What Are The Margins in Sports Betting And How to Improve Them
While it is true that last year was record breaking for sports betting with $53 billion in wagers, these businesses actually operate on the lower end of the profit-margin spectrum.
The hold margin is what a sportsbook takes in on both sides of the game. By calculating the hold, you can determine what percentage of the time you would need to be correct on that bet to make money long term.
As a rule of thumb, 5% is low, 10% is a healthy margin and 20% is a high margin. However, gambling is not your typical business, and this is why the number of bookie businesses continue to increase each year, aided by Pay Per Head wagering solutions. In fact, the sector does not look like it will plateau anytime soon and remains a great opportunity.
The average sports betting hold for a sportsbook will vary on average from 5% to 12% depending on management and the Pay Per Head platform you select.
Despite the relative low-margin of revenue, opening a sportsbook is still a gold mine for operators with high potential.
The primary reason: Online sportsbooks are providing a service and not a product. Therefore, the overhead cost is just the license, gambling software, location and staff. There is no need to worry about buying, storing, shipping and selling.
Bookmakers make money from quantity, a few big sports bets from a handful of gamblers, or many small to average sized wagers from several customers. Even with a low number of customers, as long as they keep betting on a regular basis, a small bookie can easily earn $100,000 per year.
Sportsbook Pay Per Head services drastically cut down on costly overhead being that they provide the full gamut of customer service, hosting, lines management and so on. Thus, they go from paying tens of thousands of dollars per month to just $5 per player to operate their sportsbook.
- Aaron Goldstein, Gambling911.com
