The Central Statistic of Casino Revenues

Central Statistic

The central statistic of  casino revenues gives the lie to assurances from casino promoters that they do not want, or need,   problem gamblers. In one line:

52 % of revenue at the average casino is the net losses of  “problem gamblers.”

The term “Problem gamblers”  as used above combines gamblers in two categories: what is now called “disordered gambling” (formerly called “pathological” or “addicted” or level 3); and those in what was formerly called “problem” or “subclinical pathological” or level 2).  There is no universally accepted name and unambiguous term for the combination, which was in the past termed by some “disordered gambling,”   by others “problem gambling.”  The combination  category is about  4 % of the adult population,   perhaps  10 to 15 %  of  casino users.  We recommend that “problem gambling” be kept as the portmanteau term for the combination.  We recommend that  persons whose lives are adversely affected by gambling but who do not meet  criteria for “disordered gambling” be called “at risk for disordered gambling.”

Nearly all the quantifiable socio-economic costs of legalized gambling,  more than $60 billion/year nationally ,2  move through this same 4 %  of adults who are “disordered”   or “at-risk-for-disordered” gamblers.   A program that reduced to zero the number of active disordered and at-risk gamblers and totally prevented formation of new ones would almost wipe away  the huge quantifiable socio-economic costs of legalized gambling, estimated at  $266 per year/capita adult  in the USA. 3

But,  that program would also reduce casino revenues by close on half.  Government’s share, based on taxing the total net losses of gamblers (“gross gaming revenue”), would drop by the same proportion.

The casino exchange exists only for profits.  Do you really think it would support in good faith a prevention and treatment program designed to cut its profit margin by half ?

Do you honestly think the state government would support in good faith a program whose complete success would mean a 50%  decrease in a budgeted revenue line?

Or, do you think the casino exchange and  government agencies would rather cooperate  to showcase  worthy  aims for “regulation” and “prevention  and treatment”  that might just fall short in practice ?

References

1.  Grinols, Earl L. and Omorow  J.D.  16  J. Law and Commerce 1996-97  p. 59 .  Details in appendix below.

2. The figure $60 billion comes from making low-side cost of living adjustments to convert 2003 dollars into those of 2012 and adjusting for population growth between 2003 and 2012.  The 2003 figures are on page 176-177 of Gambling in America by Earl L. Grinols (Cambridge University Press, 2004). This works out to about one-third the annual cost of illicit drug use.    https://www.drugfree.org/join-together/drugs/new-report-estimates-illicit-drug-use-costs-u-s-economy-more-than-193-billion-annually

3. http://cagnyinf.org/wp/gambling-economics-statistical-summary-by-prof-earl-grinols

Appendix:  What Proportion of Gamblers’ Net Losses to Casinos come from Problem Gamblers?  Brief  Review of  Five  Major Reports from the Last Twenty Years

Estimates of what proportion of casino gross gaming revenues derive from the approximately 4% of adults whose lives are adversely affected to varying degrees (“problem gamblers”) by gambling are not many.  The one most directly applicable to the average American casino is that of Grinols and Omorov.  Observations of  types of gambling other than physical casinos accord with Grinols and  Omorov in that  gamblers’ total net losses to a casino (also termed “gross gaming revenues”) have, like many other human activities, a Pareto distribution: the bulk of the output or the uptake   (e.g. consumption, volunteer work done) comes from a relative minority of the participants.

The casino exchange is wont to say that all such problem gambler statistics are wrong, that the biggest chunk of casino revenue is from wealthy “whales”  who  are not problem gamblers, just persons with a lot of discretionary spending money. That is all the rebuttal the exchange offers.

While “whales”  do exist, they do not frequent most casinos or racinos.  Casinos certainly have the information technology to respond with data to the above charges by opponents of predatory gambling, yet they do not.  To weigh in on this they would have to  acknowledge that they can identify all or most of the problem gamblers in their clientele.  This would open them to well-deserved criticism that they are not acting responsibly towards those persons.

Below, we review five documents related to the question of  % gambling revenues from problem gamblers, one each from United States, Alberta, Nova Scotia, Great Britain and Western Europe.

The next section, to the asterisks, is a continuous quote from page 59 of the article by E.L. Grinols and J.D. Omorov “Development or Dreamfield Delusions?: Assessing Casino Gambling’s Costs and Benefits.”  J. Law and Commerce vol. 16 (1996-1997) pp. 49-87.  The table has been re-formatted and footnotes removed.

“Table 1 provides a hypothetical profile of gambling revenues by type of gambler.

                           [table below]

Applying the terms “pathological” and “problem gambling” as

used by the psychology profession to the two groups losing the most to

casinos, we call those who have not gambled in a casino in the past year

“nonbettors,” and divide the remaining gamblers into “heavy” and

“light” bettor categories. Based on prevalence studies, we assume that

1.38 percent of the adults will be pathological gamblers  who lose an

average of $4,01328 and that problem gamblers lose one-seventh the

amount that pathological gamblers lose. This implies that 52 percent of

casino revenues come from the 4.11 percent of the population who are

pathological and problem gamblers.  In this respect, casino gambling resembles

alcohol of which 6.7 percent of the population consumes 50 percent

of all alcohol consumed. Allowing for the average adult to lose as

much as $200 annually to casinos in some areas would still mean that

more than 35 percent of casino revenues in those areas come from problem

and pathological gamblers.

