How Profitable Are UK Betting Sites?
The house always wins – this is a phrase known to people who play in casinos, but it also works for those who enjoy sports betting. Essentially, it means that the games and odds are designed in a way that ensures a victory for the betting company or casino at all times. Though some people make huge amounts of money, the amount lost by players is higher and this averages out as a win for the company. It’s the thrill of becoming one of the winners from an event that keeps us betting each week.
This being said, we’ve never really seen people discuss the true profitability of betting sites. We know that they make a profit,
it would be a terrible business model otherwise, but what is the extent of this profit?
The Key Principles of Bookmaking
Before talking about the numbers, we first want to discover how betting sites make a profit. They’re in control of the odds for all events, this is true, but it goes deeper than this. There are some important principles of bookmaking that allow companies to continue operating in the future.
Whichever term you’ve heard, this is the main way that bookmakers control the odds and ensure that they make a profit on an event. You might think that the odds are the likelihood of an outcome to occur, but the truth is that there’s a margin built into these odds. Like VAT added to a product price, bookies build a margin into the odds and this helps them to make a profit.
To understand margins, also known as ‘juice’, let’s look at a simple example like a coin flip. We all know that a coin will either land on heads or tails (if you manage to get a coin to land on its side, please do send us a picture!). Naturally, therefore, it’s equally likely to land on each (50% split). If bookies were to use true odds, heads would be valued at 1/1 (2.00) and tails would have the same odds.
If 1,000 customers bet £5, with half on heads and half on tails, the problem is that the bookmaker would only break even. So far, before the outcome, the bookmaker has £5,000 in its pocket. Regardless of whether the coin lands on heads or tails, they will have to pay £5,000 out in winnings (£5 at 1/1 to 500 people). Despite what we might think of bookmakers, they’re all businesses and need to make money for us to continue enjoying them.
For this reason, the bookmaker needs to build some sort of margin into the odds to make a profit. Even if two outcomes are equally likely, they might use odds of 10/11 to account for this. Using the same example as before, everybody who selects correctly will place £5 but will now only receive £9.55 in return (instead of £10). In total, the company receives £5,000 in stakes and pays out £4,775. Half the people have still won, but the bookie has made a profit of £225. The winners are happy, the bookmaker has a reward for laying the winning selection, and the game continues.
While on the topic of generating odds, it’s the job of odds compilers to achieve this for every bookmaker. Sometimes called traders, their role is to calculate two things:
- Expected income through wagers
- Likely profit from each selection
Essentially, odds compilers walk a tightrope between wanting to make a profit and offering competitive odds. The odds displayed in a sportsbook need to look enticing for bettors but while still including a margin for profit. For these professionals, they rely on statistics as well as sporting knowledge. With this in mind, it’s normally the case that a trader will specialise in one or two sports rather than covering them all.
If we use a rugby match as an example, the odds compiler will consider the form of the two teams, head to head encounters, injuries and other factors that might affect the performance of a team, and more. After working out the probability of each team winning, they’ll then reduce the odds by a percentage depending on the margin they wish to achieve.
Finally, another problem that odds compilers need to contend with is balancing the books. If Wasps are playing Saracens, they need to set odds so that a profit is made in every eventuality. If they need a team to win to make a profit, they’re essentially gambling too. How do they do this? By adjusting the odds over time. Ever notice how the odds for a particular outcome change from one hour to the next? This is the traders trying to maintain a balanced book on the event.
In rare cases, bookmakers are confident of a particular result and will therefore boost the odds for the expected loser to maximise profit. This being said, most of the time they’re just happy to make a profit.
The Role of Mergers
It seems that every year another small service gets swallowed up by a larger betting company, and this is dramatically transforming the landscape of the market. As soon as a small bookmaker gains some traction, it also gains the interest of the bigger brands. As you go through the list of profitable betting sites, you’ll see just how much mergers and parent companies have changed the industry.
In recent years, the Competition and Markets Authority has had to keep a close eye on the betting industry. For some, the fact that huge conglomerates are buying smaller companies means that there’s little opportunity for competition. In the coming years, we think the authority will have to continue working hard to keep the market competitive for consumers.
For those who haven’t been paying attention to this market, the CMA has actually blocked some mergers to keep the market in a healthy, competitive state. You may have seen the merger between Coral and Ladbrokes, but you may not know that the two were forced to sell up to 400 shops just to push the deal through. According to the authority, the merger was going to negatively affect competition in over 650 areas.
The Profitability of Betting Companies – The Big Names
Now, the moment you’ve been waiting for because we’re going to discuss the finances of the biggest betting names. Which companies are the most profitable in the betting niche? Let’s find out!
