Wednesday, April 27, 2011 | 2 a.m.
VEGAS INC Coverage
Talk to a local sports bettor long enough and you will get an earful.
Nevada casinos are too conservative with their sports bets, they complain. The odds are poor. They won’t take big action. They don’t offer enough lines on games and ignore second-tier sports. Comps on sports bets are small to nonexistent.
For their part, casinos often return the sentiment, calling sports gamblers demanding and unprofitable. Want a comp? Try playing some slots, bud.
The arrival of Britain’s biggest bookmaker on U.S. shores could change that.
William Hill this month announced an $18 million deal to buy Nevada bookmaking chain American Wagering Inc., which operates Leroy’s sports books and provides the sports betting systems many Nevada casinos use to run their books.
Besides a proclivity for high tea and soccer, Brits tend to bet on sports differently from their Yankee counterparts.
Legal sports betting is a sideshow in Nevada, where casino CEOs view them as marginally profitable amenities next to more lucrative attractions such as nightclubs and gambling pits. But sports betting is big business in Britain, where the profits of corporate bookmakers rival those of the big Nevada casinos.
Quaintly called “betting shops” in Britain, sports books are the primary icons of that region’s gambling industry. They are part of Britain’s cultural mainstream, decades older than their Nevada counterparts and as ubiquitous as fast-food chains.
In its first quarter earnings report last week, William Hill reported a 21 percent increase in operating profit driven by a 54 percent increase in its online sports betting business and a 62 percent increase in wagers. Between mobile forms of gambling and action generated in more than 2,300 betting shops in Britain and Ireland, the company generated net revenue of $1.8 billion and operating profit of $457 million last year.
Despite its dominance in Nevada, American Wagering’s balance sheet is anemic by comparison. The company reported a loss of $1.8 million for the nine months ended Oct. 31 and generated revenue of only $14.5 million for the year ended Jan. 31, 2010. The company filed for Chapter 11 bankruptcy protection in 2003 and emerged in 2005, only to see business decline in the recession.
Sports betting is a study in risk management. The bigger the gambling volume, the better a book can balance opposing wagers and thus, generate a profit.
In the case of William Hill, bigger betting volume allows the company to take larger, although more profitable, risks by offering more favorable odds and larger bets than is custom in Nevada.
The company’s odds on who will win the Super Bowl, for example, are more favorable than several Las Vegas books, although William Hill doesn’t accept bets from Americans. The company’s British gamblers can wager on many American and foreign sports, including darts, snooker and hurling. The company’s betting rules allow for winnings in the millions of dollars on major sports — much larger than the typical Las Vegas book is willing to risk.
William Hill will have difficulty replicating its sports book track record in Nevada, home to the world’s largest concentration of “sharp” gamblers who make large, strategic bets that are often successful, said Steve Fezzik, a professional sports bettor and moderator of the local website lvasports.com. Nevada sports books tend to attract small-time, casual bettors or professionals seeking to bet the maximum, neither of whom are terribly profitable for casinos, Fezzik said. As a result, Las Vegas casinos know not to accept big wagers that could result in sports book losses.
Britain has a larger volume of nonprofessional gamblers who bet big on sports — an audience William Hill no doubt hopes to build in the United States, Fezzik said.
Industry experts say the acquisition is a future bet on the eventual legalization of Internet gambling in the United States. The deal will give William Hill, whose online casino in Britain includes poker, a platform from which to build a national online gambling brand. American Wagering’s recent launch of smartphone betting technology for BlackBerry and Android users made the company, despite its poor capitalization, a takeover target, the experts say.
“I don’t think there’s any question that online poker will be first” to be legalized, said Ted Sevransky, a sports bettor and handicapper in Las Vegas known as Teddy Covers. “And there’s enormous crossover between poker players and sports bettors.”
The company expects to receive regulatory approval next year for its American Wagering purchase and a separate $21 million deal to acquire Club Cal Neva Satellite Race and Sportsbook Division in Northern Nevada.
William Hill CEO Ralph Topping sees immediate growth prospects offline, in the Leroy’s sports books and mobile bets conducted over secure wireless networks. Yet he’s modest about plans to run additional sports books for Nevada casinos that would rather operate slots and table games — and is mum on the potential introduction of British-style betting action.
“It’s a great opportunity to create a robust and highly competitive business with increased scale,” Topping said. “There’s a lot of work to be done in strengthening these businesses ... But I don’t overpromise, and we take a long-term perspective. I want to learn from (Nevada casino operators) and build some confidence in William Hill. I don’t want to be some silly guy from the U.K. telling Americans how to run their business.”
There’s money yet to be made in sports betting, American Wagering CEO Victor Salerno said.
“We’re the only state that can really use this as a marketing tool — and we’re making it more available to people through technology,” Salerno said. “We’ve lost a lot (of business) to (illegal Internet) books, but we think we can capture that back.”
Cantor Gaming, a recent arrival in Nevada, has taken over sports books in several Las Vegas casinos on the profit potential of “in-running” betting, a European-style sports betting enabling gamblers to place bets seconds before individual plays throughout a game. Cantor welcomes large wagers and professional gamblers who attempt to use the company’s real-time trading technology to hedge bets like investment bankers. American Wagering offers similar technology, although Leroy’s typically caters to smaller bettors.
Cantor and William Hill could significantly increase the market for big-time sports betting, Sevransky said.
“Cantor has really changed the paradigm in Las Vegas by catering to wiseguy bettors,” he said. “That speaks to the growth potential for sports betting.”
Although sports betting accounted for only 1 percent of Nevada’s gambling revenue last year, it has increased by about 10 percent in the past decade and has held up in the recession. Although sports betting revenue accounted for about 1 percent of all the money gamblers lost to Nevada casinos last year, that revenue rose by
22 percent from 2000 through 2010. Including horse racing, sports revenue rose 10 percent over that period.
“American people love to bet,” Topping said. “I haven’t met an American who doesn’t have an opinion on sports.”
Or, in the case of Nevada bettors, a gripe or two.