While there are many ways to gauge the size
of any industry—by the number of employees, the output
of products, tax receipts or customer count—the most common
comparison is by gross revenues, or sales. When gross revenue
is used to gauge the size of the gaming industry, it is a measure
of how much consumers spend—or the operator wins—on
legal gambling games. This appears to be an easy question. But
the answers vary widely. For example, a Washington Post columnist
claimed that "Legal gambling takes in" about $637
billion yearly. Within a week, however, U.S. News and World
Report stated that "The gambling industry's revenues"
were "$50.9 billion at the most recent count." Who's
right?
To understand why people arrive at different estimates of the
gaming industry's size, consider a hypothetical casino customer's
experience.
Sue and Bill visit Casino Royale one Saturday evening to
gamble a bit and see a show. Bill exchanges $100 in cash for
100 $1 tokens to use in Casino Royale' s slot machines. Bill
bets one token at a time and bets each of his original 100
tokens. He'll win some of these bets, and he'll lose some
of these bets. Because the typical slot machine pays out 90
cents for every dollar put in the slot machine, Bill ends
up with about 90 tokens.
Bill continues to bet one token at a time, and bets each
of his 90 remaining tokens.
Of his original $100, Bill has $81 left. He has, for all practical
purposes, "spent" $19 on the slot machines. He's
wagered both his original $100, plus the $90 he had in his
tray after his first round on the machine—or a total
of $190. But Casino Royale only has $19 from Bill.
Confusion between the amount wagered, sometimes called "handle,"
and the amount actually spent accounts for the widely varying
estimates of the size of the legalized gaming industry. The
only relevant figure - for Bill's personal accounting, for
the casino's accounting and to gauge the size of the gaming
industry in relation to other industries—is the amount
actually spent by customers, not the total amount they may
have wagered repeatedly over the course of the evening. Legalized
gambling is accurately depicted as a $54 billion industry,
the gross revenue reported by operators before salaries, taxes
and expenses are paid.
Definition of gross gambling revenue (GGR) = amount wagered
minus the winnings returned to players, a true measure of
the economic value of gambling. GGR is the figure used to
determine what a casino, racetrack, lottery or other gaming
operation earns before taxes, salaries and other expenses
are paid - the equivalent of 'sales' not 'profit.'
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