Online casinos have increased in popularity in the last decades. Since the pandemic, the benefits of a casino website as opposed to a brick and mortar casino have become clear. If you want to get in on this lucrative business, you can start your own online casino. How much seed money and recurring costs do you need to expect before you set this plan into motion?
Options for Creating an Online Casino Business
When you want to start your own casino business, you can choose between two options: brick and mortar or online casinos. In recent years, casino websites have been increasingly successful. They are easy to access from the comfort of the player’s home and offer attractive bonuses, like the current promotions at King Billy. These benefits are great reasons to aim for an online casino rather than a land based one.
You can start this process by yourself or work together with specialized B2B (business to business) services that have the right expertise to help you get started.
The Costs of an Online Casino
There is more to financing an online casino than just the seed capital for registration and licenses. Here are the most important cost factors to keep in mind:
Registration of a Legal Entity
Most countries will expect you to register your business as a legal entity. Without this registration, most partners, like payment services and software providers, will not work with you. How much this process costs, depends on the location.
- It can lie between $0 (Gibraltar or Curaçao) and $3,000 (Costa Rica).
Typically, you will need a lawyer or notary to process the paperwork. This will cost you an additional fee that can reach up to $1,000. Make sure to check if the country has any additional costs associated with the creation of a company, like registering a trademark.
Game Software
When you are running an online casino, most of your service is based around the software you offer to your clients. There are multiple kinds of software this applies to, from software that helps you manage the website, its accounts, and games, to the game software itself.
If clients have problems handling the software or there is a lack of variety, they won’t stick around. Functionality, reliability, and the software’s features are important, which is why you should not go for the cheapest options.
Many software developers are working on casino games and software that help you manage the website. If you want to use them, you have to pay for the licenses. There are several kinds of fees that might apply here. You might have to pay the price for the software itself, commissions, and the royalties of your monthly profit.
- You will also have to provide around $200,000 to $300,000 to cover large payouts when players win.
Royalties can make up 15% to 40% of your profit. Single games might cost between $200 to $5,000 per game, depending on the developer. It’s best to buy games in bulk because they tend to be cheaper this way. Game platform management software can cost you between $10,000 to $500,000 with commissions between 15% to 60%.
- Expect a price point of about $250,000 and upwards for the total software package.
Legislation
Many countries that have legalized online gambling have strict gambling laws and regulations. To offer your service there, you will have to apply for a gambling license. The price point depends on where your business is registered, and which license you apply for.
- It can cost you anywhere between $3,000 (Gibraltar) to $200,000 (Antigua & Barbuda) a year for the license.
Some countries have additional tax costs on top of this.
Staff
Don’t forget that your online casino isn’t completely automated. You will have to hire staff, like customer service, to keep the website running and its users happy. A typical number of staff members for a functional online casino is a team of eight people.
- This leaves you at about $200,000 a year in payments and co.
Marketing
Without clients, you won’t make any money. That’s why the payment for marketing strategies should be included in your seed money from the very beginning. You can advertise using Google, invest in SEO, or chose affiliate marketing.
- Budget your marketing costs at about $50,000 per month if you want to work with affiliate websites. They bring in a high amount of traffic.
Payment Services
You need to pay for the implementation of payment services like PayPal. It is good practice to get a variety of different services, so every user will find their most preferred option. You can acquire them individually or use a payment processor that combines them automatically.
- A single service will expect you to fund them with around $50,000 while the payment processor costs you $420,000 a year.
Website
You will need to hire someone to design and code your website, as well as cover costs for servers and any kind of service connected to keep the site secure and up and running.
- A professionally built casino website starts at around $3,000, but will most likely cost you more for the best result.
What Is the Total Cost of an Online Casino Business?
Opening an online casino business is not just a question of finding the initial capital to fund the business. One needs to acquire licenses, invest in marketing, and optimize your service’s quality to find and retain new clients, and differentiate your casino from the competition.
Oftentimes, you will not be able to find the best solutions by yourself. To create a great business plan, you may have to rely on consultations from experts like tax advisers and lawyers. Before you ever hit the threshold of making profits, you may need to have enough funds to cover these costs and pay out your clients’ prize money in the meantime.
- Most successful online casinos break even after the first two years. Before that, the total cost of opening an online casino business runs from $1.5 to $2 million.
Funding Your Online Casino Site
Venture capitalist firms are typically on the lookout for projects they can invest in. If you are looking for funding, contact these and offshore companies to find investors. If you do so, make sure to have a bulletproof business plan on hand to make your business seem worthwhile.
Conclusion
There are many factors to consider when you are planning to open an online casino. If you don’t calculate properly, you risk bankrupting yourself quickly. Profits won’t be made in the first years, and there are some costs that easily get overlooked or underestimated.
Keep in mind that before you ever break even, you will have to pay your staff, prize money and other running costs. With all these prices in mind, opening an online casino will cost you about $1.5 to $2 million. Venture capitalist firms might be willing to fund you.
