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Closing down of Online Casinos

May 16, 2010

New online casinos are launched periodically and some existing online casinos close down.  This happens in all businesses.  When the closure does not harm the players and the affiliates then it does not make big news.  However, recently some online casinos have closed down in an undesirable manner.  Hence it important for players to understand why online casinos closed down and the mechanisms they adopt.

Online casinos close down because their owners are making losses. In the long run the income of the casinos is a percent of the total amount wagered. This percent is the average house edge across all games. In a competitive industry the owners cannot increase the house edge or they will lose the business altogether. Therefore they concentrate on increasing the total amount wagered. This is done in two ways. One is to increase the number of active members. The other is to increase the proportion of high rollers. If they are able to do this then they make profits and the online casino flourishes. If they are unable to do this then they make continuous losses and it is time for exiting.

Online casinos with good credentials just do not close down and vanish. They make sincere efforts to ensure that the players do not suffer. Two mechanisms have been adopted by such casinos. One method is to come to an agreement with some other online casino and transfer their players to that casino. Notice is given to the players that they should register at the other casino within a specified period. Once the player registers then his balance is transferred to the other casino. There are two problematic issues. One is uncleared bonuses and the other is loyalty points. The bonus schemes and loyalty points schemes in the two casinos would very likely be different. Therefore these cannot be transferred. Players are advised to complete their wagering requirements and redeem their loyalty points before the cut off date. If they fail to do so they will very likely lose these benefits.

The second option is easier to execute but more difficult to arrive at. This is selling the property to another online gaming operator. When an online casino takes the player base of another, it is not incurring any extra cost but can expect extra revenue. But if it buys another online casino then it opens up another management front, which requires much more consideration. However outright sale does involve any transfer of customer base and players can continue wagering as before.

If a loss making online casino is unable to find a solution using any of the two options then it has to close operations altogether. This can get messy because players’ deposits have to be returned in the very least. Ideally online casinos are required to maintain players’ deposits in a separate account and not mix them with their operating funds. But the casino has been making losses and the temptation is great to use the players’ deposits to cover up the losses. Some online casinos may give in to this temptation.

Some of the earlier articles indicate telltale signs of casinos that are making losses. Delays in payment are the most common symptom of this malaise. It is best to leave the online casino the moment it exhibits symptoms of ill health because one can never be sure if it will treat its players right when the end comes.

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