Crunching the numbers: slots v video games
In case you hadn’t noticed, gaming’s a pretty big deal. The industry will have an estimated worth of $525 billion by 2021. While much of the fuss is around video games – particularly the continued emergence of eSports – a hefty chunk of growth is being seen in the gambling industry. Slot games are among the most popular types of games players have a flutter on – and who could blame them, with colourful interfaces and engaging themes?
Let’s take a look at how slot games and video games stack up in terms of the finances – which is pulling in the most revenue, and which is most profitable?
Did you know? The first electric slot machine ‘Money Honey’ was released in 1964 by Bally Technologies.
Jump in the time machine and travel back over 40 years to a time when this slot machine was at the forefront of gaming technology
Online Slots: Online gambling is an industry with staggering revenues. This is all the more miraculous, given it’s prohibited in the vast majority of countries around the globe. Last year, online gambling brought in revenues of £36.2 billion – with £5.6 billion of that coming from the British market alone.
35.71% (£2.0 billion) of the overall British remote gambling revenues came from online slots, making it the most profitable arm of the online industry – even more so than sports betting. Double-digit growth is forecast for online gambling next year with slots earmarked as the main driving force.
Slots have always been popular, thanks to their simplicity and generous payback rates. Add to that the quick speeds and engaging themes brought on by enhanced digital technology, and it’s easy to see why they appeal to so many millions of gamers.
New mobile streaming service Google Stadia is expected to revolutionise the video game market, especially on mobile devices
Video Games: In terms of market share and availability, video games have the distinct edge over online slots – but that’s to be expected, as they don’t suffer from restrictive legislation in most countries. This is reflected by the amount of people worldwide that game annually – 2.5 billion.
Last year those 2.5 billion players spent a combined £119.6 billion on video games – dwarfing the online gambling sector enormously. Traditional console gaming brings in similar revenues to remote gambling, £37.4 billion, whereas mobile gaming is the sector that brings in the big bucks.
Last year mobile games helped to bring in revenues of £57.5 billion, while growing their total gaming market share to 45%. That figure is expected to rise next year as new gaming platforms like Apple Arcade and Google Stadia hit the market in autumn.
Who wins? Video games
Slots v video games: which is more profitable?
Online Slots: If you walk into an average casino you will be standing in the backdrop of flashing slot machine lights wherever you go. In almost every casino in the world the ratio of slot machines to normal table games is around 10 to 1.
In a 2016 study, it was found that slot machines in Las Vegas brought in $7 billion in profit compared to table games, which brought in just over half of that figure.
Slot machines work on a return to player (RTP) rate, which is based on an elaborate algorithm that determines how much the average player will lose when they play. The average RTP of a slot machine 92%, meaning for every £100 spent by a player, they will lose £8 to the slot.
As house edges go, it’s not too bad – especially when you consider that slot machines can cost anywhere from £100,000 to £1 million to develop, depending on the quality of the game. Conservative estimates place the overall profit of slot machines at 69% after deducting licensing and marketing costs. Based on the £2 billion revenues the Gambling Commission reported, this means the online slots market brought in profits of £1.38 billion.
Most online slot providers don’t develop their own games – they lease them or buy them from a select group of games developers. This keeps costs low and profits high, while providing customers with a decent range of games they can find elsewhere. Some exceptional online casinos, however, provide their own.
One of the best gambling operators is 888 Casino, which has its own exclusive online slots as well as popular classics – so we’d definitely suggest heading there if you get chance.
Much of Red Dead Redemption 2’s sizeable profits were eaten up by an enormous outlay on marketing
Video Games: The profits of video games depend solely on their commercial success making video games, similar to Hollywood films. Production and marketing costs of video games are staggering in comparison to online slots.
One of the most popular console games of 2018, Red Dead Redemption 2 had a production and marketing budget of £708.3 million. The game sold over 23 million copies for a total revenue of £920 million, which represented an overall profit of 28%.
In fairness, the marketing and production costs for Red Dead Redemption 2 were astronomical – making a huge impact on its final profit margins. The average profit for a video game is 40% which would put the industry’s global profits at £47.84 billion.
To directly compare video games to the profits of online slots we must look directly at UK sales, which came in at £4.01 billion in 2018. Overall British video game profits totalled £1.6 billion in profits last year, slightly more than online slots.
Who wins? Video games (just)
Slots v video games: the verdict
It’s an undeniable fact that video games bring in bigger profits – both on micro and macro levels – than online slots. However, if the two industries are scrutinised in more detail it becomes apparent that online slots are eminently more profitable.
The whizzing, flashing world of gambling slot machines is characterised by relatively low output costs and high revenues. If current trends continue, it’s set for double digit growth in the years to come.
Video games are also expected to grow in popularity over the next decade, with mobile gaming leading the charge. However, the development and marketing costs of the industry do not appear to be decreasing, in fact it is even possible that they will increase as developers seek out new forms of technology like virtual reality.
According to the current trajectories, it will only be a matter of years before the online slots industry overtakes video games in terms of profitability in the UK. What’s more, if countries like the US relax its online gambling laws, this pattern will be reflected worldwide. So if you’re thinking of investing in online slots, now could be the perfect time.