[jfoutz]

The article appears to break gamblers into 3 groups.

1) casual players

2) problem players

3) professional gamblers.

so basically casual players gamble something like 50 bucks a year. Problem gamblers get money however they can (and although it's unstated and I have no evidence, I think this is where the actual money comes from). And finally, people that can snipe the mispriced bets, and make a lot of money.

Feels sort of submarine-ish. Casino's can't survive off casual players. They need the addicts to make payroll. The pros eat up casino margins.

I dunno. Feels like a "I run a business, but I'm not really good at it so we need laws to force the pros out". Please don't regulate me, but regulate who can play.

Interesting that it's in Bloomberg. Interesting that the casinos are so bad at laying odd they lose. I have no sympathy for anyone but the addicts. Those folks are sick and need help.

[JumpCrisscross]

> Casino's can't survive off casual players. They need the addicts to make payroll.

The fact that the pros are simulating problem players because then the betting apps give you more leeway, e.g. by "send[ing] you bonus money" and raising your limits, paints the picture quite effectively in my book.

> Casino's can't survive off casual players. They need the addicts to make payroll

To what degree is this true? Sure, a casino with a massive spend on free alcohol and structure needs a high profit margin to return its capital. But betting apps don't have those costs.

[dkrich]

This is backwards. Casinos offer huge cross subsidization opportunities like getting people to spend lots of money in clubs and bars or gamble on games like slots that have a huge house edge while apps have near zero cross subsidization opportunities and massive overhead. An app running at draftkings scale costs a lot to operate.

I’ve believed for a long time and continue to that the math on these businesses just doesn’t work. Eventually they won’t exist because they aren’t profitable.

[burningChrome]

>> I’ve believed for a long time and continue to that the math on these businesses just doesn’t work.

These companies and their apps feels like they're framing this as a social media app. Get together with your friends, play against each other. Its very, very much like fantasy football which generates billions in revenue every year. To me, those are the people and the money they're aiming for - not the casino betters.

I would assume this is the early stages of any market. You have a lot of companies jumping into the fray and trying to make it work. Then as time goes on, like you said, the money just won't work for them and at which point you'll see the standard consolidation where the companies who figure it out will still be there, possibly buy up some smaller companies and so on and so forth.

It will be interesting to see if companies like Draft Kings and Fan Duel can outlast some of the bigger players coming in like BetMGM and other casino backed companies. I don't think we'll be seeing "Bob's Bets" app anytime soon, which would support your idea that this is most likely a loss leader for these casino's, and what's the threshold where they will pull out?

[oremolten]

all my friends who are into the fantasy are now competing on some sports gambling app/site in the same exact manner. Who's teams win the most money etc. They were practically begging me to join them "Look you get like 700 free dollars man! just make some bets and add money and you can cash it out etc etc" They've already been hooked.

[Miraste]

DraftKings is profitable as of a few months ago.

>gamble on games like slots that have a huge house edge

This is what they're working on next: legalization of online casino-style games. They've already got seven states. Profit margins will only go up.

[adw]

> I’ve believed for a long time and continue to that the math on these businesses just doesn’t work.

Particularly for Las Vegas, the business may not be what you think it is. Vegas is, amongst other things, a global money laundrette.

[dkrich]

Casinos are a proven business and have their highs and lows but will be fine. I’m talking specifically about betting apps. The fact that casinos have barely even entered the online space tells you all you need to know about how profitable it is

[oremolten]

I'd argue that's because until the last few years these forms of gambling have been illegal.

[HDThoreaun]

Bookmakers can always lay the odds so that there’s equal money on each side. Then they’re just taking a 10% rake with zero risk. If they start getting killed by pros they’ll just move to the low risk strategy.

[bluGill]

> Bookmakers can always lay the odds so that there’s equal money on each side

No they can't. Large ones can, but the small ones sometimes cannot because they have to match the large ones but in a smaller pool. If everyone knows which team is going to win, diehard fans of the losing team will still bet on their team - large players capture that in their odds and break even. Small players don't have the same mix of customers and so will have to take that loss because they need to compete with the large ones.

Of course overall the small players balance enough the 10% rake from less sure games over the years to make a lot of money but they can still lose 6 figures on some individual games. Small players are less a target for the pros (if only because they know their customer better and so won't accept the pros in the first place).

Remember the small players are often running an illegal operation. They need their reputation of paying out so that customers don't go elsewhere to even turn them in.

