“Ploperators” – yes made up nonsense that refers to an increasing number of online casino operations with an identity crisis, “am I a Player or an Operator?”

We all work in the gambling industry but we don’t all have to gamble. All too frequently practices and procedures in the online gambling industry are taken as defacto and only on careful consideration is it evident that many businesses are infact gambling with their own futures.

I’d like to consider the use and misuse of jackpots within online gambling operators. Undeniably progressive jackpot and seven figure prizes hold some great advantages, offering ‘life changing’ prizes with no cost or operator exposure and appealing to a whole casino demographic of devotees to progressives, with European Jackpot play accounting for up to 10% of casino wagering.

Is there a cost? of course there is. Anyone who tells you that “in the long run it all evens out” is not necessarily wrong but I’d argue they are showing signs of being a ‘ploperator’. Huge Jackpot drops are infrequent and are even more infrequent when considering a single operator, of the contributions paid at the point of wagering a fraction is returned on a monthly or yearly basis. So not only is the long run actually the “very long run” but when we take into account jackpot seeds, management of funds and currency valuations the return isn’t expected to reach the input, there is an opportunity cost to those funds locked away at the point of wager for some remote future outcome.

Jackpot contributions are merely an insurance premium, the larger the operator (the more frequent the wins) the lower the effective premium but it is a premium nonetheless. But if my player wins big early then it all pays off doesn’t it? No. Well we have all heard the stories about the wealthy jackpot winner for whom money has no value and will quite happily lose back to the house but that is a very very rare event, so in practice this money is still lost from the house; it maybe your player that now owns it and not one of your competitors but those small parts of the players deposits that accumulated to a jackpot value has still exited your casino.

How big is this cost? it can be big, very big. We need to throw some scary numbers in so lets take the fictitious jackpot that pays 97% rtp of which 6% is covered in a jackpot contribution. So the player that deposits £100 and places £100 of bets will have paid a ‘premium’ of £6 into the fund. He will however have won some back from his wagering and with £91 available to bet the next round of wagering will contribute £5.46 into the fund… and so on. Theoretically and assuming zero wins, twice the amount retained by the casino will now be deposited as premiums. So of that £100 deposited £66.67 sits in the fund and £33.33 has been retained by casino. The reality is never that bad; players don’t just play progressives, player ‘base game’ losses are not experienced at a nice 3% per round of betting and thankfully mini and minor jackpots also help in ensuring the “premium” is not a full 6% per wager.

So Progressive Jackpots are bad? No, far from it. They entice all players and drive some specific players, there is a reason lotteries are so huge. But the “ploperator” will not continually assess the cost or cost timeframe; the “ploperator” will unthinkingly pay the premium on behalf of players with bonus money,  and the “ploperator” will pray for the big win that will offset his low player hold assuming the player won’t have something better to do with the cash.