Money Smart Athlete Blog

The betting industry: A cost-benefit analysis

Dec 15, 2021 | Betting industry, Special Themes

By Demetris Constantinou, Contributor

Over the past decades, new visions have replaced old ideas, and conventional taboos have become part of everyday life. One such taboo, sports betting, has become prevalent across our lives and is now widely accepted in society. In the past, sports betting was seen as a shady activity performed by society’s outcasts, despite widespread participation. Today, sports betting is generally accepted, and with a few natural exceptions, nobody should feel ashamed of participating.

The Shift in Perception of Sports Betting

Such shift in the perception of sports betting laid the path for the formation of a gigantic industry. This is with an estimated market size of $203 billion generated by over 31,000 businesses that employ north of 190,000 employees[1]. An industry with such figures wouldn’t exist if it wasn’t for the underlying pillar.

The most obvious benefit that sports leagues have enjoyed since the emergence of sports betting is the profound spike in their earnings. As discussed above, without sports there isn’t any sports betting and as such, sports clubs and leagues are amongst the biggest stakeholders in the sports betting industry. The sports themselves have experienced both the best and worst aspects of what the sports betting industry offers. This article examines the costs and benefits of sports betting and whether the sports industry is in a better position since its emergence.

The Growth of the Sports Betting Industry

There was a study performed by the American Gaming Association in 2018. It was estimated that the four major sports leagues in the U.S, namely the NBA, NFL, NHL, and MLB, earned “a collective 4.2 billion U.S. dollars from widely available legal sports betting”[2]. There is no single way by which sports leagues make money off of sports betting. Such revenues are usually the result of ad spending by betting operators or even higher viewership of sports as a result of sports betting. Given that the sports betting market and its potential are highly untapped, such revenues could multiply. It can become even more significant for sports leagues and clubs in the near future.

How Sports Betting Can Boost Sports Popularity

Even though sports betting cannot exist without sports, it doesn’t mean that sports can’t actually grow as a result of sports betting. Specifically, it’s suggested that a large number of sports bettors don’t essentially bet to win. However, to maximize their entertainment by adding an extra layer of “fun” to an already enjoyable activity[3]. People who are not big sports followers might engage in watching a certain game or sport because of the fact that they’ve placed a wager. Thus, all of a sudden spiked their interest in the specific sport. The bettor not only obtains the entertainment of viewing the game but also enjoys the idea of winning and the thrill of uncertainty and spontaneousness associated with betting.

Macroeconomic Benefits of Sports Betting

The benefits above directly relate to sports leagues, but a broader benefit reflects well on the entire industry. The macroeconomic benefits of the sports betting industry positively impact sports clubs that rely on localities to grow their fan base. These benefits create win-win situations where the betting industry, local economies, and sports clubs all experience higher revenues and more jobs. However, the opposite argument exists regarding the social and economic impact of sports betting, which clubs prefer to avoid. No sports club wants to be directly associated with the macroeconomic benefits or costs tied to the sports betting industry.

The Social and Economic Impact on Sports Club

Undoubtedly, the benefits listed above can skew the perception of the sports betting industry’s positive impact on sports. To fully understand the impact of sports betting, we must consider its downsides and how they negatively affect leagues and clubs. The most significant issue sports leagues and clubs face with sports betting is match fixing. This is one of the greatest modern threats. While match fixing is a separate issue, it remains a significant threat to modern sports and can jeopardize entire leagues or clubs. Sports’ popularity relies on uncertainty and unpredictability; without it, sports become boring, and fans may turn to other entertainment. That’s why match fixing is one of the greatest threats to the sports industry and should be addressed seriously.

The Negative Emotional Impact on Sports Clubs

Another downside of sports betting is the negative feelings bettors may harbour toward a club after losing a wager. It’s common for people to blame teams or individuals for losing money. This is especially when they fail to perform as expected. Such negative feelings create a bad association with both the clubs and the leagues, ultimately pushing people away from sports. This issue may not affect the larger scale, but it remains an unavoidable consequence of the rise of sports betting. Efforts must be made to ensure these feelings stay limited to a small minority of sports followers.

Balancing the Benefits and Downsides of Sports Betting

Both the benefits and downsides mentioned above fail to reflect the broader societal and economic effects of sports betting. Nevertheless, this article’s purpose is not to examine whether sports betting is good or bad, but to analyse its impact. In monetary terms, sports betting has certainly benefited the sports industry significantly and will continue to grow on a larger scale. However, such success depends on closely monitoring harmful behaviours like match fixing, which can have severe consequences if not addressed.

For further discussion on the pros and cons of the betting industry for sports, you can contact us at [email protected].

[1] Key data on the global sports betting industry 2020 | Statista

[2] How Much Do Leagues Stand to Gain from Legal Sports Betting? – American Gaming Association

[3] The Advantages of Sports Betting – Why Should You Bet on Sports?

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