Sports Arbitrage Alert *Service* Subscriptions – Why single upfront payments are risky.

We have recently added a new category to our complete list of Arbitrage Alert Services titled “Non-Subscription Based Software“. This was added because a couple of companies have recently started selling software in this manner and it seemed appropriate that they be distinguished on this fact. The three entries currently in this section charge no ongoing fee, but instead require one single upfront payment. In some sense it may seem like a sound investment; it is easy to rationalise that the profits made from arbing will eventually pay them off and you will be able to continue arbing for free for the rest of your life if you wanted… but there are quite a few concerns which need to be pointed out when considering taking a non-subscription based offer.

For instance, what happens if:

1. Arbing is not what you thought and after a month or two you want to quit?

   This is the most obvious risk for all newbies to sports arbitrage trading, and probably the most common problem. Arbitrage can easily be made to sound very enticing. It is easy to make it look like arbitrage is free money for anyone who wants it, and many companies use that methodology when trying to sell their software. Reality of course is very rarely ideal, and the hands on experience of arbitrage could take all of the excitement out of the idea. Within a month or two the average person just isn’t interested anymore. If you are using a subscription based service then you simply stop paying the monthly fee and move on, no loss incurred (even your trading balances are usually intact, which is one of the best aspects of arbitrage!) However if you are using a non-subscription based service, and you have just paid a huge upfront fee for the software; you’re stuck with it. Refund policies rarely cover “I don’t want it anymore” and you are now out of pocket for the entire fee paid.

2. You gain experience and start to realise that the software isn’t as good as you first thought?

   This is a general risk which most people new to arbitrage will never think of. If you don’t know what arbitrage really is, how it really works, and don’t have years of experience doing it, how could you possibly know what is good quality? Making something look all shiny and fancy is much easier than making something work well. If you are considering paying a huge upfront fee for some software, you better know it is high quality, otherwise you could be basically giving away good money for nothing. If there is no decent trial period where you can have a chance to see how well it really works for yourself, then that is definitely a good reason to be concerned. Similar to the first concern, there is very rarely a refund policy for “It’s not as good as I expected.” If you were in a subscription based service, you could simply stop paying your subscriptions and move to a better service. When it comes to one off payments though, you are trapped and have to accept the product you have paid for. You could complain to the company providing the software, but what real incentive do they have to improve their service? They already have your money and there is no financial incentive for them to invest in improving things when they know that their product can still bring in new clients who know as little as you did when you started.

3. The arbs stop being delivered, or The quality of arbs decline over time?

   The fact which most people don’t realise with alert services, is that it isn’t the software package you are really buying. What you are really paying for, is the ongoing ‘service’ provided by the owner of the arbitrage alert feed to continue providing high quality arbs. With most alert software, the software you have or the website you log into is just a the ‘client side’ of the whole package. The real work is done on the ‘server side’. That means that the real work being done on a server somewhere else, and the results are simply being displayed in your software or on the web page you view. So it is very important that the service side aspect of your alert software is maintained because without the server working, your software is completely useless. This is very important because the software which runs on the server side of an arbitrage alert service is still just stupid software blindly doing what it has been programmed to do, and in every case this will requires constant human attention to ensure it is finding the right odds for the right sport at the right bookmaker for it to work. It can’t do this itself because the work that it is doing (finding odds from many different bookmakers, standardising them into a comparable format, calculating arbitrages and presenting the data to clients) is based on information which is constantly changed. So when Bookmaker A decides that they want to do a complete redesign of their website, the alert software pulling odds from their website will need to be recalibrated to find the odds in their new design. And when Bookmaker B decides that they are going to move their XML feed (where odds are provided to most odds comparison websites etc) to a new server, the alert software will have to be pointed to that new feed. Or if Bookmaker C changes the naming protocol for all of the sports, will the alert service still be able to match up odds for that bookmaker with all of the other bookmakers for each particular sport and market?

   Bookmakers are very dynamic. They change regularly, and there are a LOT of them out there so there is continuous ongoing work in ensuring that your alert service works well. That is why most alert services require ongoing monthly fees. You aren’t paying for the software alone, you are paying for the continued performence of the software. You are paying to make sure the server which provides the alert software with its arbs keeps working! Which brings us to the bigger concern raised in this point: What happens if the alerts simply stop coming? The company which sells you alert service software for thousands of dollars goes bankrupt for unforseeable reason (or disappears for any reason for that matter) and they have to remove their server which does all of the real work for alert service software? The software which was worth so much is now worth nothing. Without the stream of arbs being fed through to your client side software, all of its fancy features, calculators, clever displays and functions are completely worthless.

   As with the previous two points, having already paid for the product, what incentive does the company providing the software have to maintain the quality of their arbs? With a subscription based service, if their quality drops you can quickly and easily move to a better service. If the company goes out of business and their arb feeds stops, you have no recompense and worthless software. If you are paying on a monthly basis though, then you have not lost anything other than maybe a months fee (at most). There is no real way of knowing for sure than any of these scenarios won’t happen, either accidentally, purposefully, or through complete apathy. Regardless of the cause though, the risk to the consumer is real and must be taken into account.

When it comes down to it, you may be certain that concern #1 is not a problem for you: you are certain that you want to arb for the rest of your life. Maybe even point #2 doesn’t apply: you are already experienced and the demonstration/trial you had of the product proved that it was the best software on the market. Point 3 though is inescapable. You have no control over it and the risk will always be there.

When you are looking at a non-subscription based service, you are basically betting that you will get its value out before one of the above risks are realised. As most arbers are risk adverse (the very idea of arbitrage is to reduce risk to a negligible level) I expect that most would prefer to take the ‘surebet’ option and avoid the risk altogether. Of course in the end it does depend on the cost. For example, JuiceTrading is one of the programs in the “Non-Subscription Based Software” field, but its cost of only $99 means that it only needs to work for less than a month before it pays for itself in comparison to the monthly subscriptions which usually cost around the same per month anyway. It is when the cost is significantly higher that the extra concern is warranted.

To just conclude the point of this article, I think it is worth contrasting the above risks, with the benefits that come with paying an ongoing monthly subscriptions.

When you need to pay for each month as it comes:

1. You have influence

   To ensure ongoing profit the provider has to keep his customers happy. If the service declines in performance, then many customers will leave and it will have a very real tangible impact on the profit of the provider. Thus there is a lot of incentive for the provider to maintain a high quality feed and to ensure their customers are happy.

2. The business model is much more stable

   Most people know that it is easier to keep a customer than it is to find a new one, so services which make ongoing profits from each individual customer they already have are much more likely to stick around longer than business which are constantly fighting to get new customers in order to make a profit. Non-subscription based services have no other product to sell to their current customers, so the customer they have already worked so hard to get, are now worthless to them.

3. You have freedom to choose

   As long as you have only paid for a month at a time, at the end of every month, you can pick a different service. You are never locked in, and even if things go wrong, you can only lose a small amount of money. Freedom, drastically reduced risk, and no concerns.

Date posted:September 15, 2007Post Category :

• Arbitrage Alert Services
• AusSoft
• CSI Arbitrage
• JuiceTrading
• Uncategorized