Opinion: FOBTs or Football Betting – Which One Makes the Bookmakers More Money?
Fixed Odds Betting Terminals (FOBTs) have effectively served as an ATM for bookies ever since their introduction. With the unfortunate sobriquet “crack cocaine of gambling,” FOBTs have been the subject of the ire of anti-gambling campaigners. In their old form, it was possible for punters to bet £100 a time.
The most popular game on these machines was the dreaded roulette wheel which gave the bookies an edge of almost 3%. With each spin taking mere seconds, it is possible to make well over 100 bets in an hour. According to figures from Gambling Aware, over 233,000 FOBT users lost over £1,000 in a single sitting in 2016. Over 650 people lost £5,000+ as bookmakers were roundly criticised for encouraging addicts to lose their money.
I was watching a TV program on the subject of FOBTs and was shocked to hear an unnamed Coral employee admit that they were told to encourage further play, regardless of how much money a person was losing. The notion that bookmakers nudged players towards sensible betting was utterly dispelled.
By law, bookmakers are allowed to place four FOBTs per shop which has led to an increased number of High Street bookmaker openings as the likes of Ladbrokes, Paddy Power, and William Hill tried to make as much profit as possible. Even worse, there is evidence that bookies deliberately targeted low-income areas.
Eventually, the hammer fell as the UK Government announced plans to cut the maximum stake from £100 to just £2. Bookmakers reacted in the only way they know how; threats and recrimination. They claimed thousands of jobs would be lost while ignoring the economic impact FOBTs have on communities at large. The news certainly hurt William Hill who already announced losses of over £800 million in the first six months of 2018, before the new law came into place.
FOBTs have served as a reliable form of income for bookmakers, but how do they compare to the profits, and edge, they gain from football markets?
FOBT Profit & Edge
FOBTs are software-driven terminals that enable you to bet on some ‘events.’ The outcome is completely random and controlled by a number generator. Games include roulette, representations of greyhound and horse racing, penalty shootouts, and numbers. It is often assumed that the profit margin is 2-3% although bookmakers have reported slightly higher figures.
In 2012, a Ladbrokes annual report stated that its FOBT margin was 3.48%. In 2013, it had risen to 3.62%. Also, in 2013, Coral’s annual report recorded a profit margin of 3.75%. However, these figures don’t offer any indication of money inserted into the machine, also known as the cash retention margin. Ladbrokes admitted that its margin in this instance is 18%.
However, what’s really important is how the margins play out in practice. When you hear the 97% return figure, you may believe that FOBTs are not the bookie cash machines of lore. The reality is VERY different. The average person’s balance is not damaged via profit margin. Instead, the rapid-fire nature of FOBTs, which results in hundreds of bets per hour, is the killer.
Let’s use roulette as an example with the famous 97% pay-out ratio often claimed by bookmakers. Placing approximately 180 bets in an hour is possible. After one spin using our theoretical figure, you are down to £97. After a second spin, you are down to £94.09 (£97 x 0.97). After ten spins, you are down to £73.74, or a loss of over 26%.
After 20 spins, you are down to £54.37, a loss of almost 50%. After 50 spins, you have lost over 78% of your stake. Remember, you can make up to 180 bets in an hour on a roulette wheel. Thanks to the speed of your stake degradation, you have lost over 99% of your original balance by this time. In addition, FOBTs are designed to create multiple ‘near-miss’ scenarios to frustrate but also encourage players. It is easy to see how addicts become hopelessly trapped; mentally, emotionally, and eventually, financially.
By the way, with Coral’s 3.75% profit margin, it takes just 19 spins to lose half your balance. After 50 bets, you have lost over 85% of your balance, and you are down to just 1% after around 121 bets; which can take little over 40 minutes in some cases.
Small wonder then why bookmakers are devastated at the reduction in the maximum stake. One gambling study, published in the Independent in 2017, found that 11.5% of FOBT players are ‘problem gamblers,’ more than ten times the rate (1.4%) amongst all gamblers. 96% of all losses in a gambling session that exceeded £1,000 took place on FOBTs.