[jayrot]

Also, for what it's worth, the idea that betting lines and odds are set to make "equal money on both sides" is a very simplistic and often ignorant talking point. It is quite possible if not common, especially on big games like the SB, for the books to have significant exposure to one side.

Making betting lines is a crazy complex mix of the house essentially betting on an outcome themselves, tempered by a limit to exposure/liability as well as the need to keep lines in basic accordance with other linemakers.

It's unreal how good these guys are most times.

[smabie]

With a 10% edge you really don't need to be very good

And in fact if these guys were good they wouldn't be banning people at all

[rsync]

Forgive me… This is not an area. I have much knowledge of…

… But I thought even a small sports book could balance things properly by setting an appropriate pointspread?

my parent has described a risk for the sports book that seems too assume the simple picking of winners and losers and not a pointspread?

[bluGill]

The issue is the big players publish their spread. You have to at worst match them or everyone sends their money to the big players. You can beat them but not do worse. For bets on the local little league you can set your own spread but the big money is national (and international), sports where you have competition and so need to watch what they do. As a small agent you shouldn't bother calculating spread on the big games just match the large players.

[gnatman]

This is sort of an "assume a perfectly spherical gambler" type problem.

[cardiffspaceman]

I wonder if street bookies make money “for someone” by somehow bringing lending in house. It would be the pair of activities that would be profitable. But they wouldn’t have to be that good at bookmaking.

[gopher_space]

From my perspective the last thing an amateur bookie wants is an outstanding balance either way.

Your only way of dealing with a bad debt is banning the person and letting the other amateur bookies know about it.

[smabie]

Or you could beat the guy up

[glenngillen]

They've existed in other jurisdictions for decades and seem to be doing very well financially.

[dkrich]

Not with the overhead of a draftkings or fanduel

[JumpCrisscross]

Fair enough, I'm not knowledgeable about casino economics. Focussing only on the gambling, however, I'm scpetical they need whales.

[WorldMaker]

They have shareholders expecting massive year-over-year revenue growth and are directly comparing themselves to the free-to-play/mobile gaming space where whales seem plentiful, so of course they are optimizing for whales long-term over sustainably building a low margin overhead product. You can see this almost directly in many of their advertising plans, Draft Kings and the others advertise just like the mobile games space. (They just have fewer places they can show their advertisements from old gambling advertisements laws.)

[hinkley]

And if you keep pulling on that thread: are casinos only profitable because they’re laundering money?

[svantana]

If so, they are in trouble now that they've been disrupted by crypto and NFTs.

[pests]

What legal casino uses crypto or NFTs?

[hinkley]

Other way around. Easier laundering on these.

There’s a reason MMOs let you put money in and make hoops to take it out. Otherwise I can overpay for garbage from my “associate” and he can cash out free money with very little paper trail.

[RobRivera]

Its not a matter of belief its a matter of math.

Their net income is either positive or negative

[dkrich]

Yes and it’s negative

[jfoutz]

You nailed the key point my muddy intuition (and the article) failed to express.

Pro gamblers simulate problem gamblers, so they can bet more.

I said, "Casino's can't survive off casual players. They need the addicts to make payroll"

> To what degree is this true?

I don't know the ROI. It's hyperbolic, I'll freely admit that.

But I think there is an important point. We let problem gamblers gamble more, and it's not fair pros take advantage of that dark pattern.

[JumpCrisscross]

> don't know the ROI. It's hyperbolic, I'll freely admit that.

Being a bookie is making a market. As long as you do your maqth right, your potential for losses are capped--lots of small bets are actually less risky in this respect. Problem gamblers are a cherry on top, far from essential to any gambling enterprise, particularly not one making a two-sided market.

> We let problem gamblers gamble more, and it's not fair pros take advantage of that dark pattern

The pros are the beneficial bacteria checking how much the apps can prey on the problem gamblers.

[phs318u]

When the "cherry on top" (problem gamblers) is responsible for half your revenue (from the Bloomberg article), then that's not just a cherry. That's half the cake. And it's a really, really, big cake.

[JumpCrisscross]

It's still cake! The implied assertion is gambling enterprises need problem gamblers. That if you restrict their ability to prey on problem gamblers, nobody gets to casually gamble.

I know nothing about gambling. But I know a lot about market making and the math of being a bookie. And basaed on that, I don't think the claim is true.

[phs318u]

Well, I don’t know much about market making but as a member of Gamblers Anonymous since 1998 I’ve seen just about every kind of devastation caused by every kind of gambling. In the last few years I’ve seen a significant increase in the number of very young men coming to us. Here in Australia, the gambling industry absolutely is laser focused on targeting young men using every psychological trick in the book, including such pernicious features as “Bet With Mates (tm)” which is explicitly designed to use peer pressure to lock in and escalate those in the group who may otherwise pull out.

