As fun as online slots are, at the end of the day the main purpose of these games is to bring a profit to the operators running the online casinos hosting them. The saying “the house always wins” is true, after all, and if it wasn’t for this profitability then the casino sites would sooner, not later, just pack up and close shop. With this basic fact in mind we’re going to take you through the economics of online slot games, and how developers craft titles that are worth hosting for casino sites.
RTP and House Edge: An Explanation
Get into playing slots and you’ll sooner, not later, bump into the term “RTP.” You’ll also frequently see mention of “house edge.” But what do these terms mean, and how do they affect your game experience? Continue reading, because these are key to understanding the main issues of online slot economics.
What is RTP?
The term “RTP” stands for “Return to Player.” In a few words, this is a number that shows how much money a player theoretically stands to get back from playing a slot for a long period of time. As such, at least in theory, if you spend £100 on a slot over a large number of bets with an RTP of 96% then you’ll get at least £96 back.
However the use of “in theory” is of utmost importance here. This is because the RTP is calculated by providers over hundreds of thousands, if not millions, of simulated spins. As such, we have to stress that the RTP does not indicate how much you’ll win by playing a slot for a few spins - far from it! It’s actually a long term statistic calculated over a long period of time, and in any case slots are games of chance powered by a Random Number Generator (RNG).
Now you might be asking what the RNG is. It’s exactly what it sounds like, namely a means to generate numbers that are truly, well, random. This is necessary to ensure the fairness of a slot, where it is key that the final outcome of every spin is indeed random. This also means that while the RTP is a long term indicator, the reels’ randomness means you can never truly tell what you’ll get on the reels. You might win a jackpot on your first spin, or spend hundreds of thousands of pounds on a slot and never see a win worth more than a few pence. Again, these are games of chance, and the only true winner is, as always, the house…
What is House Edge?
The house edge is, simply put, how much profit the casino makes from each game. An online casino is a business, after all! In the case of slots this is the inverse of RTP, meaning in a game with an RTP of 96% the casino stands to get back 4% of wagers placed over a long period of time. Now one might think that casinos should boost the house edge to make even more of a profit, but that’s where the fine art of online slot economics comes into play - while casinos are a massively profitable business, they still need to entice players with the promise of exciting game sessions, if not outright wins.
It’s All About the Volatility
“Volatility” is another term that you might have heard about if you’ve been playing slots. This refers to the potential frequency of the payouts on offer by the slot, as well as their possible size. Volatility comes in three main options - low, medium, or high. Low volatility games promise frequent but small payouts, medium volatility means a middle ground between payout frequency and size, and high volatility typically results in infrequent but potentially big prizes. Again, always keep in mind that slots are ultimately games of pure chance, meaning volatility is only a suggestion and not an actual indicator of how much you will win by playing.
Volatility goes hand in hand with RTP to bring about a certain experience for the player. A highly volatile slot will always feel more exciting and riskier, even if it is paired with a high RTP, while a low volatility slot will pay out relatively frequently even if its RTP is low. This is because providers craft their games to satisfy different players while ensuring the online casino can depend on a reliable house edge no matter how frequently the slot is played.
The Economics of Jackpots
One big draw in online casinos is jackpots. This is understandable, as after all who doesn’t like the promise of a massive prize? The chances of winning such a prize are, as always, pretty slim, and there’s good reason why casinos and providers offer such big sums - they bring in a lot of players that make up for the expense of the prize itself. Jackpot prizes at online casinos come in two main flavours, fixed and progressive, both of which we’re going to detail right here.
Fixed Jackpots
Fixed jackpots are self-explanatory - these are jackpots that have a prize set at a fixed amount. The jackpot may be offered by the game provider, online casino, or in partnership between the two. The economics behind such a prize are, as explained above, pretty simple. The size of the prize lures in players, who play the associated game or games more frequently in the hopes of getting the win. Then there’s the fact that jackpot slots typically have a lower RTP compared to their regular versions, which in turn mean a higher house edge and, as a result, greater casino slot profits.
Progressive Jackpots
Progressive jackpots, on the other hand, don’t come with a set size for their prize. Instead, as the name suggests a progressive jackpot keeps on growing until it is eventually won. The prize first starts with what is known as a seed amount, which is typically contributed by the game provider and the online casino, before part of each player’s bet (generally around 1-5%) is put in the pot. The more players wager on the progressive jackpot game the more the pot grows. Some providers even link all the versions of the progressive jackpot slot across different online casinos to make for an even bigger final prize.
There are different ways to win the progressive jackpots. In some games the jackpot keeps on growing until it is randomly won, typically by landing a number of special symbols on the reels. In others the jackpot grows until a set date and time, and once the deadline is over the prize will be awarded to a random player. Whichever the case, once the progressive jackpot is won its amount is reset back to the seed total and the process repeats.
Gambling Regulation in the UK
Thanks to the efforts of the UK Gambling Commission (UKGC) the slots found at UK online casinos need to clearly provide players with their RTPs. This brings a level of fairness to the slot experience, since this means you’ll know how much the slot theoretically pays out, and how much of what you bet goes towards the online casino. In addition the RNGs are rigorously tested by third party agencies to ensure they are truly random and cannot be meddled with by the provider or casino site.
Play Smart With Knowledge of Slot Economics
As fun as they are, slots are ultimately means for an online casino to make money. The promise of big wins is just that, a promise, and while it’s fun to dream about life-changing prizes you should know that this will near-certainly not be the case for you, no matter how many times you play. If anything, as we’ve seen in our explanation of RTP, playing in the long-term is a money loser, as a percentage of your stakes will always go straight into the casino site’s pockets.
With this in mind, play smart by being responsible with your gambling. Set a budget for slots, and stick to it. Make small bets so that you can play more spins, and never chase your losses - these are games of chance, after all. Enjoy these games and admire how well they are designed, but remember that the duty of this design is towards the game’s one true winner, namely the online casino itself.
