The sports betting industry is a longstanding sector with its roots going back hundreds of years, but over the last twenty years, powered by the internet, it has grown to become a global powerhouse.
By the end of 2022, the global sports betting sector was estimated to be worth $242 billion, its growth fuelled by the liberalization of gambling laws and the spread of fast internet technology. In 2023, sports fans are able to watch almost any sporting event taking place anywhere in the world and to bet on that event at the click of a button or by tapping a screen.
Yet, like any other industry, the sports betting sector has its weaknesses and strengths. Digging a little deeper we can see that along with the many opportunities available for successful sports betting companies, there are also considerable threats on the horizon.
- Enduring popularity of sport and gambling
- Simple and successful business model
- Big data removing risk
The biggest strength of the sports betting industry is that it rests on two enduring aspects of human society: sporting competition and the urge to gamble.
Humans have been competing in sports events since the very first civilizations were formed and gambling has been around for just as long. Many attempts to ban gambling have been instituted over the centuries, yet people still gamble, legally or illegally. If your business is based on such enduring human activities, that is clearly a source of great strength.
Another strength of the sports betting sector is that it has a simple and successful business model. By adding a small margin to its odds, a sports betting company can produce a profit whatever the outcome of a sports event. And there is no convoluted or vulnerable supply chain or contracting out: just customers making direct transactions.
Even the business of setting the odds has become simpler. Where once sports betting companies had to take great care in setting their odds to ensure they were not at a disadvantage, it is no longer necessary for them to conduct football odds analysis or in-depth racing odds research. Big data provides all the tools necessary to produce accurate odds on all sports events.
- Gambling has an image problem
- Legislative complexities
- Market consolidation and saturation
Gambling has been illegal in certain territories at certain times and the industry has a lingering image problem as a result. Even in those nations where gambling is widely accepted and has been legal for decades, it can periodically attract the attention of those who believe that gambling is either immoral or a threat to society, so is unable to operate with the same freedom as other sectors.
The legislative legacy of illegality and the rapid development of internet technology means that gambling companies have to be alert to evolving legal landscapes in which the precise legal status of sports betting can be unclear or can change rapidly, which is not conducive to business operation.
In strongly established markets such as the UK, there are dozens of sports betting companies, and it can be hard for them to differentiate themselves. At the same time, consolidation has been a trend for many years, leading to a handful of giant gambling corporations and reduced competition.
- Rise of esports
Although the global picture is a little patchy, the overall trend for some years now has been toward the liberalisation of gambling laws. Most notably, this is the case in the US, a hugely influential sports market. The growth of the sports betting sector across US states, along with the pressures towards legalisation in Africa, South America, and parts of Asia present major growth opportunities.
Esports have expanded rapidly since the early 2000s and the increasingly mature and sophisticated esports betting sector offers significant opportunities for sports betting companies, given that most fans of esports are in the 18-30 age demographic.
- Social and political challenges
- Bad practices
The biggest threat to the sports betting sector is the potential for social and political concerns about sports betting to escalate to legislative and regulatory restrictions. Tighter gambling rules are being proposed in the UK, and betting companies around the world face periodic criticism from some health bodies, and political and religious figures.
The industry has often damaged itself. Examples of poor practice, including excessive payouts to executives, the practice of closing ‘unprofitable’ customer accounts and failures to protect vulnerable customers generate significant negative publicity and drain public and political support.