If we accept that almost 50% of revenue comes from 80% of gamblers (a diverse cohort) while the other almost 50% comes from 3% of gamblers (a far more uniform cohort), then of course betting companies would be absolutely defending against any change (regulation) that would impact the 3%. Furthermore they’d be remiss in their duty to their shareholders if they weren’t trying to migrate gamblers from the larger cohort to the smaller.

[kasey_junk]

I also no nothing about gambling and a lot more about market making.

One major difference that may change the math is the tax rate. Illinois for instance just passed a 40% tax on sports betting.

[consteval]

Intuitively I see all addictive industries the same. The Tobacco industry can, and does, make money off of the odd cigar at a house party. But ultimately, they rely on the constant addiction to have a business model.

It's cheap, and easy, to make nicotine free tobacco like devices. You could lower your cost quite a bit - pretty good for the books! But it doesn't matter, and nobody with half a brain does it.

[victorbjorklund]

The aqusition costs are extremly high for online betting and online casinos. If you pay 1000 usd to aquire one customer it is not profitable if they gamble 50 usd / year.

[gcanyon]

Then online casinos are a bad business and shouldn't exist, just like breweries shouldn't exist if they can't break even selling to casual drinkers and need alcoholics to make a profit, and gun manufacturers shouldn't exist if they can't break even selling to one-or-two-gun owners and need wannabe-commandos and survivalist cosplayers to make a profit.

[hermannj314]

I worked at a biotechnology company, we had thousands of clients but five of them were 80% of our revenue. In your world, should that business not exist as well?

I don't understand the princple that revenue should be uniformly distributed as a condition for existing. How would you enforce this?

[gcanyon]

I’m not claiming revenue must be even.

And I’m assuming that the five customers actually benefitted from your company’s work? If so, then they’re not really comparable to gambling addicts, alcoholics, and gun fanatics, right?

We already (poorly) enforce (weak) laws requiring casinos not to prey on addicts.

We already (poorly) enforce (weak) laws requiring bars not to over-serve and alcoholics to get treatment sometimes.

We do almost nothing about gun addicts.

But commenting that something shouldn’t be the way it is isn’t a claim to know how to fix it.

[achierius]

Kinda weird to shoehorn in the last one, isn't it? People who own four guns aren't ruining their lives any more than someone who owns four laptops is. So long as they're not using them to commit crimes it's basically just a hobby, and the sort of person who needs a shed to store AR-15 accessories is actually going to be significantly less likely to misuse it than someone with only one or two guns.

[inkcapmushroom]

I don't get how gun fanatics fit into these other groups.

[ElevenLathe]

Are those clients addicts who are ruining their lives with your product? If so, yeah you shouldn't exist, or at least you need to downsize and try to get that percentage way down.

[consteval]

It depends on what you're selling.

> How would you enforce this?

Case by case. We already do this, this isn't a hypothetical. You can't advertise tobacco anymore and guess what, lots less people addicted and we're saving literally millions of lives in the long run.

[butterfly42069]

I presume one would just continuously uniformly distribute everything till they arrived at communism lmao

[consteval]

Or, if we decide to come back to Earth, we simply make the obvious restrictions on a case by case basis via cost analysis. Then we stop when we feel like it.

For example, tobacco is now extremely restricted. That's an obvious industry that profits off of addiction. We went ahead and fixed that. The result? Millions of lives saved.

Oh, but the spooky hypothetical communism! Come on kids, light up these cigs! They make you look cool and masculine! Oh woe is the modern American for being a commie!

[im3w1l]

Acquisition cost is basically an auction. Different casinos try to outspend each other on advertising. If the lifetime value of an average customer trends down then the acquisition costs will come down too.

[FireBeyond]

> The pros eat up casino margins.

In games against the house, the house usually ensures that even with mathematically perfect play, that they will still have a margin (though, admittedly, it's a tighter margin than when a bachelor party is drunk and playing blackjack and hitting on 19 because "I'm feeling lucky!").

Most pros play against the other players (i.e. poker, etc.), and the rake is the rake, regardless of that - the old adage, "If you look around the table and can't figure out who the chump is, you're the chump" stands, i.e. you don't have to beat the house, you just have to beat Bob who flew in from Iowa (not intended to insult anyone or anywhere, just more exaggerate the casual player).

