Gross Gaming Revenue (GGR)
Gross gaming revenue (GGR) is the revenue that gambling companies generate from people placing bets.
What is Gross Gaming Revenue (GGR)?
Gross gaming revenue (GGR) is the revenue that gambling companies generate from people placing bets.
This measure, also known as gaming yield or the gross game win, is the total amount of money a gambling business brings in through bets minus the amount that is paid out for winning. It is essential to understand that it measures the revenue of companies in the gambling industry and is distinct from profits or earnings.
Conversely, the net gaming revenue (NGR) is the profit a gambling company generates, and it is calculated by subtracting all other expenses from the gross gaming revenue.
How Is Gross Gaming Revenue Calculated?
Gross gaming revenue is the revenue a gambling company generates from the bets that are made through its platform. It is calculated by subtracting the players’ winnings from the total amount that was gambled.
The formula to calculate it is as follows:
GGR = Total Amount Gambled - RTP
where,
- Total Amount Gambled = the amount of money that people wagered
- RTP = return to players or the amount of winnings that players received from placing winning bets.
Gross Gaming Revenue Margin (GGRM)
Gross gaming revenue margin measures the GGR as a percentage of the total amount gambled. The formula for GGRM is below.
GGRM = GGR / Total Amount Gambled
Gambling companies and investors always want to look for the highest GGR margin possible, as this indicates how much money the company can keep from the bets made. It may be easier to think of it like this: for every dollar wagered with any gambling company, its GGR margin is the average percentage it gets to keep of each dollar.
Of course, too high a GGR margin may appear unattractive to gamblers who are looking to maximize their winnings. In some cases, a gambling company with a lower GGR margin may be able to make more money because it can bring in more customers as it has a more attractive payout for winners.
Gross Gaming Revenue Example
Let us look at an example of a fictitious gambling company called Oasis Gambling. Every year about $2 million are wagered through this company. Winners take home about $1.66 million in correct bets from the amount wagered and gambled. Knowing that the GGR is calculated by subtracting winnings from the total amount gambled, we can find what the GGR is.
GGR = $2 million - $1.66 million = $340k
Taking this further, we can calculate the gross gaming revenue margin with our information.
GGRM = $340k / $2 million = 0.17 or 17%
This, of course, is not the profit the company made. This is simply the gross revenue that Oasis Gambling brought in through the money wagered. Its profits will be what is left after all other expenses are subtracted from the GGR.
Gross Gaming Revenue on the Income Statement
Let us now imagine Oasis Gambling’s income statement, where GGR can be found.
It is also important to note that gambling companies often report the cost of sales as $0. This is because there are no materials, inventories, or other costs directly associated with their revenue through gambling. In instances like this, GGR would simply be listed as the company’s revenue.
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