The SCOTUS decision legalizing sports betting on a state-by-state basis has unleashed a firestorm of activity and chaos. How this is going to play out over the next few years is anyone’s guess, but here are some factors and scenarios to consider:
I originally thought that the books in newly legal states would merely be clones of Nevada books, which are far inferior to offshore books because their primary goal is to maintain the status quo, which is to not lose, rather than take the risks inherent in being very profitable. However, the DraftKings books have offered some interesting innovations [LINK] that could attract bettors, and are acting aggressively to expand their market share. This is a move in the right direction and I hope it spurs further innovations.
The big fly in the ointment for the success of US books is vigorish. State politicians, sports leagues, and big-money investors have visions of a massive money well and are fighting over the buckets. Much of this hysteria is based on faulty thinking. Sports books in Nevada operate on thin margins. To create the massive envisioned profits in new legal states, the betting public would have to accept a higher vig than is standard now. I don’t think this is sustainable, especially if offshore books continue to operate.
If a major federal effort is made to shut down access to offshore books (which is questionable), and juice is raised to -115 or higher, serious bettors will either move their operations to countries where they can access offshore books, or simply quit because their profit opportunity is vastly reduced and not worth the effort. I had a talk with someone in the business today and he brought up something I’ve been pondering: If the heat on offshore books is intense, bookies might go back to taking bets over the phone. Welcome to the ’80s! If offshore books remain accessible to Americans, bettors will flock to the lower-vig offshore books and US books will suffer greatly.
One thing that will be interesting is if offshore books are denied access to data from the sports leagues for not paying the fee. If they have to pay, they might have to increase their vig, too and smaller books will be forced out of business.
The sports betting environment in the U.S. at present is like the wild west and will take several years to stabilize. Many cans of worms have been opened. When it all plays out, there will be winners and losers on both sides of the counter. I have a feeling the winners on the book side will be those who develop innovations, or market disruptions that attract veteran bettors and entice new ones.
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The whole point about leagues having “exclusive data” is nonsense. They may hold exclusive data to a few things, but they are likely insignificant. There’s multiple sources for data, and sports bettors know where to access them. Knowing how many miles Kawhi Leonard ran in his last game is likely to have no effect on the betting markets.
EVERY…SINGLE…SOLITARY…new gambling market is the last fifty years has operated with a mindset of slaughtering the sheep rather than shearing them. These new books will have high-vig lines, exotic bets with huge house edges, and futures bets with minus EV that would make live Keno look good. The novelty will bring in lots of customers. At first. Then business will die out, and shockingly rapidly at that. Many people can afford to lose at gambling. Not many people can afford to be raped.
The corollary to this is that no one will have the guts/brains to offer better prices than Vegas. In Vegas today, any casino that dealt single deck 3:2 blackjack, had 10X odds on craps, lots of 99.5%+ video poker, etc. would be MOBBED, but no one has the balls to do it. Similarly, no sports book operator will have the savvy to undercut both Vegas AND the other US books. You still make money on a nickel line. You just have to take in twice as much action. Why wouldn’t somebody decide to be the WalMart of sports betting? Because everybody wants to get rich quick by slaughtering the sheep.
Pity. God knows, I’d do it if I had the money. And in a year, I’d have half the business in the country.
I have no idea what the data think means going forward. I think the MGM made a horrible mistake kowtowing to the NBA. Unless the league owners are total idiots, the books could have held out and the leagues would have realized that if they disrupted the action, they would suffer as much as anybody. Can they possibly think that the majority of people who watch the NBA would still do it without a wager? The NBA product sucks. The fact of legalization will mean millions, or billions to each team’s value and bottom line without this tact. They are just greedy and stupid. There’s lots to bet on without the NBA. Personally, I hope it blows up in both their faces.
But, the leagues claim they own the stats on their product, and they’re probably right. The other sources you cite, like, I assume, ESPN, Yahoo, etc., most likely already pay something to the leagues for real time data. If the league tries to give MGM an exclusive, or withhold data from entities that don’t pay, it will throw a wrench into the whole thing. MGM’s deal makes an already chaotic situation even more so.
Blair, if we remove NBA and replace it with NFL, it all applies as well. How big would the NFL be without gambling and fantasy football? The NFL fought gambling for years knew they had to do a 180. The proliferation of injuries has caused a number of rule changes. Football will no longer be the game we grew up watching. The number of players going out for high school football has fallen significantly, and that impact will be felt at the college and professional levels.
I agree, Tom. I wouldn’t watch an NFL game without action either. (In fact, there are few things I would watch without a wager.) The NFL has major issues and unless they come up with some real answers, their future isn’t rosy. I think they know this and will embrace betting.
The NFL’s problems are unique in that no other sport has been deemed by much of the public, and even its own athletes, as dangerous. What other sport has had players–in their primes–retire for fear of being crippled and/or demented later in life? As a kid, football was always me favorite sport; now I almost feel guilty watching it. The NFL wishes that anthem protests were its biggest problem. As an Eagles fan, I’ve been saying for years that I hope they win a Super Bowl before the sport goes the way of the wooly mammoth.
When Ebay came around, many predicted it being the death knell for flea markets and many lifelong vendors felt they had found bliss. Make money on their antiques with minimal physical work. For awhile they did and flea markets were becoming obsolete. However, with Ebay getting greedy and increasing fees over the years and making it much more difficult for the small business and independent sellers, flea markets are once again booming. Many vendors I know who used to sell on Ebay have given it up and cringe at the mention of its name.
I have a feeling, as alluded to in the article, that this could happen with sports gambling as well. Eventually the novelty of casino wagering will wear off and increased vigs might drive even small-time bettors back to dealing with illegal bookies (illegal in most places), betting on the phone and settling once a week. They haven’t gone away totally and might see a resurgence due to Ebay-like tactics of gouing its customer base.