Soon after the birth of the World Wide Web in 1993, Antigua and Barbuda passed the Free Trade & Processing Act of 1994 allowing the licensing and launching of online casinos in that same year. Online gambling sites were in their infancy, but they were popular with gamblers from around the globe due to their accessibility and convenience. Not to be outdone by the online casinos, the first sportsbook was launched online in 1996 by Intertops. The online gambling revolution was now in full swing and just 4 years later an estimated 2,000 online gambling sites covering casino games, poker, bingo and sportsbetting were online and taking action.
The explosion of online gambling was now large enough that it was displacing real world casino and sportsbook revenue as well as action for local bookies. Why would a bettor want to be limited to wagering options with their local bookie when they had the entire world of sports available to bet online at anytime of the day or night at their fingertips.
While local bookies were being disintermediated, many of them decided to cut deals with online sportsbooks to place their players who wanted the convenience of wagering online. Online sportsbooks typically offered a 50 cent sheet for these bookies, offering to manage all of their betting action and split the profits 50/50 with the bookie. While not a terrible deal for the bookie, retaining half of your income was better than loosing it all to the online sportsbooks, as long as you could trust them to maintain the player relationship, accurately report profits and continue to pay out each week.
While it seemed that the traditional bettor and bookie relationship was coming to an end, online sportsbooks noticed that there was an entire untapped market of players out there who liked the convenience of online wagering, but didn’t trust a company in a far off land to handle their money, pay out winnings electronically or simply to remain in operation. In response, the sportsbooks developed player management software that interacts directly with the same software that is running their sportsbook. The sportsbooks offered this software to local bookies to manage their players with the goal of capturing a larger share of the market.
This presented the best of both worlds for a traditional bettor as well as the bookie. The bettor now had the convenience of wagering online on any sport at any time, while maintaining a relationship with a local bookie they trusted to handle their winnings and losses. The bookie also benefited by saving the time of taking calls, recording bets and grading wagers, now all done through the bookmaker’s sportsbook software. The bookie now had more time to spend on managing their existing players and growing their business.
Today, the local bookie has a new level of control over their business thanks to the rise of the pay per head industry. Pay per head refers to the ingenious business model the bookmakers invented for their sportsbook software. Rather than splitting half the profits from their players, the bookie simply pays a nominal software usage fee on a per player basis. The sportsbook may not make as much money from this arrangement, but they are tapping a market they couldn’t reach before and the usage fees add up to a reliable stream of weekly revenue since the bookie pays the usage fee no matter if their players win or loose. Yes, the local bookie has been reborn and has more control over their operations than ever before.Tweet
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