It’s not a secret that bookmaking business is quite profitable.
The fact that thousands of companies work in this sphere speaks for itself.
A good bookmaking company will always benefit from its activity.
Even the most unreal players’ victories are very much unlikely to leave a bookie with an empty bag.
Did you often think of how bookies make money?
Let’s figure it out.
Who are bookies?
The word “bookmaker” is known to many, but not so many know what bookies do.
Some even think they are swindlers.
To answer the question of who a bookmaker is, let’s, first of all, refer to the definition:
The definition “bookmaker” has an English-language origin and means a profession of a bettor who takes bets on forthcoming events with preliminary determination of winning and payment conditions.
To put it simply, a bookmaker is a man taking bets.
- Considering the popularity of this business, many bookmaking companies widened the range of their activities by taking not only sports betting, but also that in the spheres of politics, art, high life, computer games, and so on.
Doing such risky business, modern bookmakers want to be sure that they won’t be in the red.
For that, they usually employ sports analytics that forecast the outcomes of sports events.
That’s why making a bet with a bookmaker, players face uneven conditions.
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Anyone willing to bet will benefit from understanding the process.
Let’s consider it by the example of sports games.
Bookmaking companies always work applying math, namely, combinatorial mathematics, theory of probability, and mathematical statistics.
Bookmakers’ work primarily consists in solving this issue – correctly building the line.
Line is formed by a list of sports events and their possible outcomes, every outcome being given its own coefficient.
“Correctly building the line” means that the company must objectively evaluate chances for every outcome and offer such coefficients that will bring profit in any case.
Such balance isn’t easy to achieve; it’s a difficult task fulfilled by hundreds of professionals.
Petty bookmakers watch the lines of their larger rivals and make minor adjustments.
Besides, the smaller the company, the fewer coefficients it provides: small business expenditures are higher comparing to its profits, thus, a higher margin is required.
So far let us continue and return to the margin a little bit later.
The possibility of any outcome varies from 0 to 100 % or from 0 to 1.
Every event can have several outcomes.
For example, a soccer match can end with any team winning or in a tie.
Every outcome has its probability. The sum of the probabilities of all outcomes totals 100 %.
Bookmaking companies’ professionals must evaluate the probability of every outcome as precisely as possible.
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For this purpose they use:
- statistics of the previous results of these teams’ games;
- the list of injured players;
- the overall motivation of the team and individual motivations of its members;
- relationships within a team, between certain players and their coach;
- the situation regarding future transfers to other teams or expectations concerning the arrival of new players: this influences the team’s morale;
- the team’s goals for the tournament in terms of which a match is conducted;
- information about the country, the city, the stadium receiving players (in this regard – the duration of flight, fans’ aggressiveness and their level of support, type of lawn grass, and so on);
- loyalty of the designated referees;
- weather forecasts for the day of the match and many other factors.
Calculation of the coefficient which determines bookmakers’ future profit
- After conducting such deepest analysis, a company’s employee draws the probability of every outcome of a sports event.
- Then he converts the meaning in the field from 0 to 1 (50 % = 0.5, 30 % = 0.3, 7 % = 0.07).
Afterwards, one (1) is divided by meanings of probabilities and coefficients are obtained.
For instance, the coefficient for 50 % equals 1/0.5 = 2.0; for 30 % it equals 1/0.3 = 3.33; for 7 % it equals 1/0.07 = 14.29.
The coefficients obtained level the probability of various outcomes.
If the chances are assessed correctly, the company doesn’t care for the proportions of players’ bets.
It is explained so that if a large number of similar matches is played, the outcomes will be evenly distributed: the first team will win every second match, the tie will happen in 3 matches out of 10, and the second team will win only 7 times per 100 games.
If coefficients are calculated correctly, the sum of the gain will never surpass the sum of money put down on all outcomes of this event.
The exception might occur only in case a large some is put on one outcome and the so called money slant of the line happens.
Professional players always notice when coefficients in the line change closer to the beginning of the match.
It is explained so that a bookmaking company makes adjustments to the line considering that one outcome has received a much higher bet comparing to the other, while the even distribution of bets is preferred.
In this case the companies entice players with high coefficients for the outcome without a bet, while lower coefficients for the outcome estimated with the largest bets turn off potential players.
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How bookies make money?
The logical question is: how do bookmaking companies make money if the sum of all gains equals the sum of the bets?
Everything regarding coefficients described above is called pure line.
In fact, the company determines the level of the margin in advance.
For instance, such profit can constitute 10 %.
Then not one (1) is divided by the meanings of outcome probabilities, but (100 % make the margin level) /100 %.
That is, in case of the 10 % margin number 0.9 is used.
Thus, the coefficients are as follows:
at the 50 % probability – 0.9/0.5 = 1.8; at 30 % – 0.9/0.3 = 3.0; at 7 % = 12.85.
This working model doesn’t guarantee that the betting terminal will always win.
The bookmaker can lose 10 and even 100 times in a row.
But in the long run, especially in case of multiple bets for various outcomes, the bookmaking company will be in the black.
That’s why it is important to attract as many players as possible, preferably from different countries and backgrounds with various viewpoints on various kinds of sport.
The bookmaker benefits from the diversity of bets.
It is not by chance that the bookmaking companies’ lines undergo more and more diversification every year.
Sports betting is a profitable business for bookmakers.
Due to the hefty margin, companies can stay afloat even after substantial disbursements.
In the long run they still receive impressive sums at the cost of commission percentage.
Thus, we figured out how bookies make money.
Large volumes provide them with very good profits.