[orwin]

No, advantage betting is pretty much only against the houses, not against other players. While people who know the sport and manage to bet misplaced lines can be winning over a season, advantage betting is the only way to reliantly have a positive EV. Casinos and now sport betting apps try to prevent professionals to use this, but with the number of shit you can now bet on, and since you don't have to tie an account to your real identity yet, it is becoming very difficult to catch that, especially if you muddy the water with dumb bets.

[blitzar]

Outside of the US where gambling on sports has been the norm for decades, the bookies tend to run square books and just earn spread + commissions. To the point where pvp exchanges have been the dominant destination for betting for 20 years or so.

These article (and others like it recently) just make me think US sports betting operations are operating on antiquated business model.

[orwin]

Yes, this is only because american sports give "line bet" and "prop bets", that anybody can exploit if two apps aren't coordinated. You can do line arbitrage (middling is the easiest, but professionals use props with weird maths and specific knowledge to make a living).

If you only offer to bet on the money line, it makes it way harder for professional gamblers.

[blitzar]

A football game in the UK for example has ~60 markets on exchange for a single game with bets on everything from the result, handicaped result (multiple lines), the number of goals, the times of the goals, scorers of goals, half-time results, yellow cards, red cards, number of corners, number of shots at goal, time of first thrown in etc.

[adw]

All the tech piling into US sports books is British precisely because the British markets (particularly horses, football and tennis, but really everything up to and including political markets) are so much more sophisticated and there's a killing to be made exploiting the rubes in the Wild West.

Really professional gamblers (eg Tony Bloom / Betlizard) are just hedge funds and what we're talking about in this thread is "trying to gain an execution edge".

[dustincoates]

> and although it's unstated and I have no evidence, I think this is where the actual money comes from

The article links to a WSJ article that says this group of problem players provides more than 50% of revenue to the betting companies despite being just 3% of all bettors.

> Of the more than 700,000 people in the SMU panel, fewer than 5% withdrew more from their betting apps than they deposited... The next 80% of bettors made up for those operators’ losses. And the 3% of bettors who lost the most accounted for almost half of net revenue

[DrScientist]

> fewer than 5% withdrew more from their betting apps than they deposited... The next 80% of bettors made up for those operators’ losses. And the 3% of bettors who lost the most accounted for almost half of net revenue

That's a deliberately misleading representation - they offset the 80 against losses rather then the 3%. In terms of net revenue the 3% are less than half net revenue - not more.

[Yeul]

This is why Vegas is all about entertainment not just rows of slot machines.

[ebiester]

Vegas is about entertainment because it brings people to the rows of slot machines. And ideally, from their perspective, traps a handful of whales from every cohort.

[015a]

I highly, highly doubt that the share of people who consistently stay in category 1 year-over-year is more than a couple percentage points. Lots of people put $50 in to try the whole thing out, lose, then never return. Extremely few people will then return in 2025 and be like "lets do that again".

I cannot for the life of me understand why these apps can't make money off the pros, and instead need to ban them. Ignoring all the dumb promotions these apps do: Sports betting is zero sum, you're betting against the other players, not the house. The odds are set by who you're betting against. Literally, how does it not work out that the profit is just the money from the losers minus the house 30%-or-whatever cut? Is "pros" in this context people who also frequently abuse the (oftentimes wild) promotions these apps run?

But, if it did work like that, the problem is even more apparent: these apps are at best a direct wealth transfer from addicts and idiots to corporations and pros. Wait, I just described the stock market, we're talking about sports betting :)

[elbasti]

Sports betting is zero sum, but the market is very inefficient. So you need market makers (the gambling sites) that will fill any order and that set the initial price.

The correct price is often not known for a short while, and that's when the pros bet. Immediately when the line (price) comes out, if they think the line is miss-priced, they will place large bets.

Eventually the house realizes the mispricing and they change the line, but by that point a pro might have placed a six figure bet.

So pros really are winning from the gambling sites, not from other gamblers.

[cryptonector]

Sounds like this is a self-fixing problem. Either the betting apps/sites will go broke, or they'll get really good at pricing, which will a) push the pro bettors elsewhere, b) maybe bore the problem bettors. Ok, (b) won't happen, but at least (a) should maybe happen. Problem: the betting apps/sites won't be able to hire the pro bettors to help them.

[an_account]

In sports betting you are betting against the house. If the sportsbook sets a bad line, you can lock it in and make money off of it.

Horse racing is what you describe, parimutuel, where the house just takes a commission. But the odds shift even after you place your bet. Very different for traditional sports betting.