red, Fairground Gaming, Vegas Partner Lounge and Golden Star Lounge are among those who use Microgaming's software.

The standard online casino powered by Microgaming has approximately three hundred games including slots, video poker, blackjack and roulette. Its progressive jackpot network allows players to participate in over 20 progressive games that are available to all casinos powered by Microgaming software, and has become the company's trademark. Microgaming provides its casino games in download or Flash version. The company also offers progressive jackpots through their interlinked network of casino operators. Some of these games are developed by Derivco, a South African based software development subsidiary company.

Microgaming also runs the world’s largest online poker network, connecting players from around the globe with a platform that supports many languages. Their poker tournament schedule is considered to be one of the most aggressive and rewarding on the net. Microgaming also offers a bingo network, live dealer games, mobile gaming solutions and even land-based software packages for live casino operators.

CryptoLogic Inc. is a Dublin, Ireland-based software application service provider (formerly Toronto, Canada). It in 1995, and became publicly traded on the Canadian Dealer Network (CDN) less than one year later. 1996 was also the year they introduced their first online casino – the famous InterCasino. This Toronto-based company commenced trading on the Toronto Stock Exchange (TSE) back in 1998 (listed under CRY on the TSE, and CRYP on Nasdaq).

Through a subsidiary company called WagerLogic, the company handles the licensing of its gaming software, support services and payment processing, ECash. In ECash payment system players first receive a PIN via regular mail, before they can withdraw funds.

In addition to the casino and poker products, CryptoLogic also now offers online bingo software. Their casino games can be played in a downloadable and a Java based software version.

Playtech Ltd. is a gaming software development company founded in 1999. The company provides software for online casinos, online poker rooms, online bingo games, and fixed-odds arcade games online.

Playtech Ltd. is a gaming software development company founded in 1999. The company provides software for online casinos, online poker rooms, online bingo games, and fixed-odds arcade games online.

Playtech's gaming software has been certified by BMM International, an Accredited Testing Facility and principal consultants to major gaming and wagering regulatory bodies, manufacturers, casinos and gambling operators throughout United States, Europe and Asia.

Some of the notable companies using Playtech software include GoldenPalace.com, Class 1 Casino, Betfred, Centrebet, ToteSport, Bet365, Stanley Ho's Dr Ho 888 casino, The Rank Group's Grosvenor Casino, VCPoker, Titan Poker, MansionPoker, and Christchurch Casino's Kiwi Gaming. Other key Playtech casino brands include Casino Tropez, Europa Casino, WindowsCasino.com and Prestige Casino.

While Playtech came a little later than other players it overtook the competition with giant leaps of innovative thinking and quickly became the world’s largest publicly traded, online-gaming developer.

It was the first to introduce wide-spread online casino features that are taken for granted today which includes VIP ratings, comp-point schemes, access to game and transaction histories in real-time, cutting-edge fraud-prevention tools, and much more. The most revolutionary innovation cited by industry experts was Playtech’s "unified-platform" technology which allowed players and operators to access several gaming activities using a single user account. The platform makes players the main entities, rather than the casinos or poker rooms they are playing in. That way, a single player account is sufficient for all kinds of activities, and cross-platform activities (for example, poker and casino activities) are just as easily accessible for players as they are easily monitored by operators and support teams.

If you consider affiliate casino business…

Among most prominent players that offer affiliate programs to those who want to earn in the online casino industry are CasinoBlasters and InterCasino. This may play into your hands as long as solid name and firm position of these leaders make players feel safe and confident. Yet, as noted by an expert in online casino affiliate business, the same advantages may turn into deficiencies. As the expert says it is hard to imagine today an online gamer who does not have a real account with these gambling sites which means that you will be able to bring just an insignificant number of new clients and thus gain trifling profits. That is why you need to search for something fresh, for a new but still credible name on the web.

Among the main advantages of an affiliate casino business is that you will be receiving your commissions during the whole period of your referrals’ activity and this is the case with 95% of affiliate programs. Thereby, while a person you brought is playing you get your gains. Some Internet casino haunters may spend as much as $200,000 a year with 30%-40% paid to an affiliate who referred this hen laying gold eggs.

There are two main types of an affiliate program. They are CPA (Cost Per Acquisition) Programs and Revenue Share programs. While in a number of cases an affiliate can earn as much as $300 for a referred player under the CPA scheme most webmasters prefer to work with the Revenue Share schedules as they offer a sliding interest which means that the more a player you brought spends the higher is the commission paid to you. Here is an example of commissions earned under CPA and Revenue Share programs offered by CasinoBlasters.

CPA Casino Program

If you refer a player to CasinoBlasters who makes an initial minimum deposit of $80 your earnings per month will be as follows:

From 1 to 20 new players - $100 per player
From 21 to 50 new players - $150 per player
From 51 to 100 new players - $200 per player
From 101 to 200 new players - $250 per player
201 new players and more - $300 per player

CPA Poker Program

From 1 to 10 new players - $65 per player
From 11 to 50 new players - $75 per player
From 51 to 100 new players - $85 per player
From 101 new players and up - $100 per player

Revenue Share Program – Casino

CasinoBlasters offers its affiliates to earn as much as 50% of Casino Gross Revenue (Total purchases minus total payouts) within the first month irrespective of your volume.

Every month thereafter an affiliate will be paid 36% of Casino Gross Revenue. Every month for the life of your referred player you will earn 36% of all player gross losses regardless of volume.

Revenue Share Program – Poker

You earn an income from every hand played (the 'rake') by the players you drive to the Aggregated Poker Room. The commission may be as much as 20% to 35% of the Gross Rake.

For total rake for the month generated by your players you earn the percentage below for that month:

Between $1 and $9,999 - 20%, PLUS:
Between $10,000 and $19,999 - 25%, PLUS:
Between $20,000 and $29,999 - 30%, PLUS:
Over $30,000 - 35%

As a conclusion

In light of recently sever measures taken to regulate online gambling industry many Internet casinos were forced to move their operations from the U.S. to other countries. Still U.S. remains a source of substantial profits made by the industry. That is why though UIGEA and similar acts restrict business activity of online gambling companies within the U.S. players in America are still very eager to bet, to dice and to play cards. Thus they go to the websites registered with such countries as Antigua and enjoy their Internet gaming. The Government of Antigua does not recognize the authority of the United States when it comes to Gambling over the Internet. Antigua's policy is: "Don't tell us not to take online wagers from Americans....Stop Americans from placing internet wagers with us." Diplomatically the U.S. cannot enforce its acts on other states.