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Comment by JumpCrisscross | Hacker News Reader

> Casino's can't survive off casual players. They need the addicts to make payroll.

The fact that the pros are simulating problem players because then the betting apps give you more leeway, e.g. by "send[ing] you bonus money" and raising your limits, paints the picture quite effectively in my book.

> Casino's can't survive off casual players. They need the addicts to make payroll

To what degree is this true? Sure, a casino with a massive spend on free alcohol and structure needs a high profit margin to return its capital. But betting apps don't have those costs.

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This is backwards. Casinos offer huge cross subsidization opportunities like getting people to spend lots of money in clubs and bars or gamble on games like slots that have a huge house edge while apps have near zero cross subsidization opportunities and massive overhead. An app running at draftkings scale costs a lot to operate.

I’ve believed for a long time and continue to that the math on these businesses just doesn’t work. Eventually they won’t exist because they aren’t profitable.

Fair enough, I'm not knowledgeable about casino economics. Focussing only on the gambling, however, I'm scpetical they need whales.

They have shareholders expecting massive year-over-year revenue growth and are directly comparing themselves to the free-to-play/mobile gaming space where whales seem plentiful, so of course they are optimizing for whales long-term over sustainably building a low margin overhead product. You can see this almost directly in many of their advertising plans, Draft Kings and the others advertise just like the mobile games space. (They just have fewer places they can show their advertisements from old gambling advertisements laws.)

And if you keep pulling on that thread: are casinos only profitable because they’re laundering money?

If so, they are in trouble now that they've been disrupted by crypto and NFTs.

What legal casino uses crypto or NFTs?

Other way around. Easier laundering on these.

There’s a reason MMOs let you put money in and make hoops to take it out. Otherwise I can overpay for garbage from my “associate” and he can cash out free money with very little paper trail.

Bookmakers can always lay the odds so that there’s equal money on each side. Then they’re just taking a 10% rake with zero risk. If they start getting killed by pros they’ll just move to the low risk strategy.

I wonder if street bookies make money “for someone” by somehow bringing lending in house. It would be the pair of activities that would be profitable. But they wouldn’t have to be that good at bookmaking.

From my perspective the last thing an amateur bookie wants is an outstanding balance either way.

Your only way of dealing with a bad debt is banning the person and letting the other amateur bookies know about it.

Or you could beat the guy up

> Bookmakers can always lay the odds so that there’s equal money on each side

No they can't. Large ones can, but the small ones sometimes cannot because they have to match the large ones but in a smaller pool. If everyone knows which team is going to win, diehard fans of the losing team will still bet on their team - large players capture that in their odds and break even. Small players don't have the same mix of customers and so will have to take that loss because they need to compete with the large ones.

Of course overall the small players balance enough the 10% rake from less sure games over the years to make a lot of money but they can still lose 6 figures on some individual games. Small players are less a target for the pros (if only because they know their customer better and so won't accept the pros in the first place).

Remember the small players are often running an illegal operation. They need their reputation of paying out so that customers don't go elsewhere to even turn them in.

Also, for what it's worth, the idea that betting lines and odds are set to make "equal money on both sides" is a very simplistic and often ignorant talking point. It is quite possible if not common, especially on big games like the SB, for the books to have significant exposure to one side.

Making betting lines is a crazy complex mix of the house essentially betting on an outcome themselves, tempered by a limit to exposure/liability as well as the need to keep lines in basic accordance with other linemakers.

It's unreal how good these guys are most times.

With a 10% edge you really don't need to be very good

And in fact if these guys were good they wouldn't be banning people at all

Forgive me… This is not an area. I have much knowledge of…

… But I thought even a small sports book could balance things properly by setting an appropriate pointspread?

my parent has described a risk for the sports book that seems too assume the simple picking of winners and losers and not a pointspread?

This is sort of an "assume a perfectly spherical gambler" type problem.

The issue is the big players publish their spread. You have to at worst match them or everyone sends their money to the big players. You can beat them but not do worse. For bets on the local little league you can set your own spread but the big money is national (and international), sports where you have competition and so need to watch what they do. As a small agent you shouldn't bother calculating spread on the big games just match the large players.

DraftKings is profitable as of a few months ago.

>gamble on games like slots that have a huge house edge

This is what they're working on next: legalization of online casino-style games. They've already got seven states. Profit margins will only go up.

>> I’ve believed for a long time and continue to that the math on these businesses just doesn’t work.

These companies and their apps feels like they're framing this as a social media app. Get together with your friends, play against each other. Its very, very much like fantasy football which generates billions in revenue every year. To me, those are the people and the money they're aiming for - not the casino betters.

