The Bingo Renaissance: Getting to the Bottom Line
by Eric Casey
different ways and different times to the many tribes running
I n 1995, I met with the manager of a large bingo room in a
prominent Las Vegas casino who proudly pointed out that
he was having one of his best years ever... his bingo room was
bingo businesses. In the meantime, managers face the daily chal-
lenges of keeping players and ﬁnding new ones, and keeping
going to lose less than $1 million dollars by ﬁscal year-end! their bingo operations proﬁtable while steering the enterprise
I asked him if this status was truly appreciated by upper man- into the future.
agement, and he assured me it was. In fact, bingo was not even As a tribal government business operation, bingo comes in
perceived as a potential proﬁt center to the casino, but as a all shapes and sizes: some tribes offer three or four sessions of
planned loss-leader... a convenience to bring people into the facil- bingo per week, while others may offer three or four sessions
ity and keep them in there longer. And he was having a great year! daily, seven days per week! Bingo can be run in a hall located
Everyone involved in bingo knows that the industry has gone within a casino or in a stand-alone facility completely separate
through major contractions over the last 10 years. During the from any other gaming.
90s, bingo grew to an $8 billion dollar handle in the U.S. and A stand-alone bingo enterprise delivers a clear proﬁt/loss
Canada, of which roughly half was wagered in tribal bingo halls. statement (P&L) every month, and it's easy to see a bottom
But as the demographics of our player base changed and other line that's in the black or in the red. Where the bingo hall is
forms of competition for gaming and entertainment dollars located within a casino facility, bingo is often a division much
proliferated, particularly with the casino and riverboat expan- like table games, keno, or slots. We would hope that these bingo
sion which peaked in the late 90s, many bingo halls were sud- halls are proﬁtable, but it's here where we are most likely to
denly struggling to keep players, ﬁnd new ones and stay prof- encounter vestiges of that 'loss-leader' perception where bingo
itable. This is a challenge that is still continuing today. is thought of or accepted as little more than a means of attract-
Fortunately, even while the bingo marketplace has been ing players to the property's casino ﬂoor. In this type of busi-
changing and contracting, our industry is also undergoing a ness model, bingo basically becomes an expense against the
massive reinvention from the inside-out, which has made the dif- overall casino P&L. Sometimes that's okay, like it was in Vegas
ference between a 'contracting market' and a 'declining market.' way back when. But today we have the tools and the market
The 'loss-leader' hall in Vegas that in 1995 was cheerfully position to make money with bingo and run it in the black.
losing a million dollars a year is now, in 2005, well in the black. Assuming that proﬁtability is the objective, there are some
One of the reasons is electronic bingo, and this was generally key accounting strategies in both budgeting and in analyzing
true throughout the industry; the negative effect on gross the hall performance that help shape that bottom line. Bingo
bingo revenue from a contracting player base was offset, often forecasting and budgeting, as well as monthly statements of
spectacularly, by increased spend through electronic bingo. proﬁt/loss can all shake out of the same accounting calculations.
In fact, using electronic bingo technology to remove the Bingo operations can sometimes seem a bit outside-the-box
inherent physical limitation on the bingo player's spend was of standard accounting practice, but only because of the unique
one of the fundamental bingo-paradigm shifts of the 90s. And language that governs bingo. Bingo prizeboards, progressives
now, in the early 2000s, technology has thoroughly integrated and reserves, cost of goods to support sales of paper and elec-
into and transformed the 'industrial age' paper/dabber toolsets. tronic bingo, which may come in the form of per card pricing,
Especially in Indian Country, the roots of electronic bingo tech- revenue share, per unit per play fees, or combinations of these.
nology are now running deep enough in the industry for inno- All of these factors and more need to be ﬁt into a bingo P&L
vation to truly ﬂower, limited mainly by regulatory constraints format that can be used by management to navigate to proﬁt.
such as those that may ultimately be imposed by the Class II Checking on gross margin is the ﬁrst and most important
Classiﬁcation process. exercise. If you take the example in the table below and re-cre-
The next phase of industry evolution is shaping up to ate it on a spreadsheet, plugging in your actual revenue and
address the 'bingo experience' itself, by changing the hall expenses you'll quickly see where your gross margin lies. Is it
environment and the presentation of the game. This phase aims in the neighborhood of the 27% industry standard?
at accomplishing what technology alone could not: a more com- The following example shows gross revenue minus cost of
plete repositioning of bingo in society as an exciting, afford- goods sold (COGS) and depreciation. The COGS line items were
able, and desirable entertainment venue for a broad spectrum expenses directly related to creation of bingo revenue. There are
of players of all ages. From reinvention comes renaissance. many different ways to account for line item expenses both
This bingo metamorphosis is unfolding throughout Indian before and after the gross margin line, but the table shows the
Country on many levels but it will take time and investment most common and critical elements. Generally, the section
to fully actualize bingo's potential; and success will come in on the income statement after the gross margin line contains
48 Indian Gaming October 2005
selling and general petitive bingo halls in the area, but also designed (multiplied
November administrative by estimated attendance) to generate sales adequate to support
expenses (SGAs) and the planned prizeboard and operational expenses and turn a
Gross Revenue $391,300
interest and tax proﬁt.
