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How Bookmakers Make Money

Posted on November 25, 2020 by Natashia Broome

In order to understand how bookmakers earn a living, it’s important to first establish what a bookmaker is and what a bookmaker does.

A bookmaker is basically someone who facilitates the act of betting on sports or other events. The bookie handles the process – right up to the point of the bet being about to be made by the actual bettor. The bookmaker will set the odds, accept bettors’ bets, place those bets on the actual events, and also pay out the eventual winnings to the relevant parties.

Every bookmaker’s main goal is therefore to create and maintain a balanced set of “books”. This is achieved by a constant adjusting of the odds in such a way that an even amount of people end up betting on a win and a loss.

A Cut Of The Cash

This brings us to the following statement: bookmakers don’t typically earn their keep by placing actual bets themselves. Instead, they charge a small “transactional fee” on every bet wagered via their books. This fee is typically referred to as a “vigorish” – or “vig”, for short.

Some bookmakers may even lend money to bettors. These bookmakers are typically strictly regulated and are registered financial service providers. Bookmakers authorised to extend loans to bettors should be easily verifiable by contacting the relevant regulators overseeing their particular region or area or jurisdiction.

How Do Bookies Set Odds?

Considering all that’s been mentioned so far, the next logical question should be how bookmakers go about setting their odds.

Modern-day bookmakers often employ entire teams of statisticians, mathematicians, sports experts, and professional tipsters. These are people experienced in their respective fields – whether that be data analysis, software development, sports coaching, etc. Systems ultimately responsible for determining the actual odds are almost exclusively digital – very much unlike how early bookmakers used to go about the business of facilitating bets wagered on a day at the horse races. Bookmaking today is a science, i.e. no longer someone merely acting on a semi-informed hunch or so-called gut feeling.

A Bookmaker’s Skillset

As is the case with all other professions, bookmakers rely on a specific skillset in order to earn a living and make money. These typically involve:

  • Setting the correct bet prices, or vigorish.
  • Setting and maintaining betting lines (which involves changing the betting lines).
  • Constantly balancing the book – this in order to eliminate any possible risk to themselves.
  • Knowing more about the “bet” than the average sports bettor. Part of this entails actually counting on the fact that bettors will make incorrect decisions driven by a lack of experience, emotions, etc.

A great way to understand why it is important for bookmakers to set the correct odds is to consider the typical toss of a coin. Each toss will have two possible – and equally likely – outcomes, or results: 50% chance of a “heads” result and 50% chance of a “tails” result. In order for anyone to show long-term earnings from betting on the toss of a coin, some decisions must be winning decisions, and some other decisions must be losing decisions. It’s no more than simple mathematics.

Posted in SportsTagged Bookmakers

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