A bookmaker or bookie is an organisation or a person that sets odds, accepts bets and makes payouts to the bettors. They hold the key in the sports betting industry and facilitate the gambling process.
However, bookies have a share of their profit margin and follow a business model that enables them to make profits from the bets placed by the punters.
How do bookmakers earn money?
Bookmakers earn money by first setting the right bet prices and then balancing the estimated bet. In betting, bookmakers cannot control the outcome of an event but they can set the odds in such a way that they gain profits from the placed bets.
One of the main techniques followed by the bookmakers is to include vigorish. Vigorish or vig also known as juice or the overround is a fee charged by the bookmaker while accepting the bets from the punters. It is included in the odds and helps bookmakers make profits.
How do bookmakers set odds?
Odd compilers set the odds enabling a built-in profit margin for the bookmakers. The act of setting the odds is known as pricing the market.
To illustrate, consider the event of tossing a coin with a bet amount of INR 100. It has two possible outcomes, 50% chances for heads and 50% for tails. Therefore the odds for the event must be 2.0 / 2.0 on both sides with the winner set to win INR 100.
However, the bookmaker offers odds for heads or tails slightly below 2.0 giving themselves an edge to make profits.
In simple terms, the profit earned by the bookmaker can be calculated as follows:
Profit = Margin x Volume of bets x Amount bet
How do odd compilers work?
Odd compilers play an important role in determining the odds. They help in determining how much amount of money the bookmaker will make and how much will be paid out. The two main criteria for compiling the odds are to check how likely an event might happen and the profit margins behind them.
What is a balanced book in betting?
In betting, a balanced book enables the bookmaker to earn the same amount of profit irrespective of the outcome. In case of an imbalanced bet, the bookmaker will make a profit if one team wins and will incur a loss if the other team wins.
As a result, odd compilers adjust the odds to ensure the book is balanced. Balancing the bets enables the bookmakers to get more volume of bets thereby increasing their chances of earning profits.
How are sports odds calculated?
Odds are calculated based on a number of factors such as team lineups, player injuries, the position of the team in the league, current form and winning and losing streak.
The probabilities of calculating odds differ from bookmaker to bookmaker. For example, the European bookmakers have an in-house odds team that decides the odds according to the percentage of a team’s victory. Meanwhile, most Asian bookmakers prefer a balanced book in order to reduce their liability.
Why do bookmakers offer promotions and bonuses?
Although bookmakers try to earn and maximise their profits, a general tendency followed by most betting websites is offering customers bonuses and promotions.
One of the most common reasons for this is the stiff competition. Bookies look to build the base of their loyal customers and therefore are willing to lose a small amount of money in a trade-off for future profits. A good bonus by bookmakers is considered a long term investment.