Many punters, especially novices, get blinded by the bonuses that sportsbooks offer. 300% deposit bonuses, free bets, and all the other flashy promotions that online bookmakers offer are hard for bettors to pass up. The punters wonder how the bookies can make such huge profits by giving away such large chunks of bonus money so freely. They want to know how the bookies stay in business despite all of these generous gifts they so liberally bestow onto their customers.
The answer is juice. Vigorish. Gambling commission. The margin. Call it what you want. It is the reason that bookmakers are collectively raking in billions of dollars every year. They make their profits by nickel and diming the sports bettors on each and every bet they lay. This is the bookies profit margin. Those glitzy bonuses that some punters are so enchanted by are the power-bait that catches the big fish. Those generous sign up bonuses are small investments that bookies make and in the long run, they yield incredible returns. The phrase “the house always wins” isn’t just some meaningless and overused adage. It is a fact. Any doubters only need to do a quick internet search to find out how much money this gambling industry makes.
What is the Bookmaker Profit Margin?
In a nutshell, the bookie’s profit margin is the vigorish which is like a small commission that is taken from every bet. To illustrate this, let’s use a coin toss as an example. A coin toss is, in essence, a 50-50 proposition. If you and a friend decide to bet $10 on a coin toss then you both have a 50% chance of winning. This is a true even money proposition. You call heads, your friend calls tails and the coin is tossed. One of you wins and comes out $10 ahead. This is because you and your friend made this wager using true odds.
When bookies get involved, it’s a little different. Instead of giving you the true odds based on mathematical probabilities, the bookmaker will fudge the odds a bit in order to get their cut. When you lay a bet on heads through the bookie, they will adjust the odds to something like 1.95 for heads and 1.95 for tails. This means that if you win the bet, you will come out $9.50 ahead as opposed to $10. The bookmaker pockets the other $0.50. This is the bookie’s betting margin and this is how the sports betting companies make billions of dollars.
In a perfect world, bookies would get equal action on both sides which would eliminate even the smallest financial risk. The bookie would simply take the losing wager money and give it to the winners while collecting their margin. It’s not a perfect world but these companies still have methods of minimizing their financial risks. The bookie may lose a bit of money on a given day but in the end, they make their margins and comfortably stay in business.
How to Calculate Odds Margins
A bookie’s odds margin can be figured out using this mathematical formula:
((1/Odds 1) *100+(1/Odds 2)*100)-100
We will use the above coin toss scenario for this example. The odds on Heads are set at 1.95 and Tails is also 1.95. Therefore:
This reflects a margin of 2.56%
If you want to figure out the margin on a game with 3 possible results like win, draw, and loss then just factor in the third option in the same way. As an example we have Norrkoping @ 2.70, Draw @3.50, and Rosenborg @ 2.30:
This reflects a margin of 9.07%
Let’s put this to practical use with real 2-way lines from a couple of leading sportsbooks on an MLB game between the Atlanta Braves and the Cincinnati Reds. At Sportsbook A, the Braves line is 2.55 and the Reds are 1.57. At Sportsbook B, the Braves are 2.60 and the Reds are 1.56. Let’s compare the sportsbook’s profit margins:
Braves bettors will want to lay their bets at Sportsbook 2 and Reds backers will find marginally better value at Sportsbook A. But what else does this comparison tell you? That’s right, Sportsbook A’s odds margin is a little higher for this baseball game. Now let’s throw in a 3rd sportsbook’s odds and compare. Sportsbook C has the Braves listed at 2.50 and the Reds at 1.50:
You can see that Sportsbook C has a significantly higher margin than both counterparts. It is quite obvious that if given the choice, savvy punters would not make either their Braves bets or their Reds bets at Sportsbook C. The return on both bets would be lower than the alternatives because the bookmaker is taking a bigger slice of the action.
How do Bookmaker Odds Margins Affect your Long-Term Winnings?
Let’s go back to our coin toss example. The true odds are 50-50. This means that in order to break even, a punter would need to win 50% of his long-term bets. When we factor in the bookie margin, this takes away from the punter’s winning amount which now means that the punter will need to win close to 53% of the coin tosses to break even. We can then apply this to a sportsbook with a higher margin. Maybe the math shakes out to the punter needing to win 55% or even 60% of the time to break even.
One or two percentage points might seem like a very negligible amount but you should clearly see how every percentage point impacts long-term earnings. Even 1% shifts the balance significantly. This is why it is so critical that punters seek out the best odds.
How can you find the Best Odds?
Finding the best odds is just like finding the best price on a particular pair of shoes. You need to shop around, maybe you take a look at some reviews or look for some promotion codes. You may see your desired pair of shoes advertised at $99 in one store, $110 at another, and $129 at the third store. Comparing free bets, cash back offers or the odds is always important. In the Atlanta Brave vs. Cincinnati Reds example above, Braves backers have their choice of 2.60, 2.55, and 2.50. Which one would you take?
For a variety of reasons, bookmakers have different margins on different sports. You may find that your sportsbook consistently offers the best odds on Premier League soccer but their hockey odds are lower than other sportsbooks. This is one of the biggest reasons why so many smart sports bettors use multiple sports books. By analyzing margins and closely comparing odds, sports bettors give themselves their best chance at having long-term success.
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