How Bookies Make Money? What’s the Business Model
Bookies play a key function in online sportsbook gambling, from setting odds and laying bets to paying out winnings to the punters. But how do they make their money?
What is bookmaker and what is ‘balancing the book’?
‘Bookie’ refers to bookmaker – that is, a person who lays bets and records them in a book.
By ‘balancing’ the book, a bookmaker would adjust the odds of every possible outcome to ensure that they would profit from any given result or potential outcome.
Bookmakers have always played a part in gambling. These days, the term more widely incorporates a variety of individuals, brands and businesses that set odds, accept bets and pay out winnings to punters.
Although the physical book may have been replaced with digital records and automatic odds calculation, the concept remains the same.
How do sports bookies maker their money?
The bookmaker has a lot of influence and a degree of control over most aspects of any sports betting transaction. Bookmaking is so lucrative because bookies keep the sportsbook wheel turning, especially online.
There are plenty of ways that bookies make money, and the bookmaking business model is based on guaranteed profit. As long as there are wagers coming in, bookies can make cash.
Bookies set odds, lay bets and pay out winnings. Some bookies may also trade bets. Because it is the job of a bookie to balance the book, they will by nature always profit from any outcome or wager.
One of the main ways that bookies make money is laying bets.
Laying a bet is basically the same as accepting it – if a player wants to place a bet on a selected sporting event or outcome, they usually have to find a bookmaker to ‘lay’ or accept their wager.
While some punters may be able to lay their own bets through independent betting exchanges, laying bets for punters online is generally a consistent form of income for any sportsbook bookie and a crucial element of the bookmaking business model.
Another key way that bookies make money is by setting odds and adjusting them to ensure profit irrespective of outcome.
To set a simple example, think about a coin toss, which implies 50/50 probability of either a heads or tails outcome.
Whilst a 50/50 split indicates a ‘perfect’ book or perfectly balanced odds, these odds are not profitable for a bookie, who would only break even after payout if laying bets at these odds.
By overestimating the odds of either probability by a mere couple of percent, the bookie ensures that there is a profit margin on both bets, and that the ‘perfect’ odds are broken.
The more outcomes and betting markets a match offers, the more profitability it provides to bookies.
The Vig – Profit Margin
Using the coin toss example, it is evident that bookies add implied probability to ‘true’ odds to make sure that every outcome is extended above an even 100%. Anything over 100% is classed as profit for the bookmaker.
Bookie’s profit (anything over 100% or even odds) is referred to as the house edge, the overround, the juice or the vig. The Vig is a measure of profitability of odds. It is pure profit margin for the bookie.
To hike up the vig and boost profit margins, many bookies make use of accumulators and multiple betways to increase overround. By offering punters more betting selections within any given match or tournament, bookies allow for greater potential profit.
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