[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