Why Do The Bookies Always Win?
Ask anyone who has ever placed a bet what they think of bookmakers and you’re unlikely to get a particularly favourable reply. They’re part of the industry that we love to hate, needing them to act as the recipient of our wagers but always wishing that they would offer longer odds, give us better value or be more generous in their offers. Speak to a bookie, though, and they’ll soon let you know that they have overheads they need to deal with, make generous offers as it is and also operate as a business, not a charity.
All of which is entirely fair, of course. We’d love it if they would given us our money back on losing bets and reward us generously when our wagers are winners, but that’s just not how sensible businesses operate. Yet how much of what the bookies say is true? Are their offers generous? What are the overheads that they have to cope with, bearing in mind that they’ll be different for an online company compared to a high street bookmaker? Perhaps most importantly of all, how come it is that they always make a profit no matter what? Here’s a quick look at the way bookies work and the things you need to remember when you’re placing a bet.
Setting Odds
The first thing that a bookmaker needs to do is offer odds to its customers. The setting of these odds is what allows a company to ensure that they stay in profit, given that if they offered ridiculously long odds on a dead cert then they wouldn’t be in business for long. They use experts, known as odds traders, along with software algorithms to help them set odds through a combination of probabilistic modelling and experience.
When it comes to setting odds, bookies don’t just give customers a completely fair reflection of the likely outcome. Let’s say, for example, that the bookmaker is offering odds on a football match between Liverpool and Manchester City in the Premier League. Realistically that will probably be seen as a 50/50 bet by the bookies, but they might also know that people tend to bet more heavily on Liverpool. They will therefore make the Merseyside club the favourites, positioning themselves to make a profit regardless of the outcome of the game. This is known as balancing the book, whatever the result the bookie will win.
Bookmakers will also adjust the odds in accordance with how the public is betting. Let’s say that people actually bet far more heavily on Manchester City in the above example, bookies will then make City the favourites instead of Liverpool. In other words, bookies will shift and change the number of bets being placed and the amount of money that they stand to lose depending on how people are betting.
The Vig
One of the key parts of a bookmaker’s strategy is the ‘vig’, which is short for ‘vigorish’ and is essentially a margin that they put into the bets to ensure that they’ll make a profit. Also known by nicknames like ‘the juice’ or ‘the margin’, it’s best seen as being akin to a commission that a bookie takes for being wiling to accept your bet in the first place.
Let’s look at something like the toss of a coin as a simple explanation of how the vig works. In reality, there are only two possible outcomes from a successful coin toss: heads or tails. That means that the real odds are 1/1 fractionally (evens) or 2.00 in decimal. If a bookmaker were to offer those odds on each outcome, however, and half of the people bet on tails and half on heads
then they would stand to make no money whatsoever.
What bookmakers do, therefore, is build their commission into the bets that they offer by giving customers odds that aren’t quite a true reflection of the likely outcome. Instead of 1/1 they’ll offer 10/11, or 1.9091 in decimal. Previously your bet of, say, £10, would have seen £20 come back to you. Instead you’ll now get £19.09, with the 91 pence missing going to the bookmaker. That’s obviously not a huge amount of money on its own, but times it by hundreds and thousands and you’re suddenly seeing them make a tidy profit for doing absolutely nothing.
The Overheads
Given that, as mentioned before, bookmakers aren’t run as charities, the ‘vig’ is an entirely necessarily part of running the business. After all, bookmakers have overheads that they need to pay for in order to even be able to operate in the first place. What these are exactly will completely depend on the type of bookie that you’re dealing with.
A high street shop, as an example, will need to pay rent or a mortgage to a local council for the venue that they’re based in. They’ll also need to pay electricity, gas and water charges, to say nothing of the wage that will be demanded by the staff that are working there. If it’s a company with a number of shops in a similar area then the likelihood is that an area manager will also be asking for some money to do their job.
Most bookmakers have gambling machines on their premises, which will need to be bought in the first place and also maintained. It’s unlikely that you’ll have been to a bookies that doesn’t have televisions showing some form of live sport, so they’ll need to be paid for and looking after. There are also licences required in order to show said sport, with companies needing to acquire those licences. That is especially true of horse and greyhound racing. There are many other things beside, with telephone lines and so on also needing to be thought about.
