Online Sports Betting

Sports betting is the largest individual segment in the online gaming sector. Excluding the US, it is estimated that the global online sports betting segment was worth $10.5 billion of GGY in 2010, up by 10.4% on the previous year.

The growth enjoyed over recent years is expected to continue with H2GC forecasting that it will reach $13.4 billion by 2015, a compound annual growth rate from 2010 of 5.0%.

Source: H2 Gambling Capital, February 2011

The popularity of different sports varies by territory which impacts the mix of wagers and the margins available to betting operators. Horse racing and football are particularly popular in the UK while football and tennis are among the most popular events in other parts of continental Europe. H2GC estimates that, excluding the US, between 2009 and 2015 the online sports betting markets will achieve a compound annual growth rate in Gross Gaming Yield of approximately 5.0per cent. per annum, reaching an estimated Gross Gaming Yield of approximately $13.4 billion in 2015. The proliferation of online sports betting sites means that no market share data is currently available.

By including live coverage of sporting events, or integrating sports news and statistics with immediate call to actions onto the gaming site, online sports betting operators are able to increase the appeal of the overall player experience.

How sports betting works

Sports betting exists in most countries and its fundamental characteristics are similar throughout the world: wagers are made in advance of or during sporting events in pursuit of an attractive return. The bookmaking process for online sports betting is structured in a similar manner to land based bookmaking. Operators bear the risk of all sports bets placed with them. Ideally, stakes are proportionately distributed on every possible outcome so that, regardless of the result, the book will be balanced and the operator will make a positive margin. The bookmaker’s skill lies in calculating and adjusting the odds as wagers are placed, thereby managing exposure based on achieving a theoretical margin. The gross revenue earned in any period will vary depending on the outcome of the events and the bookmaker’s ability to manage the risk. For example, the largest amount of money staked typically goes on the favourite in an event, and the theoretical margin will assume a certain proportion of favourites winning across all events in a season. If more favourites win than expected, the actual margin realised by a bookmaker on a particular event will typically be lower than the theoretical margin, and a bookmaker on a particular event may even incur losses.

Due to competitive forces and the tendency of players to back favourites, sports betting operators sometimes run unbalanced books, expecting that the bookmaker’s greater insight into the likely outcome of the event will result in a positive margin. In this way, the bookmaker can offer more favourable odds on outcomes that it regards as unlikely to actually occur. The sports betting operator is a genuine trading desk, taking active positions in each market in which it operates.

Advances in technology have meant that live betting – where bettors can place bets during an event – has become increasingly popular and can represent as much as 50% or more of the amount wagered on a particular event.

All market data supplied by H2 Gambling Capital, February 2011