In recent years, the world of sports betting has evolved remarkably, transitioning from a specialized segment to a multi-billion-dollar global sensation. Although it hasn’t reached the profit and earning potential of commodities and stock markets, sports betting continues to be a notable and growing industry in many regions, opening a vast opportunity to capitalise on this thriving sector.
There’s a significant opportunity in this booming sector. Since sports betting became legal, it has integrated into European culture. While traditional retail betting has seen a decrease, the rise of the internet has ushered in a new era with online sports betting.
One of the advantages of online sports betting of course is that you don’t need to maintain a series of retail betting venues, with all the associated costs and headaches. According to the latest reviews, there are now hundreds of operators providing everything from traditional sports betting platforms to esports betting sites.
Sports betting offers potential profitability for those with knowledge and initial investment. However, succeeding in this domain is more challenging than it seems, fraught with risks and hurdles. In this article, we’ll delve into key considerations for launching a sports betting business.
How do bookmakers make a profit?
Even if you’ve never bet on sports, you probably understand that bookmakers somehow manage to make a profit regardless of the outcome of a sports event. On the other hand, you might think that bookmakers win and lose just like sports betting punters, but that they’re simply better at weighing the odds.
Neither assumption is strictly true. Providing a sports betting platform is not as simple as, for instance, setting up an online casino. The outcome of sports events cannot be predicted with certainty, leaving a small window of opportunity for particularly skilled sports bettors or those with inside information.
At the same time, bookmakers aren’t simply pitting their judgment against punters. That’s the old-fashioned model of bookmaking. Today’s sports betting platforms earn their profit by imposing market margins.
Bookmakers’ profits parallel that of casinos. They incorporate a small edge into every sports betting market. This is why, if you convert all the odds in any given market into percentages, they’ll total more than 100%. That excess percentage represents the bookmaker’s margin.
Sports betting companies generate profit by setting, then adjusting, their prices to either attract or deter customers. This ensures a profitable position across all possible outcomes of an event.
While this used to be accomplished with teams of dedicated odds compilers and experts, the contemporary approach varies. Nowadays, odds might be contracted out to third-party providers, generated through data analytics, or determined by observing the competition. While the occasional market might result in a loss, the majority of markets are profitable.
Basic steps to start a sports betting business
Licensing
To establish a sports betting business, obtaining a license from the relevant national regulatory authorities isn’t just essential—it’s a significant undertaking.
In fact, multiple types of licenses are typically required, encompassing a variety of activities, including sports betting and bingo. Additionally, there are annual fees tied to license renewal. These fees come along with a comprehensive set of rules and regulations that not only need to be met at the outset but must be consistently adhered to in order to maintain operational status.
In the European Union, there’s increasing scrutiny on sports betting enterprises concerning their societal impact. This heightened attention has led to the introduction of various new regulations and directives by national regulatory agencies. Compounding the challenge, negative media coverage has intensified the pressure on the industry. Looking ahead, success in the sports betting sector will likely hinge on the ability to foresee and adjust to both the shifting legal and regulatory landscape and changes in public opinion.
Establishing your betting website
Looking back a few decades, the business of bookmaking was fairly straightforward. Bookies would determine their odds and embed a modest profit margin for each market. A bookmaker’s standing hinged on the precision of their odds, and astute bettors would seize opportunities presented by any inconsistencies.
Today, constructing your own odds and establishing, testing, and maintaining an online betting site demands a significant outlay of both resources and capital. Consequently, many bookmakers opt for turnkey solutions.
A popular choice is the white-label solution. Here, a bookmaker pays a fee to operate an already-developed betting site, reminiscent of a franchise business model. Alternatively, they can commission a specialized company to craft a site from the ground up. While often more cost-effective, this approach provides greater customization flexibility. Nonetheless, the end result is deeply influenced by the operator’s vision and proficiency.
Advertising and Marketing
In the world of online sports betting, setting the odds better than your competitors is not the key to success. There is often very little difference between the odds available at different bookmakers.
Nowadays if you want to succeed as a sports betting operator, you need to bring in a constant flow of new customers. That’s why you see so many big sports betting bonuses and special promotions. In fact, from time to time some bookmakers are even happy to take a loss on a big event – such as the each-way betting markets for the golf Majors – in order to attract new customers away from competitors!
The sports betting industry is highly competitive. Established bookmakers and online platforms dominate the market. Breaking into the industry and gaining market share can be challenging, especially for new entrants.
Risks and challenges of starting a sports betting business
Starting a sports betting business is fraught with various challenges. One of the primary risks is fierce market competition. Other significant challenges include:
- Regulatory and legal challenges: Most jurisdictions heavily regulate sports betting. Navigating these intricate legal frameworks, obtaining licenses, and ensuring compliance can be daunting. Furthermore, shifts in legislation or unforeseen legal obstacles can introduce substantial risks.
- Financial risks: Establishing a sports betting platform demands a substantial initial investment. If the enterprise fails to attract enough customers or yield adequate revenue, it could face significant financial losses.
- Customer trust and reputation: Earning customer trust is paramount in the betting sector. Any discrepancies in payment processing, the accuracy of odds, or security of customer data can tarnish the business’s reputation. In today’s digital age, negative publicity or customer grievances can spread swiftly on social media platforms, leading to potential customer attrition.
- Addiction and social responsibility: The menace of gambling addiction cannot be understated. Firms bear a societal responsibility to advocate for responsible gambling and extend support to those grappling with addiction. Neglecting this duty can lead to regulatory sanctions and a tarnished reputation.
- Technological advancements and challenges: The fast-paced evolution of technology, marked by phenomena like blockchain and cryptocurrency-based betting platforms, has the potential to unsettle conventional betting methods. The inability to pivot with emerging technologies could result in lost market share. Additionally, technical malfunctions, server downtimes, or security breaches can disrupt services and deteriorate customer trust.
- Global events: Unpredictable global occurrences, such as the COVID-19 pandemic, can deal a blow to the sports industry. This could lead to the cancellation or postponement of sports events, directly impinging on betting prospects and revenue channels.
Operating a successful sports betting business in the EU is undoubtedly challenging. It’s essential for aspiring sports betting entrepreneurs to conduct thorough market research to mitigate these risks effectively. However, for those with the necessary resources, expertise, and marketing acumen, it can still be a profitable sector to engage in. Given the longstanding tradition of sports betting in many EU countries, it is expected to remain a lucrative industry for many years ahead.
