Commercial Gambling and the Surplus for Society

Abstract

Background: Gambling is an important source of public revenue in many countries. Little is known about how this revenue is generated, and how it depends on product portfolios, operating costs, turnover, and the institutional contexts of the industry. Methods: A comparative analysis of income statements from 30 European gambling companies is reported. Scatter diagrams are used to describe how the surplus depends on volume, operating costs, monopoly status, and the game portfolio measured by aggregate return-to-players (RTP). Company profiles are used to interpret the results. Hypotheses: Commercialization increases aggregate return to players. This is likely to lower the surplus. Low operating costs of automated and fast games compensate for this loss. Commercial companies produce less surplus than monopolies. Results: The surplus is a linear function of the total revenue. Excluding three big companies, total volume is positively associated with the average return percentages but not proportionately with operating costs. The difference between monopolistic and market-based companies does not appear to be significant. Detailed descriptive analysis shows that the European gambling market may be facing a situation of supply saturation where further growth of gambling proceeds for good causes can no longer be accomplished.

Keywords

• Gambling
• industry
• revenue
• surplus
• beneficiaries
• costs