I would assume this is the early stages of any market. You have a lot of companies jumping into the fray and trying to make it work. Then as time goes on, like you said, the money just won't work for them and at which point you'll see the standard consolidation where the companies who figure it out will still be there, possibly buy up some smaller companies and so on and so forth.

It will be interesting to see if companies like Draft Kings and Fan Duel can outlast some of the bigger players coming in like BetMGM and other casino backed companies. I don't think we'll be seeing "Bob's Bets" app anytime soon, which would support your idea that this is most likely a loss leader for these casino's, and what's the threshold where they will pull out?

all my friends who are into the fantasy are now competing on some sports gambling app/site in the same exact manner. Who's teams win the most money etc. They were practically begging me to join them "Look you get like 700 free dollars man! just make some bets and add money and you can cash it out etc etc" They've already been hooked.

> I’ve believed for a long time and continue to that the math on these businesses just doesn’t work.

Particularly for Las Vegas, the business may not be what you think it is. Vegas is, amongst other things, a global money laundrette.

Casinos are a proven business and have their highs and lows but will be fine. I’m talking specifically about betting apps. The fact that casinos have barely even entered the online space tells you all you need to know about how profitable it is

I'd argue that's because until the last few years these forms of gambling have been illegal.

Its not a matter of belief its a matter of math.

Their net income is either positive or negative

Yes and it’s negative

They've existed in other jurisdictions for decades and seem to be doing very well financially.

Not with the overhead of a draftkings or fanduel

You nailed the key point my muddy intuition (and the article) failed to express.

Pro gamblers simulate problem gamblers, so they can bet more.

I said, "Casino's can't survive off casual players. They need the addicts to make payroll"

> To what degree is this true?

I don't know the ROI. It's hyperbolic, I'll freely admit that.

But I think there is an important point. We let problem gamblers gamble more, and it's not fair pros take advantage of that dark pattern.

> don't know the ROI. It's hyperbolic, I'll freely admit that.

Being a bookie is making a market. As long as you do your maqth right, your potential for losses are capped--lots of small bets are actually less risky in this respect. Problem gamblers are a cherry on top, far from essential to any gambling enterprise, particularly not one making a two-sided market.

> We let problem gamblers gamble more, and it's not fair pros take advantage of that dark pattern

The pros are the beneficial bacteria checking how much the apps can prey on the problem gamblers.

When the "cherry on top" (problem gamblers) is responsible for half your revenue (from the Bloomberg article), then that's not just a cherry. That's half the cake. And it's a really, really, big cake.

It's still cake! The implied assertion is gambling enterprises need problem gamblers. That if you restrict their ability to prey on problem gamblers, nobody gets to casually gamble.

I know nothing about gambling. But I know a lot about market making and the math of being a bookie. And basaed on that, I don't think the claim is true.

I also no nothing about gambling and a lot more about market making.

One major difference that may change the math is the tax rate. Illinois for instance just passed a 40% tax on sports betting.

Well, I don’t know much about market making but as a member of Gamblers Anonymous since 1998 I’ve seen just about every kind of devastation caused by every kind of gambling. In the last few years I’ve seen a significant increase in the number of very young men coming to us. Here in Australia, the gambling industry absolutely is laser focused on targeting young men using every psychological trick in the book, including such pernicious features as “Bet With Mates (tm)” which is explicitly designed to use peer pressure to lock in and escalate those in the group who may otherwise pull out.

If we accept that almost 50% of revenue comes from 80% of gamblers (a diverse cohort) while the other almost 50% comes from 3% of gamblers (a far more uniform cohort), then of course betting companies would be absolutely defending against any change (regulation) that would impact the 3%. Furthermore they’d be remiss in their duty to their shareholders if they weren’t trying to migrate gamblers from the larger cohort to the smaller.

It will just be like meth and painkillers: everyone pretends there isn't a problem for years until it gets so bad that the government has to step in.

Absolutely looking forward to the headlines in 2034 about how gambling apps were just too tricky and deceitful so there's no way anyone could have known how bad they were.

Intuitively I see all addictive industries the same. The Tobacco industry can, and does, make money off of the odd cigar at a house party. But ultimately, they rely on the constant addiction to have a business model.

It's cheap, and easy, to make nicotine free tobacco like devices. You could lower your cost quite a bit - pretty good for the books! But it doesn't matter, and nobody with half a brain does it.

The aqusition costs are extremly high for online betting and online casinos. If you pay 1000 usd to aquire one customer it is not profitable if they gamble 50 usd / year.

