Summary
Sports betting and sports have always been strongly connected. Traditionally, these betting markets have been cleared by bookmakers, who accept bets on certain events. These bookmakers carry the risk of paying the amount wagered if the event occurs. Recently, a new type of betting market has appeared, so-called betting exchanges. In these markets, punters bet with each other directly, and the organization that creates the market does not carry any risk that depends on the occurrence of the event. In this paper we provide an analysis of this new type of markets, using a SWOT-analysis. Issues like competitiveness and survival of betting exchanges are addressed. We argue that liquidity is the prime determinant of long-term success of betting exchanges.
See the full content of this document
Extract
Betting Exchanges: The Future of Sports Betting?
Introduction
Sports and betting have always been strongly connected. In fact, some sports derive their very existence from the popularity of its associated betting market (e.g., horse racing). Traditionally, betting markets have been cleared by bookmakers, who accept (or not) the bets on a certain event. Different forms of betting markets are discussed extensively by Sauer (1998) and Buchdahl (2003).Recently, a new type of betting market has appeared, where punters bet directly with each other (peer-to-peer betting). These markets are known as betting exchanges. Similar to the model of a stock exchange, the user can buy ('back') or sell ('lay') bets at the price ('odds') he or she wants. Only if the offer is matched by another user, the bet has 'action.' An example of a typical market is shown in Figure 1.One of the first, and by far most successful, betting exchange is named Betfair (http://www.betfair.com). Betfair was launched in June 2000 by Andrew Black, a professional gambler, and Ed Wray, former vice-president of JP Morgan. The company has grown astronomically to become the largest online betting company in the United Kingdom, and has been widely recognized as one of the more successful entrepreneurial innovations of recent times, being awarded the British Ernst & Young Emerging Entrepreneur of the Year Award in 2002.1 Also, in 2003 Betfair won the British Queen's Award for Enterprise, in the category Innovation.2Following the footsteps of Betfair dozens of new entrepreneurial online betting exchanges have seen the light, especially of a Scandinavian (e.g., http://www.betsson. com), British (e.g., http://www.wbx.com), and American (e.g., http://www.matchbook. com) origin. This has led to intensive competition between not only the exchanges themselves, but also between the exchanges and the traditional bookmakers, whose market shares are increasingly under pressure.In this paper we provide a SWOT-analysis of betting exchanges. The tool of a SWOT-analysis is not new, of course, but this particular application is. Issues like competitiveness and survival of betting exchanges are addressed. Also, we compare the most important players in the market.We will argue that liquidity is a prime determinant of long-term success.Sector AnalysisA SWOT-...See the full content of this document
Sponsored links
