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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