How Do Sportsbooks Make Money

Sportsbooks do not always win in the short run but with a proper balance sheet and book, they should always make a net profit. They may “win” your losing bet but they still have to pay “winners”. The vig, or the vigorish, is the number one answer to the question, “Do sportsbooks make money?” Also known as the “juice,” this is the fee that a sportsbook charges for taking wagers from bettors. We’ll look at how sportsbooks make lines for games, study how they might shade lines to increase profit margins, and see how public “betting percentages” can help identify value. In future articles within this series, we’ll take a closer look at why “smart money.

We all know that a sportsbook is a place where bettors can make wagers on various sporting or non-sporting events. These sporting events ranging from baseball, football, basketball, hockey, soccer, golf, tennis, MMA, boxing and many, many more.

We also know that gamblers who correctly pick the winning side make money from their bets and those who picked the wrong side to lose money. what about sportsbooks? How do these sportsbooks make money?

For starters, sportsbooks don’t just hold the bets for both sides. They are companies which exist to earn a profit as well and mind you, out of all the parties to a bet, the online betting sites often always comes out as the big winner in any sporting or non-sporting betting event. Surprised? Let us discuss further.

Betting Odds

At first, betting odds look complex and even confusing but in reality, they are not. Odds are the probability that an event is going to happen. Betting odds tell you how much money you are going to win with a particular wager. These betting odds are presented in a variety of ways. They can be either decimal, fractional or American. Let us explain each:

  • An example of decimal odds is 9.0. This means that a winning $1 stake will yield $9.0 ( 9.0 x $1.00) or a profit of $8.00 ($9-$1) for a winning bet.
  • An example of fractional odds is 4/1. This means that a winning $1 bet will give you a total of $4.00 or a profit of $3.00 ( $4-$1) for a winning bet.
  • An example of American odds is -$110. This means that a $110 bet will give you a total of $210 or a profit of $100 ($210-$110) for a winning bet.

Different bettors prefer the different presentation of odds and online sportsbooks will give you an option as to which way you want the odds to be presented. All you have to do is choose. Now that you know what the odds are, you might ask who comes up with these numbers and how do they come up with these numbers?

How

Betting Line

Casino

These odds are carefully created by the in-house oddsmakers working for online sportsbooks. These oddsmakers are the brightest minds in the sportsbook and they use public perception and key statistics to come up with the betting odds. Oddsmakers first create an overnight line which is also known as the opening odds. This is an educated guess of the starting point which oddsmakers think will get the same amount of betting action from bettors of both sides.

The opening line is usually offered to a select number of bettors, the professional ones. Once the bookmaker gets an idea of what these few professional bettors think, they will modify the line based on that plus taking into consideration other factors like home advantage, stats, weather, and injury reports. Then the line goes public.

The line released to the public does not stay the same. It either moves up or down depending on the betting movement from both or either sides. What the online betting site ideally wants is that there is equal betting money on both sides because that’s how they make their money.

The Vig

Sportsbooks make money by including a vigorish or “Vig” in the betting odds. The vig is a commission charged for making bets. It is collected from the betting money of losing bettors. We talked about odds earlier and to explain what this vig is all about, let us use American Odds.

How To Read Betting Odds

The most common bettings odds are to put the two sides at -110 each. For example, the betting line could read this way: Lakers -110, Celtics -110. This means that to win $100, a bettor must place a $110 bet.

For Example

Let’s say a sportsbook takes a $110,000 bet on the Los Angeles Lakers and another $110,000 bet on the Boston Celtics. In total, the sportsbook gets $220,000 in bet money. After the game, only one team wins and the sportsbook will pay the winning bets a total of $210,000 ( $100,000 profit plus $110,000 original bet). Under this example, the sportsbook gets an income of $10,000.

How Do Sportsbooks Make Money

Usually, though, the better team is pegged as a favorite at a “minus”, for example, -110 while the inferior team is pegged as an underdog at a “plus”. An example of plus money is when an underdog is priced at +110. But since the sportsbook always takes a commission, the “minus” money is always greater than the “plus” money. In no instance can the odds be at -110 for one team and +110 for the other. For example: Lakers -115, Celtics +105. In this example, the sportsbook still has a spread of 10 as its commission regardless of who wins the game.

Creating a Balance

Now the sample we presented above is the ideal scenario which the sportsbooks want: an equal amount of betting action on both sides. However, this does not always happen and in fact, it rarely happens. This is the reason why we see lines move from time to time. The oddsmakers are always on top of the situation. When betting money moves to favor one side and it is going to affect their commission, they tilt the balance to the other side by enticing bettors with juicy offers for the other side. At the end of the day, it’s a win-win situation for the online betting site.

