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Costs of starting an online casino

 

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The costs of starting an online casino are often guarded “secrets” as there are only estimates and rough ideas given on numerous sites. Well, we have the scoop for you in the form of a full breakdown from an industry insider who worked for Microgaming software. Microgaming software is the largest and oldest online gambling software provider. It has a solid reputation in the industry and is known to churn out two to three games every 8 weeks. So the breakdown that you are about to see below, is based on the costs of starting a Microgaming-powered online casino. During the breakdown, you will see that we will discuss other options that you can consider in starting an online casino, but kindly be reminded that the figures will only be reflective of starting an online casino running Microgaming software.

 

1. What online casino software is the best for starting an online casino? 

 

A Microgaming software package comprising over 450 games including variations of slots, roulette, blackjack, baccarat, sic bo, paigow, keno, scratch cards, and one poker client will cost you $250,000 for a basic package. The cost of the package can either increase or decrease depending on how much you agree to pay back in terms of royalty fees. Royalty fees will usually be between 15% to 40% of your monthly profits.

 

If you purchase software from Microgaming, they will brand the casino to your specifications (between 3 – 6 months of placing the order) and provide full software support, although you will have to set up your own website and handle your own customer support. If you do choose to go with Microgaming, they are quite strict and require you to show that you have an extra $300,000 to $500,000. This money is for the purposes of paying players who cash out. You may think that this is quite an exorbitant amount, but we know of startup casinos that have had jackpots hit to the tune of $200,000 in their first month of launching.

 

Other software providers do exist, such as Cryptologic Software, Rival Gaming, Net Entertainment(NETENT), Novomatic, Top Game,  Real Time Gaming (RTG), and Playtech, just to name a few. RTG and Rival gaming software packages start at $100, 000 , while the Playtech software package costs around $200,000 to $300,000.

 

2. What is a jurisdiction and why do I need one when starting an online casino?

 

A jurisdiction is a place where it is legal to host your casino servers. The software that you have purchased from Microgaming will be housed on these servers. Because of the contentious nature of online gambling, you cannot house your server in any country, as online gambling is illegal in most countries. The most popular jurisdictions include: Gibraltar, Malta, Antigua, Curacao, Isle of Man, Netherlands Antilles, and Costa Rica. A gaming license from Antigua will set you back $ 75 000 per annum plus a 3% tax on your casino’s profits. Furthermore, in Antigua, you will also need to purchase a wagering license which costs $50,000.

 

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3. How much does it cost to build an online casino website?

 

An online casino site will set you back about $3000 to build.

 

4. What is the cost of staffing your online casino?

 

The most important people are your customer care staff, and you will need about 8 – 12 people who are available 24 hours a day to handle all player queries. You will also need Affiliate Managers who recruit affiliate partners to market your website. You will need a Customer Retention Manager whose aim will be to keep your most profitable (high depositing and loyal) players playing, as well as a three-person IT team to handle all your IT-related issues. The total cost of salaries will cost in the region of $200,000 to $300,000 per year. This figure can be cheaper if your staff is situated in a country where salaries are not as high as in Europe or North America. There are quite a number of very reputable online casinos that are located in South Africa and Costa Rica because the costs of running an online casino from there are much cheaper than running it anywhere else in the world.

 

5. How do I pay players who win at my online casino? 

 

Microgaming software requires that you have between $300,000 to $500,000 in reserves. Depending on what type of deposit methods that you accept, you will need to fund each and every one of them with reserve money, so that you can pay your players their winnings as soon as possible. For example, if you accept deposits via Neteller, Skrill(Moneybookers), PayPal, Visa and Mastercard credit cards, you will need to fund each and every one of these accounts with a significant amount. For example, if you had $300,000 in your reserves, you may decide to put $100,000 in the Neteller, $50,000 in the Moneybookers, $50,000 in the PayPal, and the remaining $100,000 in the bank accounts.

 

You can either choose to outsource the payments of players to a payment processor whom you instruct to make payments, or you could set up your own in-house payment processing team. Startups usually begin with an outsourced payment processor as they are efficient, and are very knowledgable about the processes that take place. Using a payment processor will cost you between $20,000 to $50,000 per month.

 

6. What is the cost of marketing when starting an online casino?

 

Marketing costs can range between $20,000 and $100,000. If you get a top affiliate website bringing you quality traffic, you can be paying out easily $100,000 a month . Top affiliates are affiliates who are on the the top pages of google for keywords like “top online casino”, “online casino” or “best online casinos”. In order to attract top affiliates to promote your online casino you will have to offer them pretty big revenue sharing deals as much as 50%-60%. A start up should budget $50,000 a month towards affiliate payments.

Start ups usually depend solely on affiliates to market their online casino. While you can advertise using ad services like google adwords in certain countries, for example the UK, this is very expensive and extremely saturated as every casino is bidding on the same popular keywords and in the long run is not as profitable as snagging a top affiliate.

Power moves like getting to advertise or sponsor a soccer team like Manchester United is not just highly competitive but also really pricey. In August 2012, Manchester united announced that it will be changing sponsors from insurance juggernaut AON to Chevrolet in a landmark $559 million deal over 7 years. On average, Chevrolet will be paying Manchester United over $70 million a year.

 

7. What is the total cost of starting an online casino running on Microgaming software?

(Based on year 1 expenses)

 

Microgaming Software – $ 250,000

 

Antigua Licence – $125,000

 

Website costs – $3000.00

 

Payment Processor Payments ($20,000 per month x 12) – $240,000

 

Staff – $150,000

 

Money in reserves for paying players – $500,000

 

Affiliate/Marketing Payments = $600,000

 

The total cost of starting a Microgaming powered online casino is approximately : $1, 868, 000

 

8. How long does it take to break-even after starting your online casino?

 

You can break even within 2 years of starting your online casino.

 

9. When is the best time to start an online casino business?

 

When America opens up. When America gets close to legalizing online gambling its best to have set up your online casino and wheeling and dealing to get a license there. There will be lots and lots of money to be made when the USA legalizes online gambling and trust me, there will be a Gold Rush type frenzy to secure gambling licenses.

 

10. Where can I get the money to start an online casino?

 

You can seek funding through venture capitalist firms. There are a lot of people with offshore money lying around who would be interested in funding an online casino start up. With the US slowly going legal, if you had a good business plan that included a mind blowing workable US penetration strategy , you would definitely get a good venture capitalist partner on board to fund your online casino start up.

 

 

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