How Much Profit Do Bookmakers Make?May 26, 2018 9:00 am
The big bookmakers seem to be doing all right for themselves, don’t they?
After all, how many Premiership teams have shirt – or even stadium name – sponsors who are betting companies – and that can’t come cheap, surely?
Or how about when you’re just watching football on Sky, have you noticed how many of the half-time ads are for betting companies? Again, I’m going to go ahead and assume that if they can afford to pay for the giant, disembodied head of Ray Winstone to scream at me, “Bet in play naaaaaawwww you slaaaaaaagggg,” that this is evidence of a healthy bottom line.
So just how much money are the bookies making? Well to find out, we went crawling through the records at Companies House to work out how much each bookmaker were making.
Bookmakers Operating Profits:
What is operating profit?
Ok, so what are operating profits?
Well, for convenience lets use an example company for a moment, we’ll call them Widget’s R Us.
Well as a company we sell all kinds of widgets but we’re a large outfit and it’s costs money for us to keep running. We need to take away what it cost for us to make the widgets – and also the rent paid on the fancy widget showroom and the gold plated Audi RS3 I bought myself as a company car.
It cost £100,000 to operate my company and make widgets for the year. In that time we sold £100 worth of widgets (a lean year I know)…
So my widget company’s operating profit is a healthy minus £99,900.
As you can see in the table above, the betting companies are far better at what they do then my widget company.
So once we take away their operating costs – rent for the shops, staff wages, electricity and gas bills – even the cost of all those little blue pens – then once they have paid all their bills then what is left is the Operating Profit.
And as you can see, it’s pretty healthy across the board.
Where Does Their Profit Come From?
High Street Shops
Where I live there is a high street that contains one pub, one chip shop and 3 bookies. This is not unusual, and the next time you are out and about just take a look at how many bookmaker shops are on the average high street – especially in a “poorer” area of town.
In Bradford city centre for example, there are 11 bookie shops within a 250m radius. That is a higher concentration than you will find of just about any retail outlet – except perhaps Fried Chicken Shops.
Why is this? Because despite the rise of apps and online gambling, betting companies still make a ton of money from their brick and mortar stores. They may not however be making it how you assume they would.
Bets are not the betting shop’s number one earner. No, in fact well over half the profit in each store is generated from Fixed Odds Betting Terminals – which are affectionately referred to as FOBTs.
These are the touch screen machines you see in every bookie shop – and why do you see them in every shop? Because they are a cash cow that never stops giving up the milk!
According the Gambling Commission all the betting companies in the UK had a gross Gambling Yield (I.e. how much punters like you and me actually laid down) of £13.8 billion in 2016. Of that figure, £1.8 billion was shovelled into the FOBTs alone.
Hence you can see why – for the time being – most bookies will keep operating high street premises.
Although perhaps not for long, as some industry analysts think that chains such as Bet365, who are now online only, represent the future of the gambling industry.
At the moment they account for a serious chunk of gambling revenue, but the bookies want this to be higher – and the share is rising year on year.
Well, look at our graph again and remember the difference between Gross Revenue and Operating profit. It is a hell of a lot cheaper to operate an online only business than a store.
No rent to pay, far less staff, lower electricity bills – and it will be the death of the little blue pen manufacturing industry.
Which is why online only betting sites like Bet365 are important, as they are likely to be what the gambling companies may look like in the future. So, we went through their company reports and found a few gems, such as the fact that 72% of Bet365 sports revenue came from in-play betting.
Is that surprising? I figured I couldn’t be the only person trying to rescue failed Accies with a bit of in play – but it is a little surprising just how much it makes up their market – though it does perhaps explain how mobile growth of 36% makes it now the most popular medium for betting.
After all, in play is much easier on mobiles, in fact if you’re actually at the game – or watching in a pub say – you’re hardly going to get your laptop out in the middle of the crowd to lay a bet on the next yellow card.
Oh and of course, it’s not just sports betting that the bookies are offering online, you can bet on just about everything now – who will be the next Dr Who, will Trump get impeached, when will Jose Mourinho simply implode into a bitter ball of salt.
The most startling fact though? Total number of customers using the company is rapidly approaching 23.1 million. That is insane – until you remember that-
*Bet365 data curtsy of Companies House reports.
They Operate in Different Countries
Oh yes – the UK may not export as much as it used to, but betting is definitely one area where we lead the world!
To use Bet365 as an example again, just this one company holds licenses to operate in Great Britain, Spain, Denmark, Italy, Gibraltar, Malta, Ireland, Australia and Bulgaria.
And this expansion into foreign markets, together with the increased exposure of their closer and closer ties with the ever-popular Premier League is helping them to turn record profits.
How Did We Get This Info & Is It Accurate?
So how accurate is this data? Well, It’s accurate up to a point with an estimated margin of error around 10-15% based on accounting practices and tax planning within each company. Even with that margin though, it’s easy to see that the gambling companies are doing pretty well for themselves!
By using Companies House we are using figures available to everyone so if you want to check it out for yourself, then feel free to just follow this link https://beta.companieshouse.gov.uk/ where you can search for any LTD and read their annual report.