According to a report by Statista, the online gambling market is expected to grow from $66.7 billion in 2023 to $127.3 billion by 2027.
As the industry continues to expand, operators who stay on top of Net Gaming Revenue or NGR will be better equipped to make smart decisions, manage costs, and ensure long-term growth.
Let’s understand what Net Gaming Revenue is and why it matters.
What is Net Gaming Revenue?
Net Gaming Revenue (NGR) is a financial metric used by gaming operators to measure the net profit generated from gaming activities after subtracting certain costs and deductions.
NGR is the difference between the total amount of money wagered by players and the payouts made to them, including bonuses, fees, adjustments, fees, chargebacks, and commissions. Simply put, NGR represents the amount a gaming operator retains as net revenue after deducting player payouts and promotional rewards.
NGR helps iGaming operators make better decisions by providing a clear picture of actual profit after expenses.
By analyzing NGR, operators can optimize marketing strategies, allocate budgets efficiently, and improve affiliate programs to maximize profits. Additionally, NGR aids operators in managing risk by identifying areas for improvement.
Formula for Net Gaming Revenue
Understanding how to calculate Net Gaming Revenue is important for iGaming operators. While many operators have different methods for calculating the NGR, the basic formula remains the same. With this formula, operators can find their profitability and evaluate their performance.
Here is the formula for calculating the net revenue from the gross amount:
Key Components of NGR
The key components of Net Gaming Revenue (NGR) include:
- Gross Gaming Revenue (GGR): The total revenue generated from all bets placed by players before any deductions. It is the overall income from gaming activities.
- Player Winnings: The amount given back to players in the form of the prizes won.
- Bonuses and Promotions: This is the cost of rewards such as free spins, sign-up bonuses, and retention bonuses that attract players.
- Taxes and Regulatory Fees: Taxes imposed by the government or regulatory bodies that gaming operators must pay based on the revenue generated. These may differ based on the jurisdiction.
- Payment Processing Fees: Costs associated with processing deposits and withdrawals, for example, credit card or digital wallet fees.
- Chargebacks: When players ask for their money back or dispute a payment, often due to a problem with the transaction or payment.
An Example to Understand How to Calculate NGR
Alex, an online casino operator, saw a total of $100,000 in player bets for the month. However, after deducting various costs, the actual profit was much lower.
NGR Calculation in this Example:
NGR = GGR – (Player Winnings + Bonuses + Taxes + Fees + Chargebacks)
NGR = $100,000 – ($40,000 + $10,000 + $5,000 + $2,000 + $1,000)
NGR = $100,000 – $58,000
NGR = $42,000
So, after all the deductions, Alex’s Net Gaming Revenue (NGR) for the month is $42,000.
NGR vs GGR: A Clear Comparison of Revenue Metrics
| Aspect | Gross Gaming Revenue (GGR) | Net Gaming Revenue (NGR) |
| Definition | The total revenue from player wagers before deductions. | Revenue left after subtracting bonuses, taxes, fees, and operating costs from GGR. |
| Formula | GGR = Total Bets – Total Wins | NGR = GGR – (Bonuses + Taxes + Fees + Other Costs) |
| Purpose | Calculates the total income produced by the gaming operation. | Highlights the operation’s profitability and overall financial status. |
| Regulatory Use | Commonly used for taxation and regulatory reporting, as it shows total revenue before expenses. | Used by companies to assess profitability and plan finances. |
| Importance in Affiliate Marketing | Affiliates may be paid based on GGR, offering a steady yet higher base for commissions. | Affiliates paid on NGR may receive lower commissions since it includes all operational costs. |
| Calculation Complexity | Relatively simple to calculate, and only requires data on bets and wins. | More complex as it involves multiple deductions like bonuses, taxes, fees, etc. |
Importance of NGR in iGaming
Revenue Assessment: NGR helps companies analyze the actual revenue generated by gaming and gambling activities after deducting other payouts. It also provides a clear image of the business’s net earnings as compared to gross earnings (as evident through GGR).
Operational Decision-Making: Understanding NGR allows businesses to make informed decisions regarding player bonuses, promotional campaigns, and pricing strategies. It helps in working out how business strategies must be adjusted to maximize revenue and minimize costs.
Tax and Regulatory Compliance: Many jurisdictions use Net Gaming Revenue as a basis for determining tax obligations for their iGaming businesses. Accurate reporting of the metric ensures compliance with tax regulations and helps avoid penalties.
Investor Insights: Investors and stakeholders use the unit to assess the financial health of a gaming company. A strong NGR trend is often viewed as a sign of business stability and growth potential, improving investor confidence.
Challenges in Managing NGR
Managing Net Gaming Revenue comes with several challenges, as it requires careful tracking and adjustment of various factors that can impact profitability.
Here are the major hurdles.
Conclusion
Net Gaming Revenue (NGR) is more than just a financial metric—it’s a window into the health and profitability of an iGaming business.
By understanding how much revenue is truly left after covering payouts, bonuses, taxes, and fees, operators can make smarter decisions and plan for long-term success.
In a fast-growing and competitive industry, keeping a close eye on NGR helps businesses fine-tune their strategies, attract players, stay compliant with regulations, and build trust with investors.
