Understanding the House Edge – Do Players Really Know What to Expect?

Posted by Harry Kane on Monday, June 28, 2021

There are various pieces of jargon and terminology that are used when discussing the iGaming industry in the UK, with the so-called “house edge” and “return-to-player rate” offering particularly prominent examples.

However, while operators are required to publish this information on their various websites, recent studies have uncovered that many operators are failing to present this in a genuinely concise and effective manner.

In this article, we’ll explore these concepts in further detail, while asking whether operators do enough to inform their players and empower them to enjoy a rewarding iGaming experience.

What do the Terms ‘House Edge’ and ‘Return-to-Player Rate’ Mean?

Not only are the terms ‘house edge’ and ‘return-to-player rate’ (also referred to as RTP) strategically important from the perspective of individual players, but they’re also inextricably linked when wagering online.

The former refers to the fundamental mathematical advantage that each gambling game (and therefore the hosting online casino) has over players over an extended period of gameplay. This strategic advantage results in an assured percentage return to the venue over time, and a corresponding loss that players should expect on average.

The RTP rate presents similar information to players, albeit in a different and more consumer-centric manner.

More specifically, it refers to the average amount of cash that players can expect to recoup for every £1 that they wager online, while once again it’s often applied to individual games such as slots (although it can also describe wider verticals and casino platforms as a whole).

When calculating RTP rates, you’ll note that they never exceed 100%. This is because they’re based on a platform or game’s fundamental house edge, so they’ll always record at least some level of loss from the perspective of players.

For example, let’s say that you’re playing the popular Jackpot 6000 slot from NetEnt, which boasts a published RTP rate of 98.8%. This is characterised as a certified, low-variance slot that will payout more than £0.98 on average for every £1 wagered, creating a favourable proposition but one that still requires you to accept a certain level of loss.

Interestingly, you can also calculate the game’s specific house edge using this number, simply by subtracting the 98.8% RTP rate from a value of 100%.

In this instance, you’ll be faced with a house edge of 1.20%, which for context is higher than most iterations of blackjack but considerably lower and more competitive than both American and European roulette.

Do Players Understand These Terms? What do the Studies Say?

While these descriptions are relatively simple, they’re not commonly understood by novice players. At the same time, studies from Australia and the UK have shown that online casino operators typically fail to present this information in a concise or effective manner, while some also make it hard for players to locate the data online.

This relatively narrow and focused study was telling, while it also gathered information from 363 separate roulette titles spread across 26 major, international operators.

The most interesting finding is that the majority of operators do the bare minimum to publish and clarify their house edge and RTP data, while adhering to the strict letter of the law and meeting the bare regulatory requirements.

For example, 98.3% of participating operators published the requisite data on their websites, with all but one using the minimum bold font weight allowed by the regulator.

Similarly, 95% deployed the smallest allowable font size, occasionally causing the information to become lost amid the noise, clutter and vivid colour palates of most online casino platforms.

Most operators also choose to ‘bury’ the relevant information inside a vast wall of text, usually within an average word count of 2,078 words. What’s more, just 38% of respondents placed the information in the upper part of this text, with most placing this somewhere in the middle of the content.

In terms of navigation, operators would often compel players to complete more than a single click to find and access the information, starting from the site’s home page. This made the information logistically more difficult to find, potentially deterring some players for looking and causing them to play games with a higher house edge and lower RTP rate in the process.

The Last Word – Could This be a Target of Regulation in the Future?

Another prominent issue is that operators tend to prioritise the RTP rate when publishing game information, as this concept is widely misunderstood amongst players online.

In fact, a previous study had found that around less than half of gamblers were able to correctly a multiple-choice question pertaining to an RTP rate statement. Conversely, two-thirds of the same respondents correctly answered a similar question that instead focused on house edge, highlighting a clear gap in knowledge that could impact negatively on players and their decisions.

Of course, it can be argued that such findings are relatively inconsequential, particularly as there’s no discernible link between this particular example of financial literacy, problem gambling and subsequent societal harm.

However, it is indicative of a wider sense of fiscal and gambling literacy that exists within the iGaming space, with this impacting directly on the decision making of players and potentially causing incremental losses over the course of each iGaming session.

Given this, and the fact that the UK Gambling Commission (UKGC) is increasingly committed to creating new regulations based on the type of focused study discussed in this blog, it seems as though the publication of RTP rates and the requirements placed on operators could well inspire updated regulatory measures in the near-term.

This would be part of wider reforms that follow the recent gambling industry and licensing review carried out by the UK government, of course, while it would most likely require the information to be displayed more prominently and using a larger, more visible font.

Similarly, the UKGC may focus on creating concise and universal language for operators to use when explaining their house edge and presenting RTP rate data, in a bid to improve gambling literacy rates and help players to make more informed game and betting selections.