 

The fact that the gambling industry is dependent on problem and

pathological gamblers for a large share of its revenues casts doubt on the

feasibility of treating pathological gamblers using industry tax revenues

to prophylactically prevent the externality costs of gambling addiction.

The treatment cost to the industry would be high, and these costs would

be in addition to existing taxes on gambling gross revenues that are already

high in many cases. Further, if treatment were successful in

preventing gambling by problem and pathological gamblers, it would significantly

reduce industry revenues. It is probably safe to conclude that

not everyone in the casino industry would willingly forego 35 percent or

more of their revenues.”  [emphasis added]

TABLE 1: Representative Distribution of Gambling Revenues by Type of Gambler

% of pop. designation annual loss annual loss cumul % of
per bettor $ per 100 adults $ casino gross
1.38 pathol. gambler 4013 5538 39
2.73 problem gambler 669 1826 52
5.89 heavy bettor 317 1866 65
50 light bettor 99 4970 100
40 non-bettor 0 0 0
100 total 14200 100

 

***********************************************************************

Figures in the table were computed by the authors  using information from  a 1992 report prepared by Deloitte  & Touche for the  City of  Chicago Gaming Commission:  ECONOMIC AND OTHER IMPACTS OF A PROPOSED GAMING. ENTERTAINMENT AND HOTEL FACILITY 137, 146, 147, 162

The Alberta study ( Williams et al)   two direct quotes

“ In 2008/2009 it is estimated that problem gamblers in Alberta account for 50% of all reported gambling expenditures, with that ratio being even higher for VLTs, slot machine and casino table games .”  Williams Robert J,  Belanger Yale, and Harris Jennifer N.  Gaming in Alberta  Final Report to the Alberta Gaming Research Institute 2011 p. 259

 

“A much more serious concern is that 75% of reported gambling expenditure comes from roughly 6% of the population. The most distinguishing feature of these individuals is the fact that 40.6% of them are problem gamblers. Overall, problem gamblers in 2008/2009 in Alberta appear to account for roughly 50% of all reported expenditure, a percentage that is even higher than previous Canadian estimates of between 23% – 36% (Williams & Wood, 2004; 2007). It is ethically problematic for governments and charity organizations to be drawing such a significant percentage of their revenue from a vulnerable segment of the population.”  [emphasis added]  Williams et al   op cit   Final Report to the Alberta Gaming Research Institute 2011 page 280

 

The Bwin study (Planzer, Gray and Howard Shaffer)

A study in Europe on internet gambling with casino type “games” authorized by the internet gaming company Bwin was reported on in an October 2013 article in the Wall Street Journal by Mark Maremont and Alexandra Berzon.   The investigators were Planzer,  Gray  and Howard Shaffer; their report is not yet published.  IThe WSJ article says that  3% of the 4222 customers tracked provided “half  the casino’s take.”  The  WSJ article did not say what proportion of the adult population the 3%  of the 4222 customers were.  Certainly it would be less than 3%, since only a minority of the adults do internet gambling.   The  article did not identify how many of the 3% were problem gamblers.  Safe guess it’s at least half.

Nova Scotia Video Lottery  (report by Focal Research)

A 470 page report on the Nova Scotia Lottery done by Focal Research [Schellink and Schrans principal authors] concluded that

“in 1997/98  5.7% of adults in Nova Scotia (approximately 38,750 adults) did most of the video lottery activity in the province and are contributing approximately $113,236,800, or approximately 96%, of the annual net revenue for video lottery gambling in the province.  Therefore, it can be assumed that VL   play behaviour differs significantly among those who are Casual VL Players and those who play on a regular, continuous basis and that these distinctions have significant implications, in terms of profiling VL gambling within the population at large.”

The Nova Scotia report (pages 3-42, 3-43) found that 55% of VL revenues were from “problem VL players,” who were about one-sixth  of the 5.75% of adults classed as “regular players” [defined as once a month or more].  Problem VL players thus comprised about .92% of adults.

The authors observe “It is obvious that success in helping Problem Players to reduce their expenditures will have a substantial impact on the total revenue Nova Scotia derives from VL play. If  Problem Players’ expenditure was similar to that noted for Frequent Players, there would be a reduction in total revenues from VL gambling of approximately 35% to 40%.

Using  the 2010 British Gambling Prevalence Survey, James Orford (Univ Birmingham), Heather Wardle and Mark Griffiths derived a lower figure for % of gamblers’ net losses coming from problem gamblers: 23% at FOBTs [Fixed Odds Betting Terminals].  We note, however, that the prevalence of current problem gambling in this survey (0.9% by DSM –IV and 0.7% by PGSI criteria)  was much lower than the 2-4% figures from elsewhere.  This difference is more likely to be due to methods than to Britons’ being less vulnerable.  In this study, then,  23% of the FOBT revenues come from less than 1% of the adult population.  This ratio is even more skewed than what what Grinols and Omorov reported for “the average casino” (52% from 4%) .

The opinions expressed above are those of the writer,  Stephen Q. Shafer  MD, MPH, MA retired Clinical Professor of Neurology at Harlem Hospital Center, Columbia University , New York City.  He is Chairperson of Coalition Against Gambling in New York, a non-profit registered in Buffalo  http://cagnyinf.org    Permission is hereby given to quote in whole or in part as long as the permalink is cited and all citations to other work are correctly conveyed.

The graphic is by Dave Colavito.  He places no restrictions on use  but please attribute work to him.

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