When it comes to companies based purely online, they obviously have less overheads. Depending on the size of the company, there will likely be a head office somewhere that will require most of the same overheads as above, but that’s one or two places as compared to hundreds around the country. Instead, web based companies need to think about the likes of web hosting, software requirements and so on. They’ll also need a licence if they want to be able to live stream events, which is why it’s often only the biggest companies that offer that service.
Offers
Bookmakers that operate exclusively online have significantly lower overheads and can make a much larger profit before they’re not limited in terms of where they can take bets. If you’re a high street shop then you’re essentially dependent on footfall from passing trade to come in and bet some money with you. If you’re an online company, however, then you can take bets from anyone and anywhere that is above the legal age and based in a place that you’re allowed to offer your services to.
That’s why it’s far more common for online bookies to put forward better offers than their high street counterparts. If you play your cards right then you can really take advantage of this, combining your own know-how regarding the best wagers to place with offers such as free bets, risk-free bets and loyalty schemes. If you’re a big bettor then you’d be silly not to check out which companies offer the best promotions and try to do as much of your betting as possible with that company in return for free stuff.
Now if you were to have a conversation with a bookmaker then they would almost certainly point to these free offers as an example of them doing their best to give you value. To an extent, of course, they’d be right. If no company ever offered a free bet then people would still place wagers, so why do they do it? There are a number of reasons for this, not least of which is that they’re trying to win your custom. Ultimately bookies respond to the odds offered by their competitors, so they need something to entice you to place your bet with them and promotions are their way of doing just that. They depend on a good chunk of punters not actually remembering about the free bet or placing it on something more risky, which means those that use them successfully are covered by those that don’t.
‘Mug’ Punters
Let’s be honest, we’ve all been sat in front of a selection of bets and chosen the most obvious option in front of us. Bookies absolutely love ‘mug’ punters who go out and place an accumulator bet on all of the favourites because they know that it’s actually quite rare for the favourites to all win at the same time. That’s to say nothing of people who don’t even know what an accumulator is and just place loads of individual bets on the favourites.
Bookmakers depend on ‘mug’ punters because they’re the ones that don’t think too much about the form of a horse, the injury news of a football team or the weather on a golf course. Casual punters will often bet on the name and reputation of the player, team or horse rather than do a bit of research in order to figure out if their bet is a sensible one. They lack discipline when it comes to betting, often doing it for thrill rather than because of a thought-out strategy, and will usually lack the patience to play a long-game with their betting.
With the vast majority of bettors falling into this bracket, it soon becomes clear why bookmakers are so often able to turn a profit whilst also making seemingly generous offers. Add to that the fact that sensible bookies will put restrictions in place on bettors who are usually successful, limiting the amount of money they’re able to win or the size of the stake they can place, and it’s easy to understand why good bookmakers are the only full-time winners from betting.
Do Bookies Get A Bad Rep?
Once you start wondering about the reputation of bookmakers and the way we all think about them, you inevitably have to ask yourself whether we’re fair to them in general. The reality is that it’s an industry with a low cost but a high reward for them, so which other ones are out there that don’t have the same sort of bad name?
Car rental and leasing is an industry that you might not immediately think falls into this bracket, but the companies that let you borrow a car have practically no risk attached to them. You pay them a monthly fee which will be in excess of the monthly fee that they’ll be paying to the car manufacturer, you’re responsible for any accidents or problems that you have with the vehicle and at the end of your contract they simply sell it on and clear any remaining debt on it. A similar thing is true of those that rent our properties, with the deposit taken covering any possible damage or what have you at the end of the lease.
The simple fact is that we don’t like bookmakers because they take money off us if our bets are losers, but it’s no different to any other service that doesn’t work completely in our favour. It’s not necessarily the bookie’s fault that that the industry is a profitable one. Yes, they could perhaps be doing more to offer value to punters but nobody has to place a bet, so it’s not like people are being conned into it.
As long as they can add in a commission to every bet that they take and are able to ensure that they can balance their books, bookmakers will continue to make a profit. Our job is to figure out the best way of stopping them from doing so as often as possible, which is achievable through research, planning and sensible betting.
One thing the bookies do get a bad rep for, fairly, is limiting winning players. In the UK there is no law to force bookies to take your bets and therefore players that win regularly simply see their accounts limited and their access to lucrative offers restricted. This is a negative side of the industry that doesn’t happen in other countries such as Australia. Hopefully this will be looked at in the near future.
