Last week, West Virginia became the fifth state in the country to offer sports betting to its inhabitants. So far, the only major winners have been the sportsbooks.
Sports betting is one of the few endeavors in a casino where a consistent profit is possible. The wily and studious sports bettor can show a long-term win, in the same way that some poker players can come out ahead in the long run.
However, the ability to do so takes years of practice and research to accurately predict the profitable games to bet. Unfortunately, new sports bettors in West Virginia and Mississippi simply don’t have that practice.
It’s showing, too, in the bottom lines of the sportsbooks. ESPN’s David Payne Purdum tweeted a message from a Mississippi bookmaker who claimed a 22 percent hold for the weekend.
“(There were) squares everywhere. A couple of sharp plays but overwhelmed by the public.”
Local favorites partially to blame for huge holds
A square is a bookmaker’s term for a losing player. Many squares fall victim to emotion and make poor bets based upon gut feeling and supposition, rather than fact.
One hallmark of a square bettor is excessive reliance on local or regional teams to win. A higher percentage of wagers on the hometown favorite is music to most bookmakers’ ears.
Square bettors also like parlays and chasing the allure of the big payout.
That’s why Erich Zimny, VP of Racing and Sports Operations at Hollywood Casino Charles Town, reported that his casino held roughly 50 percent of its handle in the first weekend of operation. Zimny told WV MetroNews that Hollywood had kept $324,000 in extra cash on $640,000 in wagers.
Some of that $324,000 represented held money for future bets, so the casino won’t fully win 50 percent in the long run. Still, that level of profitability dwarfs the figures in Nevada on a typical weekend.
In a way, the situation in Mississippi is even more appealing. In the Magnolia State, there are lots of football team favorites in nearby football-crazy SEC areas.
Obviously, Ole Miss and Mississippi State are going to see action, but so are schools like Alabama, LSU, and Florida. Tennessee might come in especially hot in Tunica, since Memphis is less than hour’s drive away.
But bigger reward means bigger risk for the sportsbooks
Those kinds of hold numbers are likely to generate smiles for casino management in these four new sports betting states. With so much money flowing onto emotional picks, sportsbooks can sit back and play the odds.
Over time, a sportsbook makes money by accurately setting and adjusting its lines according to the betting action on a given bet. The new problem is the same that a poker player faces if he or she takes a shot at a higher limit.
Even if the “player” (the sportsbook) has confidence about their long-term outlook for the game, the short term can bring devastating variance. This kind of variation occurs especially in sports like college football, where things like Appalachian State taking No. 10 Penn State to overtime happen all too often.
A similar situation with a hometown hopeful could be disastrous for nascent sportsbooks. In an interview with Forbes, Nick Bogdanovich, Director of Trading for William Hill US spoke bluntly about the issue:
“There will be regional bias; we just haven’t been open long enough to see how crazy it will be,” he said. “It could be totally insane or just mild.”
Obviously, as the markets mature, the lines and linemaking will improve. So will the staff skills at each book.
Until then, sports betting outside Nevada is going to be a learning experience for everyone involved.