You never see a poor bookmaker.
It’s one of the most commonly thrown around clichés in the industry. But, is it true? Aside from the likes of the mainstream bookies, are you able to set up as a bookmaker in the current climate and thrive?
The beauty of the current market is that there are a lot of avenues that you can take. These include high street, racetracks and online, to name just a few. Each have their pros and cons, but with each can turn a lucrative career if done correctly.
What many people don’t realise is that bookmaking is a science. The trick is to get the amount of money that you take on each market to give you a net win on all results.
To do this the bookmaker needs to be able to adjust odds as and when, enticing people to bet on the markets or bets that they want them to bet on. For example, if a bookies exposure on a certain horse to win a race was getting high, they make the odds shorter to encourage betting elsewhere and then drift the odds of the opposing horses to encourage people to bet with them on those horses.
The sooner the bookie works out when to drift and when to shorten, the more money they are likely going to make in the long run.
This requires a huge amount of skill and knowledge which comes from dedicating yourself to the industry. So, it wouldn’t be possible (or at least very tough) for any Tom, Dick or Harry to just “become” a bookmaker as they would lose a lot of money, very quickly.
On top of that, you wouldn’t legally be able to just set up. You would need to be fully licensed by the UK Gambling Commission who has to make sure that you are fit and proper to accept bets within the industry.
Ways to Become a Bookmaker
There are two ways that most people get into the industry:
- Set up alone and try to make it independently
- Partner up with an existing company to learn the ropes and expand that business
Both of these practices are still very much apparent, even with the most established brands in the industry. For example, mergers with Paddy Power and Betfair, Ladbrokes and Gala Coral, and Stan James and Unibet are just a handful of multi-billion-pound deals that have gone through in the last decade or so.
Routes Into the Industry
There are several routes in the gambling industry and becoming your own bookmaker. These are:
- High Street
- Mix of Each
The online boom has been one that has seen a huge influx in bookmakers. It’s also one of the reasons why licensing is so strict these days, especially from the early years of online betting.
It has essentially allowed people with very little experience or knowledge with bookmaking to set up and start earning. The downside is that the sector is now highly flooded and so it means making it online has become much harder than it once was.
The high street is now starting to die off and there are very few independent shops still available. Most of them have been taken over by bigger bookmakers, such as your Ladbrokes, Coral and William Hills of the world.
But, the main income for pretty much all of these stores doesn’t come from betting, instead it comes from Fixed Odds Betting Terminals (FOBT’s). These machines include the likes roulette, blackjack and a host of other casino games all played from a machine not too dissimilar to the classic one-armed-bandit.
The number of these terminals are limited in each shop. To get around this, it’s not uncommon for bookmakers to open up several stores within close proximity to each other just to get more FOBTs running in the area. The government have had to step in though, and the maximum bet on one of these machines from October 2019 will be limited to just £2.
The racetrack route is made up of many more independent bookmakers than any other form of bookmaking. A lot are family driven and have been about for decades, working through generations of the family.
All licensing for bookmakers comes through the Gambling Commission. These guys basically govern the whole of the betting industry and have created a number of licenses to cover all aspects of bookmaking. These licenses include:
- Operating licenses
- Personal management license
- Personal functional license
- Premises license (from your local licensing authority)
Depending on which route the bookmaker chooses to follow, they may need one or all of these to legally operate within the UK.
The bookmakers operating license will be deafferent for each type of betting platform that they are offer. For example, a bookmaker offering only Virtuals will need a different operating license than a bookmaker offering remote pool betting.
- non-remote general betting (standard) – for bookmakers trading from premises
- non-remote general betting (limited) – for on-course bookmakers
- non-remote betting intermediary
- non-remote pool betting
- remote general betting (standard) (real events)
- remote general betting (standard) (virtual events)
- remote betting host (real events)
- remote betting host (virtual events)
- remote general betting (limited) – for telephone an email bets only
- remote betting intermediary
- remote betting intermediary (trading rooms only)
- remote pool betting
One of the main points to take away from each of these operating licensees is that the funds and fees needed to complete each of the licenses successfully ill drastically differ.
Fees are predominantly based on the annual gross gambling yield for the business. From here the bookmaker will have to pay both an application fee to start the process and then an annual fee to maintain their license. As you can imagine, to keep legally running with the UK, these are both non-negotiable aspects.
To give you an idea of what these costs might be, let’s run with a breakdown of initially costs for a remote general betting operating license. This license is basically for online bookmakers offering up odds and markets on real sports, which is the vast majority of online bookmakers.
All bookmakers that are operating at less than £550,000 annual gross gambling yield will have an application fee of £2,933 along with an annual fee of £3,408. This is the lowest amount that can be paid to obtain these licenses.
For bookmakers that are generating over £1billion then the application fee rises to £25,777 and the annual fee rises to a whopping £694,856 plus £200,000 for each additional £500million of annual gross gambling yield above £1billion.
Personal Management License
A personal management license (PML) is basically a bit of a background check on who you are and your background. There was a time when as long as you passed a CRB check, they would let pretty much anyone in. But, these days they play a much greater emphasis on making sure that there is stability behind the person who is behind the business.
It goes a lot deeper than just the person at the top. It also includes the people responsible for:
- overall strategy and delivery of gambling operations
- financial planning, control and budgeting
- marketing and commercial development
- regulatory compliance
- gambling related IT provision and security
- management of licensed activity for a particular area in Great Britain where you have five or more sets of premises for which you hold a premises licence
- management of a single set of bingo and/or casino licensed premises.
The cost for these licenses is £370 per person and the Gambling Commission will not return your fee should your application be unsuccessful.
Personal Functional License (PFL)
The Personal Functional License is for people who are going to work within the bookmaker or casino. These might be:
- a dealer/croupier
- a cashier
- an inspector
- a pit boss/gaming supervisor
- security staff/monitoring surveillance related to gambling activities.
Again, this is more to do with background checks on these people to make sure that the people involved are trustworthy and not any outstanding misdemeanours.
The premises license needs to come from the local licensing for the site in question. It’s up to them to decide if they want to allow a gambling establishment to build or converted on a proposed site. Some areas are easier to obtain licenses from than others.
The process can be quite a drawn-out process as local councils often take several weeks to process applications, let alone make a decision on them.
How Much Does it Cost to Start as a Bookie?
The costs on becoming a bookmaker will vary drastically depending on which line of bookmaking the business decides to take.
An online only site will save money from things, such as rent on high street stores, along with fewer staff. But their increased costs will come from the coding of their websites, server uptime to make sure it runs flawlessly around the clock (can cost several thousand per month), initial design and then of course, traders to make sure the site is successful financially.
High street shops won’t have the online costs, but they will pay more in staff overheads, rent and likely licensing annual fees, which are higher than most online sites, especially if making a lot a of money.
Racecourse bookmakers are likely going to be the lowest start-up costs of all. Initially equipment needed will range in the £8-10,000 mark, which includes a digital board, a joint (stand), computer, printer and signage. These are generally one-off costs and once set up, these won’t be recurring payments.
Can You Set up a Bookmaker and Thrive?
This was our original question in the article and to answer it, we would have to say, yes. But, it is a lot tougher than it used to be. The increased rules and regulations have been needed for the gambling industry, but it means that you need to jump through more hoops to be accepted.
The thing is that even if you get approved and licensed, the job at marketing and getting your name out is still going to be tough. Margins are slimmer and the increase in tax paid out by bookmakers in 2019 will make it even harder.
You only need to see some of the figures the likes of the bigger boys are doing to see that money can still be made. We are talking billions of pounds. You only need a small slice of that pie to making a lot of money in the gambling industry!