COGS expenses, which are all
Prize Liability 70% $273,910 Prizeboard: The single largest liability to the bingo hall and
subtracted from the
Paper Bingo $2,200 the area that causes the most problems is the bingo prizeboard
Ink Dabbers $350 gross margin to arrive,
liability. The table shows the industry standard of 70% of
Electronic Bingo $5,500 ﬁnally, at a bottom line
gross revenue going back to the players in the form of prize
net proﬁt (or loss).
Depreciation $1,100 payouts. If that payout was actually running 80% of revenue,
The SGAs include
Subtotal COGS $283,060 the gross margin would drop to 18%, which may put the hall
wages and beneﬁts for
into the red. This often happens in a competitive marketplace
Gross Margin $108,240 staff, rent, utilities,
% of revenue where bingo halls try to lure players with higher and higher
27.6% security, insurance,
prize payouts… if those incremental revenues don't appear or
and other expenses
aren't sustainable, and the prizeboard doesn't change, these halls
typically incurred in business operations. Controlling these
can quickly ﬁnd themselves losing money.
expenses for ﬁnancial efﬁciency and savings is essential, but since
Even more common, if an annual budget reﬂects a prize lia-
these expenses must all be supported from the gross margin,
bility that was budgeted at 70% of a gross revenue number cal-
let's focus on the assumptions that take the income statement
culated from November, but then in June, July and August the
from gross revenue to gross margin.
attendance drops dramatically due to summer weather and
Gross Revenue: This is the actual total revenue created by everyone being outdoors… well, the hall can go upside-down
the hall. For session bingo in a budget or forecast situation, rev- pretty quickly. Some operations work around this by chang-
enue estimation is generally drawn from two factors: average ing their bingo programs, including pricing to the players and
bingo attendance multiplied by the estimated average spend. monthly prize payouts, tailoring them to the known monthly
Most halls forecast monthly revenue based on historical data or seasonal variances in attendance. Other halls design a prize-
for attendance and spend that can vary month to month, mod- board that always keeps them in the black, even on the low-
iﬁed by things such as attendance ﬂux due to seasonality or spe- est-attended months, and they make even more money when
cial events, both of which affect the revenue cycle. Revenue can attendance is strong.
also be included from sales of other products that go to the bingo
Depreciation Expense: A line item that might cover, for
hall, such as ink dabbers, pulltabs, Class II machines, pari-mutuel
example, blowers and ﬂashboards purchased for the halls and
bingo and even concessions. All bingo income will be captured
depreciating over their estimated lifespan.
on the P&L.
Taking all of this into consideration, the key is to estimate sales
Using just session bingo for the table, a hall with seven ses-
(attendance multiplied by spend); calculate cost of goods for paper
sions per week, an average attendance of 200 and an average
and electronics; ﬁgure a depreciation expense if any, and then
spend of $65.00 per player can forecast revenue of $391,300.00
back into the prize liability per session. Pay as much you can or
for the given month. Again, there are many levels of detail that
as much as you need to compete successfully, but that gross
can be brought to bear in forecasting this number to the great-
margin needs to stay up in the 27% range if possible. Gener-
est degree of accuracy.
ally, anything less can make it increasingly difﬁcult to manage
COGS: Cost of goods sold includes the average or antici- the SG&A expenses and maintain a positive net proﬁt.
pated prize liability and the cost of paper bingo, ink dabbers, Nowadays, with the tools at hand, each game in a bingo
and electronic bingo supplies. Detailed assumptions behind each session can be analyzed for proﬁtability… buy-ins vs. payouts.
of these categories, such as the average number of electronic Bingo programs can be fed into forecasts and budgets that can
bingo handsets used per session multiplied by the average per be laid out in intricate detail and then compared as the year
use fee should be calculated and forecast or tracked. These progresses to actual monthly income statements from the
expense calculations can be detailed right down to the daily accounting department. Ongoing analysis of this information will
bingo sessions. quickly identify areas where change might help or be necessary.
On the paper and electronic bingo costs, these are gener- Reinvention to renaissance can be a bumpy road, but bingo
ally historic and fairly constant, subject to negotiation with ven- as a business enterprise should be seen as an exciting proﬁt
dors. The primary bingo revenue stream comes largely from center… and that's the bottom line. p
the sales of these products to players, and success lies in hav-
ing the right products for the hall at the right cost to the hall, Eric Casey is Director of Sales and Strategic Planning with
while pricing them attractively to the players. The packaging Planet Bingo. Casey has 15 years experience in the bingo industry,
of the bingo products to the players is an art unto itself… the working with all segments of the marketplace. He can be reached
programs and prices have to be player-attractive relative to com- by calling (760) 773-0197 or email firstname.lastname@example.org
October 2005 Indian Gaming 49