However, 2016 figures showed that ‘only’ £1.82 billion of the £13.8 billion lost by British gamblers took place on FOBTs in 2016. Yet again, this doesn’t tell the true story. From 2009 to 2017, the number of FOBTs machines in Britain increased by 9% but losses increased by 73%! Each machine provides an average of over £52,000 profit per annum and comprises half of a bookmakers’ revenue.
You see, the £13.8 billion figure includes bingo, online casinos, and the National Lottery. For bookmakers such as Paddy Power, FOBTs earn more profit than football, horse racing, and all other sports betting combined!
Football Betting Edge & Profit
Football betting is still the king of sports regarding frequency of bets, and overall revenue. The gambling industry makes an estimated £580 million of profit from football betting, a figure you’ll know that is less than one third of FOBT revenue. It is responsible for 37% of all online bets. For the record, horse racing is second with a profit of over £345 million n and 22% of bets.
As for the edge enjoyed by bookmakers, it varies depending on the market. As you’re aware, bookies don’t offer fair odds because they need to make a profit on each market, also known as the overround. You calculate this figure by dividing the decimal odds of each available outcome in a specific market into 100 and adding them together. Anything above 100 is bookie profit. For instance, if the total is 102.5, the bookmaker has an edge of 2.5%.
Believe it or not, the straight Win/Loss/Draw market often provides the lowest bookmaker edge. At least you now know why there are so many possible markets. In the big Premier League match between Tottenham and Manchester City last week, for example, most online bookies had well over 100 markets to choose from. The Win market provided an edge of slightly over 3%.
In contrast, the Over/Under goals market provided an almost 6% edge. However, it is the markets with multiple options that provide the greatest profit to bookmakers. The ‘Result/Total Goals’ market had six possible outcomes and an edge of over 13%! The goalscorer market is one of the worst for value. With so many possibilities, it is normal for the bookie to have an edge of over 30%! Correct Score and Half Time/Full Time bets also deserve honourable mentions for terrible value!
If you were to look solely at the profit margin figures, you would assume that FOBTs offer better value than football betting; you would also be hopelessly wrong! First of all, while football betting margins are not as good in terms of ‘single’ bets, your stake will whittle away to nothing much faster with FOBTs because you are placing dozens, if not hundreds of bad value bets over a short timeframe.
That’s the key; EVERY bet you make on FOBTs is bad value without exception. These machines are designed to provide a guaranteed profit to the bookmaker over time, and all profits made are as a result of luck. There is NO skill involved, and their very design means you will lose money much faster than you realise.
At least with football betting, there IS skill involved. Savvy punters find value when making bets, and it is they who have the edge. Despite the sophisticated technology used by bookmakers, they tend to rely on software rather than the individual talents of traders. Indeed, traders, these days have very little ability in comparison to their predecessors.
Bookmakers are trying to say that reducing FOBT stakes will damage the economy. In reality, the economic damage caused by these machines is already estimated at £1.2 billion a year; far beyond any positive impact. Do your research with football betting, look for the best markets, and you may be rewarded. When it comes to FOBTs on the other hand, just say no.
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Jon is the Founder and Chief Tipster at Football Advisor and Predictoloy. He started life as data analyst in the digital marketing field before find his true calling in the world of Football and Horse Racing Betting.
Jon has been sharing his professional expertise since 2009 and specialises in using objective data analysis and subjective experience of betting built up over more than a decade of professional betting.
In 2014, Jon also launched (and continues to run) the trusted Football Advisor service service which provides a variety of football and horse racing betting models and portfolios. A few years later, Jon launched the Predictology platform which is the worlds first betting system builder and analyser covering a wealth of football betting related statistics covering more than 200,000 matches.
Jon has also lent his knowledge and expertise to several of the trusted Premium Services offered by the respected Secret Betting Club, including Football Lay Profits. Racing Bet Profits and, most recently, Racing Lay Profits.