If you’ve ever gambled at a casino, then you’ve encountered the house edge. This despicable piece of mathematics is designed to keep the gaming establishment entirely in control, even if their marketing and promotions suggest otherwise. Then again, casino owners aren’t running a charity, so it’s logical that they would find a way to consistently swing the odds in their favor.
In this article, we’ll be looking at online casinos and their advantage over the player, specifically as it applies to the average player. Please keep in mind, however, that the following text is not meant to discourage you from gambling. It’s only intended to impart a certain level of sobering information, which hopefully makes you a better-informed customer in the future.
What is the House Edge?
In simple terms, the house edge is a mathematical expression of the advantage a game has on the player over the long run. This amount has been carefully calculated to assure the gaming site of profitability, allowing them to generate revenue and cover overhead such as employees and licensing fees.
The house edge is always expressed as a percentage, and it indicates the amount of money that a player can expect to lose on a bet (over long-term play). For example, a player who risks $100 on a game with a 5% house edge could expect (on average) to lose $5 during their session. As you can see, the higher the percentage, the worse it is for the customer.
Important Terms to Know
Several terms are used when the subject of the house edge comes up. While each has a similar meaning, they’re different enough that it can cause problems for some gamblers. To clear up any confusion, I’ve listed each of them below and provided a brief explanation.
House Edge – As mentioned in the previous section, this indicates the percentage a player can expect to lose on each bet over the long term.
Payback Percentage (aka “Return”) – The opposite of the house edge, the payback percentage is the amount of money that a player can expect to get back per bet (over the long-term). The house edge and payback always combine to equal 100%, so a house edge of 5% means a 95% payback percentage.
Expected Return – This is the same as the house edge, although it has a negative sign in front of it.
How is the House Edge Achieved?
Without getting into a lot of complicated mathematics, the house edge is achieved by paying the player less than the true odds of their specific game. This means that even when the player wins, the casino is able to make a small profit of their own. But when the player loses, well, the house gets the entire amount. Are you starting to see why online and land-based casinos are so profitable?
Let’s look at an American roulette wheel. There are 38 pockets on the wheel, which includes the zero and double-zero. The odds on a single number wager are 1 in 38, so the payout should be 38 to 1 ($38 for every $1 wagered by the player). That’s not the case, though, as casinos traditionally pay 36 to 1 on this wager.
Difference Between Online and Land-Based
In most cases, the house edge for online and land-based games are similar. That’s because casino favorites such as craps, roulette, and baccarat have been around for well over a century, and their rules (and payouts) have remained the same for decades.
The biggest difference applies to slot machines, with the house edge being lower for the online versions of the game. This is due to the direct competition of Internet casinos, which leads them to offer more competitive payouts than their land-based counterparts.
Deviation from the Norm
Keep in mind that the house edge factors in long-term play. Deviations are common over the short term, so players aren’t actually going to lose every time they play. If customers consistently lost $5 out of every $100 on a game with a 5% house edge, you can bet that people would stop playing it before long.
Player wins are factored into the house edge. This keeps the customer happy and gives them the illusion of being in control. Meanwhile, the house edge is lurking, always prepared to whittle away the players bankroll over the course of hundreds or thousands of games.
In this section, we’re going to compare the house edge offered on several different games by some of the leading software designers in the industry. You’ll notice that the edge on some games remains consistent, while others differ due to rule variations.
- European Roulette – 2.78% at Realtime Gaming, 2.70% at Betsoft (1.35% on even money bets), 2.70% at Rival, and 2.70% at Microgaming
- Blackjack – 0.54% at Realtime Gaming, 0.65% at Betsoft, 0.66% at Rival, and 0.40% at Microgaming
- Jacks of Better Video Poker – 0.46% at Realtime Gaming, 1.75% at Betsoft, 0.46% at Rival, and 0.46% at Microgaming
- Pai Gow Poker – 2.86% at Realtime Gaming, 2.72% at Betsoft, 2.72% at Rival, and 2.72% at Microgaming
- Baccarat – 1.06% banker/1.24% player/4.93% tie at Realtime Gaming, 1.06% banker/1.24% player/14.36% tie at Betsoft, 1.06% banker/1.24% player/14.36% tie at Rival, and 1.06% banker/1.24% player/14.36% tie/10.36% pairs at Microgaming
As you may have noticed, most of the games remained fairly close when comparing house edges. Three of the four casinos were almost always the same, with one of the group usually having a slight variation. The exception was blackjack, where the house edge for the classic version was different at all four casinos. This serves as a perfect example of why you should research the odds and edges before you play, as they may differ from one online establishment to the next.