1. Flutter Stars Group (£3.8 billion)
Sitting atop the list, we have the parent company responsible for:
- Paddy Power
With headquarters in Dublin and Toronto, this company is now thought to have over 600 high street shops between the UK and Ireland. What’s more, 12,500 people work for the company and their most recent financial statements posted an eye-watering £3.8 billion in revenue.
How did it all start? Back in 2016, Paddy Power and Betfair came together in a move that changed the niche. At the time, it became the third-largest betting company. In competition with the Stars Group and GVC Holdings, it was an interesting time as betting continued on the path of popularity. However, it all changed again earlier in 2020 when a merger was announced between the Stars Group and the newly named Flutter Entertainment.
For those who are unaware, the Stars Group is the team behind PokerStars, Sky Betting and Games, and a variety of other platforms. When these two giants merged, Flutter Stars Group was formed, and they instantly became the leading company in the industry. Not only do they lead the way in terms of revenue, but it’s also thought that the company has just under 40% of all market share.
Is Flutter Stars Group likely to lose their top spot any time soon? Probably not, and this is because the portfolio is an expansive and diverse one. Currently, the group has services in every niche (and many different countries). Therefore, Flutter Stars Group truly is a global brand.
2. GVC Holdings (£3.7 billion)
As you can see, GVC Holdings is only just behind Flutter Stars Group, but we expect this gap to widen in the coming years. Nevertheless, GVC Holdings is still a major name in the industry with brands like Coral, Ladbrokes, Gala, and others under its umbrella.
The difference between the two groups? GVC Holdings has more of a high street presence with 4,000 shops compared to the 600 of Flutter Stars Group. Consequently, they have more employees at around 30,000.
For many years, William Hill sat at the top of this list, but this all changed in 2016 when the merger was completed between Coral and Ladbrokes. Two years later, GVC purchased Ladbrokes-Coral Plc for £4 billion. Other betting platforms under GVC Holdings include:
While Flutter Stars Group might have the youth and the revenue, it’s fair to say that GVC Holdings has the experience. In total, Ladbrokes and Coral have nearly 230 years of experience between them after founding in 1886 and 1926 respectively. Though they were forced to sell shops before the merger, the company has continued to grow and are recognised names across the United Kingdom and Ireland.
We noted the physical presence of GVC Holdings, but the brands have been making a transition to the digital world. Now, nearly half of all profit comes from this source.
3. Bet365 Group (£3 billion)
As we reach the best of the rest, Bet365 is a brand that has performed amazingly well considering that it’s just one betting platform and one name (rather than a group of several brands). As an entirely online platform, the company has 4,700 employees and was only launched at the turn of the millennium.
Ladbrokes and Coral might have the experience, but Bet365 were able to take advantage of the digital wave before most. After years of expansion, Bet365 are now the largest private employer in their home city of Stoke and have made many investments in the area (including in the football team and stadium).
4. William Hill (£1.6 billion)
Next, we find another of the old names in William Hill. After forming in 1934, the company has had its ups and downs. Recently, it has adopted an aggressive online strategy and it seems to have worked. Although it has been a fall from grace with other companies surpassing William Hill, they still have 2,300 high street shops and employ 16,000 people.
These are the only four names with revenue above £1 billion, but the following were also worth a mention in our list:
- Betfred (£800 million)
- Kindred Group of 32 Red, Unibet, Stan James (£800 million)
- 888 Holdings Plc (£600 million)
The Gambling Industry
To finish, it’s good to get an overview of the whole industry as well as the companies and groups that keep it ticking. Here are some important statistics to note:
Industry Market Share
In terms of the whole industry, sports betting is the largest niche with 40% of the market share. After this, casino slots have 37%, casino tables have 15%, and exchange betting is growing with 3%.
Betting Market Share
As has been predicted for many years, online is the biggest home for bettors with 40% of the market share. While the high street occupies 27%, it’s interesting to note that more people are playing the lottery (28%) than betting in a physical store.
All in all, betting companies contributed to annual revenues of £15 billion for the whole gambling sector last year. Compared to 2018, this was an increase of 8%. It will be interesting to see how the COVID-19 pandemic and the lack of sporting events has changed this number. Each year, the treasury receives £8 billion from the gambling industry and 100,000 people are employed by such companies. If you include indirect employees, such as in third-party companies, this increases to 500,000.
With this in mind, betting sites are incredibly profitable. Not only that, but the market is also growing, the treasury relies on income from the sector, and lots of people in the UK and Ireland need the companies for employment!
Carl Hughes - Editor
Carl Hughes is a leading expert on sports and casino betting. Carl began his career with a BSc in Sport, Exercise and Health Sciences from the University of Birmingham before working within the industry for some of the bigger names (GVC and Bet365) and has been praised as being "a leading sports betting commentator".