The gambling operations at a casino run at a profit because of what is known as the "house edge," or "house advantage." The edge becomes mathematically operative ONLY when games are played many times. Here is a simple example: Casino money.
A flipped coin will land in one of 3 ways: Either heads, OR tails, OR on its edge. But what is the probability of an edge landing? Canadian physicists Daniel B. Murray and Scott W. Teare, in their Oct, 1993 article appearing in Physical Review E, determined that, "the probability of an American nickel landing on edge is approximately 1 in 6000 tosses." (See Probability of a tossed coin landing on edge).
So now, you are ready to open your "Nickel Casino" which has just one game. For the low price of $1, the player is allowed to toss a nickel 50 times. If it lands on edge, player wins $100.00. If not, player loses the dollar. Mathematically, it will take 120 runs of 50 tosses each (6,000 tosses) before a nickel lands on edge. The actual results will vary, sometimes, a lucky player will have the first flip land on edge. And sometimes, it may take 10,000 flips before an edge landing. But on average, your casino will need to pay out $100 for every $120 it took in.
Let',s take this a step further. Suppose the player hands you $10, which will buy 500 tosses. Everyone watches one flip after the other. Assuming it takes 5 seconds to toss, observe, retrieve and then toss again, the player will need about 42 minutes to complete all 500 tosses. Given interruptions which are bound to occur, let',s say it takes an hour, on average, to toss the nickel 500 times. And with an 8-hour day, that means the total tosses will be 4,000.
Still with me? OK, next step. With just one game running, players must play one at a time, one after the other. Some will buy 50 tosses, some may buy 300, some may buy 1,000. Doesn',t matter, because the odds don',t "reset" with each change in player. All we know is that on any given day with just one game running, the nickel will be tossed about 4,000 times, right? Right!
Over the space of 30 days, there will have been 120,000 tosses. Your "take" will be $2,400. That is, 120,000 covers 2,400 games of 50 tosses each, and you get $1 for each of those games.
But we do also know that with every 6,000 tosses, you',ll need to pay out, on average, $100.00. And so, you will have paid out 20 times. That gives us 20 X $100 = $2,000. Your profit for the month is just $400.00. Pretty slim.
And there is another problem. While the average of 1 edge in 6,000 tosses is mathematically correct, in actual practice there will be significant deviations from the norm. It is entirely possible that 3 players in a row may get an edge landing within a few hours', play. Poof - there goes $300 against just $3.
To resolve this problem, you need more coin tosses, so that the overall predicted performance is more closely approached by the actual results. This is known as the "law of large numbers."
So, you expand your casino to run 100 games all at the same time. Now, at the end of the month, you',ve pulled in $240,000, and paid out $200,000, for a net 40 grand. The house "edge" in this case is 20% -Pretty sweet.
Casino free money
At the most fundamental level, this is the calculus the casinos use to make their money on gaming operations. Some games, such as craps and roulette, are highly mathematical. On any given dice roll or wheel spin, the odds are well established. In the case of slot machines, payouts are programmed into the machine, determined mechanically or electronically, and completely random. The only game where player skill comes into play is 21 (Blackjack). And the house edge in all these games is much better for the player then the nickel toss described above. All things considered, a casino may operate on an average edge of just 2%. It works, because a LOT of games are running at the same time, the law of large numbers takes hold, predicted and actual results are closely (but never exactly) matched.
If this interests you, there is no better resource than this man:
Professional actuary Michael Shackleford, known as the "Wizard of Odds," whose web site is a rich resource of information ( Home - Wizard of Odds)
Of course, many casinos also offer lodging, shows, dining and other nightlife, and all of it goes into the bottom line.
I was asked to post my comment as an answer, so here it is from someone who was trained by and worked in one of the best run casinos in the world.
Most casinos track and evaluate the amount of money they make off of people who walk in the door. The casinos know very well the average amount of money they make off of each person who walks in the door. The more people who walk in the door, the more money they make. Also the type of people they can attract to walk in the door, the more they can make off of each person, and the average profits per person will increase.
The key for casinos is to find as many ways they can to entice the most people, who fit their targeted customer profiles to walk in their doors.
Free or cheap entertainment,
Free or cheap hotel rooms,
Live sporting events like Boxing or MMA,
Lush swimming pools, spas, golf courses,
and a host of other more personal and varied ways to attract their targeted visitors, and of course on a 24 hours 7 days a week basis.
The casinos are set up to attract their chosen targeted customers and they organize their entertainment, their food, their special events and their special customer treatments to match and attract the highest number of their desired customers. The term "Whales" was used to designate active big money gamblers.
Once people walk into the casinos, the casinos let the many human emotions and characteristics (Human nature) that motivate people to gamble take over and their targeted customers gamble accordingly. These negative emotions include: Pride, Ego, Greed, Anger, Fear, Insecurities, Entitlement, etc.
The placements of the slots, the pits, the poker tables, the event arenas, the hotel lobby, the parking lot, the bars, the restaurants, the bathrooms, and everything else in the casino are done to maximize the exposure of gambling opportunities (read temptations) for customers to gamble. It is an art form on how well everything is organized in the casino to virtually force customers to almost bump into many different ways to gamble.
I was a croupier (Craps Dealer) in the largest and the best operated casino in the world at the time. That being Harrah',s at Lake Tahoe, Nevada. And they trained me an others to understand the gaming game. I became a jammer dealer and really enjoyed the action and skill it took to be a really good dealer. But, I chose to leave, because gaming exploits the negative characteristics of human nature to extract as much money from each customer as fast and as frequently as possible.
The opportunity here is for people who can control all of their negative emotions that entice people to gamble to then take full advantage of all of the free and/or less costly enticements that casinos offer, as listed above and NEVER gamble. If you can go through a casino and Never gamble, you can enjoy the many free and inexpensive benefits the casinos throw at you, normally at cost or many times at a loss and really mess with their profits.
Mr. Mixon is speaking more about how the Casino industry has some of the sharpest marketing minds in the world draw players into their venue.. then probability does the rest.
Real money online casino
Also, the whole business is modeled in a way to make money. Even if when it is legal and audited, so on. The return to player in long run will never exceed the amount staked.
Why has everybody missed the obvious: roulette for example: there are 37 numbers (0 - 36), but house only pays out at 35:1. Some casinos have a double zero so 38
numbers but still pay out at 35:1. The drinks and food are usually over priced - that is true. To summarise: gambling in Las Vegas is a mug',s game. It is a puzzle to me why it is so popular.
Casinos are designed to steal your money while providing the illusion of a fair game. They are engineered to stimulate all of the brain',s pleasure centers by some of the best engineers, marketing people, and psychologists. Casino operators buy state, local and national politicians to keep their control on the scam. And they are a mecca for other predators. Ex Las Vegas resident.
Everything we hear is an opinion, not a fact. Everything we see is a perspect...