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How Sportsbooks Make Money

Like most types of bookmaker, sportsbooks have a number of different techniques and methods to make money. Some, usually those who aren’t quite as educated in the world of betting, believe that sportsbooks make most of their money by advertising certain terms more heavily than others – either with enticing odds or simply offering favourable lines. However, that simply isn’t the case!

Limit the risks

Being completely honest, most sportsbooks don’t actually want the bulk of money placed on one team. If this happens, it puts the bookmakers in a difficult situation where they could actually lose money – hence why odds can drastically change in a short period of time. So, instead of trying to convince punters to back the same outcome, they try to tempt backers to split costs and try to get as close to a 50/50 split as they can.

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Ultimately, this gives sportsbooks the best possible chance of maximising profit. For example, if they managed to get an exact 50/50 split – they will always make money. And in that regard, sportsbooks and bookmakers cannot lose. However, they do get it wrong occasionally. But here is a brief description as to how it all works.

Okay, so let’s say you have a straight Team A to win bet. If it loses, you get no money back – that much is obvious. If you win, you get slightly less than an even money return. Usually, the industry attempts to pay out at an approximation of 10/11 odds. Meaning for every $100 paid out, bettors will have needed to risk $100. This isn’t always accurate but that tends to be common with most sportsbooks – online or offline.

Sportsbooks “vigorish”

In the world of betting, that extra $10 is known as the sportsbooks “vigorish”. In an ideal world, punters will stake exactly $220 on Team A and $220 on Team B. No matter who wins, the bookmakers would only pay out $420, giving them a profit of $20 on that particular event. And with so much money involved, a lot of $20s quickly grows into a lot of money.

By the same token, this particular method can hurt the bookmakers from time to time if there isn’t an exact split down the middle. Say if 75% of people bet on Team A while only 25% go on Team B and the former wins, the sportsbooks would probably make a small loss – although the size of the loss would be lessened because of the vigorish.

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Setting lines

In fact, sportsbooks really don’t like it when games become too one-sided in the betting markets. This is mainly because it exposes them to the potential for big losses. At the end of the day, they want you to gamble, but they don’t want you to be playing with their profits,a although there is the chance they’ll recoup later on. To combat this, they set lines and odds specifically to try and even games and betting markets out rather than setting on an expectation or result.

While this may sound a strange technique, it is actually incredibly clever and isn’t always picked up on. Here is a prime example: if the Golden State Warriors are 6-point favourites against the Toronto Raptors and the majority of betting is on the Warriors, the sportsbooks will almost certainly change the line to Golden State -6; therefore making more punters tempted to back the Raptors at +6.

As both a punter and a sportsbook, it is about getting that balance right. The house usually wins in the long term but in the short term, punters can try to tackle the sportsbook conglomerates – and now you know their pricing tricks.