Then online casinos are a bad business and shouldn't exist, just like breweries shouldn't exist if they can't break even selling to casual drinkers and need alcoholics to make a profit, and gun manufacturers shouldn't exist if they can't break even selling to one-or-two-gun owners and need wannabe-commandos and survivalist cosplayers to make a profit.

I worked at a biotechnology company, we had thousands of clients but five of them were 80% of our revenue. In your world, should that business not exist as well?

I don't understand the princple that revenue should be uniformly distributed as a condition for existing. How would you enforce this?

I presume one would just continuously uniformly distribute everything till they arrived at communism lmao

Or, if we decide to come back to Earth, we simply make the obvious restrictions on a case by case basis via cost analysis. Then we stop when we feel like it.

For example, tobacco is now extremely restricted. That's an obvious industry that profits off of addiction. We went ahead and fixed that. The result? Millions of lives saved.

Oh, but the spooky hypothetical communism! Come on kids, light up these cigs! They make you look cool and masculine! Oh woe is the modern American for being a commie!

What if I want to grow a plant and smoke it? Who are you to take that away from me? What if your experience of life doesn't align with mine, and my cost/benefit analysis for me personally is that I gain more from smoking than I lose?

That aside, I wasn't advocating for smoking to defend capitalism, and think you appear disingenuous for suggesting that. Merely that that is the end route of just dividing everything equally. I'm willing to go out on a limb and say attempting to divide everything equally doesn't work.

Edit: Apparently I'm arguing against someone I'm unable to reply to, go figure. Either way they appear to be now arguing for the status quo, over 18 regulated gambling, which I fail to see has anything to do with sharing equally, and for some reason they're acting like what they're advocating for is not the status quo. I think I may have stumbled into an argument with a nonsense Chinese LLM lol

> What if I want to grow a plant and smoke it?

That's allowed: again, reasonable and obvious restrictions.

> and my cost/benefit analysis for me personally is that I gain more from smoking than I lose?

All well and good, but that goes out the window when you sell Tobacco.

> I wasn't advocating for smoking to defend capitalism, and think you appear disingenuous for suggesting that

It's not disingenuous IMO, it's obvious. Gambling is addictive, okay so let me draw a comparison to an already existing addictive substance that we've successfully regulated. Oh, look, tobacco!

We managed to do that and not be communist. And everyone is all well and good and we're pretty much all over it. Turns out, only wins! So it can be done, was kind of my point.

I’m not claiming revenue must be even.

And I’m assuming that the five customers actually benefitted from your company’s work? If so, then they’re not really comparable to gambling addicts, alcoholics, and gun fanatics, right?

We already (poorly) enforce (weak) laws requiring casinos not to prey on addicts.

We already (poorly) enforce (weak) laws requiring bars not to over-serve and alcoholics to get treatment sometimes.

We do almost nothing about gun addicts.

But commenting that something shouldn’t be the way it is isn’t a claim to know how to fix it.

I don't get how gun fanatics fit into these other groups.

I’m not categorizing addicts, I’m categorizing the companies that prey on people who purchase vast quantities of their product against their own interests.

Kinda weird to shoehorn in the last one, isn't it? People who own four guns aren't ruining their lives any more than someone who owns four laptops is. So long as they're not using them to commit crimes it's basically just a hobby, and the sort of person who needs a shed to store AR-15 accessories is actually going to be significantly less likely to misuse it than someone with only one or two guns.

I’ve read articles that (drawing from memory) say that 10% of drinkers are responsible for 90% of all alcohol consumed in the U.S. I haven’t read articles on it, but I assume gambling and gun ownership are similar.

I know people who:

1. Live remotely 2. Have (estimating, they’d never tell anyone the real number) over fifty guns.

Largely because they are convinced the big one is coming. The guns + ammo might be $50k of money spent?

Certainly it’s not as problematic as alcoholism or gambling addiction, but it’s not nothing. And I’m not blaming them, I’m blaming any gun manufacturer that depends on them for profitability.

Are those clients addicts who are ruining their lives with your product? If so, yeah you shouldn't exist, or at least you need to downsize and try to get that percentage way down.

It depends on what you're selling.

> How would you enforce this?

Case by case. We already do this, this isn't a hypothetical. You can't advertise tobacco anymore and guess what, lots less people addicted and we're saving literally millions of lives in the long run.

Acquisition cost is basically an auction. Different casinos try to outspend each other on advertising. If the lifetime value of an average customer trends down then the acquisition costs will come down too.

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