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The betting industry: A cost-benefit analysis

By Demetris Constantinou

Over the past decades, we have seen old ideas being replaced by new visions and conventional taboos becoming part of our everyday lives.

One such taboo, that is currently prevalent across our lives, is sports betting. Back in the day, sports betting was viewed as a shady act usually performed by people viewed as outcasts of society, regardless of whether people of all income levels actually engaged in it. In today’s society, with some natural exceptions, sports betting is totally acceptable and is certainly something of which nobody should be ashamed.

Such a shift in the perception of sports betting has laid the path for the formation of a gigantic industry, with an estimated market size of US$203 billion generated by over 31,000 businesses that employ north of 190,000 employees[1]. An industry with such figures would not exist if it was not for the underlying pillar, the sports themselves, which, over the years, have experienced the best and worst of what the sports betting industry has to offer.

In this Post, we will seek to examine the costs as well as the benefits associated with sports betting and whether the sports industry is in a better position since the emergence of sports betting.

The most obvious benefit that sports leagues have enjoyed since the emergence of sports betting is the profound spike in their earnings. As discussed above, without sports there is not any sports betting and, as such, sports clubs and leagues are amongst the biggest stakeholders in the sports betting industry.

In a study by the American Gaming Association in 2018, it was estimated that the four major sports leagues in the U.S, namely the NBA, NFL, NHL, and MLB, earned “a collective 4.2 billion U.S. dollars from widely available legal sports betting”[2].

Whilst there is no single way by which sports leagues make money off sports betting, such revenues are usually the result of ad spending by betting operators or even higher viewership of sports as a result of sports betting. Given that the sports betting market and its potential are highly untapped, such revenues could multiply, and become even more significant for sports leagues and clubs, in the near future.

Furthermore, contrary to what was mentioned earlier, even though sports betting cannot exist without sports, it does not mean that sports cannot actually grow as a result of sports betting.

Specifically, it is suggested that a large number of sports betters do not, essentially, bet to win, but rather to maximize their entertainment by adding an extra layer of “fun” to an already enjoyable activity[3]. Simply put, people who are not big sports followers might engage in watching a certain game or sport because of the fact that they have placed a wager, which all of a sudden has spiked their interest in the specific sport. The better not only obtains the entertainment of viewing the game, but also enjoys the idea of winning and the thrill of uncertainty and spontaneity associated with betting.

Whilst the above benefits are directly relevant to the sports leagues, there is a third benefit which is broader, but reflects well on the sports industry. The macroeconomic benefits of the sports betting industry reflect well on sports clubs which depend on their localities to expand their fan base. Such benefits create win-win situations where the betting industry, the local economies and the sports clubs are all better off, due to the emergence of higher revenues, more jobs and greater prosperity overall. Having said that, the exact opposite argument can be made on the social, as well as economic impact of sports betting, and, as such, no sports club would ever want to be directly associated with the macroeconomic benefits or costs of the sports betting industry.

Undoubtedly, the above list of benefits creates a skewed idea of how positive the impact of the sports betting industry is on sports. To completely understand the actual impact of the sports betting industry on the sports themselves, we ought to look at the downsides that come with sports betting, and how such issues might negatively impact on sports leagues and clubs.

The most dominant problem faced by sports leagues and clubs with regard to sports betting is the issue of match fixing. Whilst match fixing is a separate topic by itself, it is amongst the greatest threats of modern sports and can jeopardise entire clubs, leagues or even sports, if not taken seriously. Sports’ popularity is built on the premise that nobody knows in advance what the outcome will be, and that everything is indeed possible and uncertain. If you take away the element of uncertainty, sports, all of a sudden, become boring and even pointless, causing people to seek entertainment in other industries. That is why match fixing is amongst the greatest threats to the sports industry and should be taken seriously if sports betting is truly to have a positive impact on the sports industry.

Another prevalent downside of sports betting is the association of negative feelings towards a sports club by the better, merely because of a lost wager.

It is not rare to hear someone blame certain teams or individuals for losing their money just because they did not perform as expected on the field and caused the individual to lose their bet. Such negative feelings create a bad association with both the clubs, as well as the leagues, and draw people away from sports. Whilst this is certainly not the case on a larger scale, it is an unavoidable collateral damage brought with the emergence of sports betting and should always be viewed with seriousness, to ensure that such feelings are contained to a very small minority of sports followers.

Both the benefits, as well as the downsides mentioned above, do not reflect the overall effects of sports betting on the wider society and fail to consider the societal and economic implications on a larger scale.

Nevertheless, the purpose of this Post is not to examine whether sports betting is a good or a bad phenomenon, but rather understand what the costs and benefits of sports betting are on the sports themselves, and whether the sports industry has benefitted overall from the emergence of sports betting. In monetary terms, sports betting has certainly benefitted the sports industry to a great extent and will continue to do so on an even larger scale. Having said that, such success is strictly contingent on the close monitoring of dangerous behaviours, such as match fixing, which can have dire effects if not acted upon swiftly and with seriousness.

For further discussion on the pros and cons of the betting industry for sports, log onto ‘www.apc-sport.com’.

 

[1] Key data on the global sports betting industry 2020 | Statista.

[2] How Much Do Leagues Stand to Gain from Legal Sports Betting? - American Gaming Association.

[3] The Advantages of Sports Betting - Why Should You Bet on Sports?



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The editors of  the Journal Sports Law & Taxation are Professor Ian Blackshaw and Dr Rijkele Betten, with specialist contributions from the world's leading practitioners and academics in the sports law and taxation fields.

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