Have you ever wondered what goes on behind the scenes in a sportsbook? With the continued legalization of sports betting across the United States and globally, many bettors want to know exactly how much their sports bookkeepers are actually making.
Sports betting has become a $194 billion industry. Because of this, many people are gaining interest in becoming a bookmaker and taking a piece of the action. But how much do bookies actually make?
Read on as we uncover how bookmakers make money in the sports betting industry.
What Is a Bookie?
A bookie is short for “bookmaker.” These are people that facilitate gambling, usually for sporting events. The bookmaker sets the odds for a particular game, accepts and places bets, and pays out winnings for other people.
Bookies don’t make money from placing the bets; instead, they charge a transaction fee called a “vigorish” (vig for short). They also lend money to bettors that need it.
Bookies can be both large organizations or a single person. Historically, the word “bookie” was associated with illegal gambling, but the legalization of sports betting has turned it into an actual occupation.
Nowadays, most people use online platforms that are referred to as the “book.” People can place legal wagers through privately run enterprises all over the world. They are placed on sports of all kinds, including football, basketball, hockey, baseball, cycling, racing, mixed martial arts, and more.
Bookkeeping Concepts to Understand
Have you ever heard the phrase “you’ll never meet a poor bookie?” Or maybe you’ve heard “the house always wins.”
There’s a reason why bookmakers have gained a reputation for “always winning.” To be a successful bookmaker (and to win against them), it’s important to understand different techniques and strategies that they use to make sure that they always have the advantage.
Let’s take a look at several concepts that need to be understood to see how bookmakers make their money.
Backing and Laying
In all sports bets, there are two sides — the backer and the layer. If you’ve ever used a betting exchange, you’ve probably seen the options to “back” or “lay” a bet.
If someone wants to back a bet for a certain outcome (i.e. the Rams winning a game by 6 points), someone else needs to take the opposite side and lay the bet.
In a betting exchange, the middleman (the bookkeeper), is actually cut out of the equation. This allows people to bet directly against each other by backing and laying bets. Exchanges typically take a small commission on the bettors for using their platform.
Understanding backing and laying is a good introduction to how bookies enter into the equation.
Balancing the Book
The term “bookmaker” came from the actual recording of bets in a book or ledger, or “making a book.”
To do this, bookmakers would lay out possible outcomes for an event so that it would guarantee profit for them — no matter what the outcome of the event was.
Simply put, to do this, they would set the “perfect” odds for every outcome while taking the right amount of money from each outcome. Although it might seem simple on the surface, bookies have to adapt their odds to hundreds or thousands of variables as well as fluctuations in the market.
They need to make sure they aren’t too different from other operators, which would make the market uneven. That’s why you typically won’t see huge differences in odds across most of the major bookmakers.
Bookies are constantly trying to figure out how much they can afford to lose in a single market. This means that the odds and balance of the book are significantly impacted by how many people place bets in the market. For example, if many bets are placed on a single side of a wager, it could drive the odds down.
If this system sounds complicated, it’s because it is. Nowadays, major bookies have complex and sophisticated technology to help automate this process. However, the underlying principle remains the same — make sure the book is balanced so that bookies make money no matter what.
How Do Sports Bookkeepers Make Money?
In the most simple explanation, bookmakers need to take more money than they pay out. Although they can’t control what happens in sporting events, they can control how much they stand to win or lose for any outcome.
Charging Vigorish/The Overground
The main strategy that bookies use to make sure the odds are in their favor is to use vigorish. The vig (also known as the juice, overground, or margin). It is basically what is built into the odds to ensure that the book makes a profit.
For example, let’s take a look at a coin flip. There is a 50/50 chance of landing either heads or tails. If the bookie offered true odds, they would offer bettors even money:
- 2.00 in decimal odds
- +100 in moneyline odds
- 1/1 in fractional odds
If a bettor bets $10 and won, they would get $20 back. In this scenario, a bookie wouldn’t make any money. This is why they add a vig into the odds.
Theoretically, they can guarantee that they’ll win money. So for this example that is 50/50, they might use odds of 1.9091 (-110 moneyline, 10/11 fractional).
Now, if you bet $10, your return would be $19.01.
Although this is an overly simplified example, it shows how bookmakers can set the odds to their advantage.
The Role of Compilers
Although technology does help automate the process of shifting odds, bookmakers still need to make predictions on sporting events at the end of the day.
Predicting things like who will win or what team will score first needs people with smart and logical opinions on sports.
Enter compilers. These are the people that set the odds that you are “up against” to make the right prediction. Since they aren’t machines, they are vulnerable to human error, which is what good bettors try to capitalize on.
It’s important to understand compilers not only to win your bets but to understand how bookies make money.
When they set the odds or “price the market,” their main goal is to accurately reflect how likely an outcome is while making sure there is a built-in profit margin for the book. They use a combination of statistics and sports knowledge to create this.
Why Do Books Offer So Many Promotions?
Many people that have been gambling across different platforms might be skeptical of the hundreds of promotions that are out there. They might wonder why a bookmaker would offer incredibly generous promotions that don’t make them any money.
Although certain promotions are indeed misleading and don’t offer good value, there is no reason to be skeptical of most legitimate promotions.
The reason why bookmakers do this is because of how much competition is out there. They are willing to lose some money on a free bet if they can secure more bettors and maintain them as long-term “customers.”
With the legalization of gambling, more gambling operators are popping up all over the world, so making sure that they can retain and keep loyal customers is incredibly important, just like any other business in the world.
Smart bettors will research many different sports betting platforms to find which one suits them best, offers the best odds, and has great promotions, like https://www.oddstrader.com/mlb/.
How Much Do Sports Bookies Make?
When it comes to the actual amount that sports bookies make per year, it varies widely. It depends on how many bettors they have that bet with them every day or week.
The more bettors a bookie has, the more money they will typically make. Bookmakers that have over 100 bettors can make around $100k a week, or over $5 million a year.
Nevada sportsbooks see money in the billions of dollars, but they have tons of bets coming in and out daily.
Get Ahead of the Game
This is a good introduction to the world of sports gambling and how sports bookkeepers make their money. Sports gambling finance is an incredibly nuanced and complex topic that could take years or even a lifetime to learn.
Even the best sports minds across all major sports look to bookkeepers and their compilers to see how they set the odds to help predict the outcomes of sports games — so it’s no wonder that they make a good chunk of money.
The strategy and market of the sports gambling industry are always changing, so keep researching and strategizing to make sure you come out on top.