Going back to our example, the sportsbook made $10,000 on a $220,000 betting action. Now we know that gambling is a billion-dollar industry so imagine just how much money these online sportsbooks make. And it’s not just one, two, three or four sports they cover. That doesn’t even factor how many games per sport happen daily. The vig isn’t a huge monetary figure when you come to think of it. But the sheer amount of betting money coming makes gambling one of the biggest industries on the planet.

Money

Some people refer to sportsbooks as a sanctuary; a place they can go where they do their best thinking and enjoy the games and atmosphere. Some people refer to them as utter chaos, and other than placing their bets at one, do everything in their power to get out before the games actually start. Whether you are one side of the fence or the other, as long as the sportsbooks have your money tied up with them, they have you right where they want you. For those of you who are new to the betting industry, a sportsbook is often another name for a bookmaker, although this is the more common term in the United Kingdom. A 'bookie' is a single person who accepts bets on sporting events, like a sportsbook is a legal establishment where wagers can be made. Their sole purpose is to make as much money as possible, and oh are they ever doing that.

How Do Sportsbooks Operate?

The simple answer to this question is that the sportsbooks are free to operate however they see fit. Each sportsbook has a different set of rules that constitutes what is considered a winning bet. Some facilities offer your money back when a push occurs against the spread, while some consider that a loss on a parlay ticket. Sportsbooks can also set their own lines and odds and adjust them however much they want in order to avoid a big loss, while still attracting action on both sides of the event. While sportsbooks try to be unique, the similarities between them are obvious. All of them offer up the same types of bets - moneyline , point spread , totals , parlays, teasers, game-specific prop bets, and future bets. However, the juice or vig you will have to pay in order to come out ahead is very different from book to book.

What is Vig?

The main technique bookmakers use to put the odds in their favor is the inclusion of vigorish (aka Vig). It is built into the odds bookmakers set to help them make a profit. In essence, it's a commission charged for laying bets. To best explain vig, let's look at a simple coin flip.

The toss of a coin has two possible outcomes, and each is equally likely. There is a 50 percent chance of heads and a 50 percent chance of tails. If a bookmaker were offering true odds on the toss of a coin, they would offer even money. This is 2.00 in decimal odds, +100 in money line odds, and 1/1 in fractional odds. A successful $10 bet at even money returns $20, which is $10 profit plus the initial stake back.

Let's say a bookmaker had 100 customers all betting $10 on the toss of a coin, with half of them betting on tails and half of them betting on heads. The bookmaker would stand to make no money at all in this scenario.

Now, with the inclusion of vig, a sportsbook is guaranteed to make money regardless of the outcome. When two outcomes are equally likely, it is common for them to use odds of 1.90 (-110 in money line).

Continuing with the coin toss example, the odds-on heads and tails would still both be the same, but they would now be at 1.90. This means that a successful $10 would return a total of $19.09 ($9.09 in profit, plus $10 original stake).

As you can see, the change in odds makes a big difference, and the bookmaker is now making a guaranteed profit on every toss of the coin. The total amount they pay out is always going to be $954.50 against the $1,000 they have received in total wagers. They have found a way to make a profit margin of $45.50 on the vigorish.

How Do Bookies Make Money

This is a very simplified example, but it' just goes to show you how bookmakers set the odds to give them an advantage. Things get a little more complicated when it actually comes to sports events, as the possible outcomes aren't usually equally likely. This is why you have to pay a premium on point spread lines that land on key numbers. Sportsbooks are simply protecting their bottom line and doing everything in their power to make sure the action is equal on both sides.

Most Popular Sportsbooks

Since very few places recognize gambling as being legal, the most popular sportsbooks are in Las Vegas, Nevada. This is the betting capital of the world, and during events like the NFL playoffs or March Madness it is incredibly hard to find a seat in these facilities to enjoy the games. Tourists from outside of Nevada flock to Sin City in hopes of turning a couple bucks into much more. If you ask 10 people which sportsbook their favorite is, they will likely all tell you a different answer. Some of the more notable 'sportsbooks' in Las Vegas include Westgate, Caesar's Palace and the MGM Mirage.

Sports Betting For A Living

In today's day and age, online sportsbooks are becoming more and more prominent. These are sportsbooks that have a physical location outside of the United States but accept clients from all over the world. These kinds of sportsbooks are also referred to as an offshore book. The concept is basically the same as a normal sportsbook except everything is done online with a few clicks of your mouse or taps of your fingers on your phone. Some of the more popular online sportsbooks are 5Dimes, Bovada and Bookmaker.

How much money do sportsbooks make

How to Choose the Best Sportsbook For You

In order to get the best bang for your buck while betting on sports, you must shop around and find the best lines. This is money-management 101, but you'd be surprised at how many bettors have only one sportsbook to wager with. As I mentioned, sportsbooks are free to set the odds however they see fit, which means some will have better odds than others. The Chicago Cubs may be -180 at one book and -190 at another. The difference of .10 cents won't break your bankroll right on the spot, but it adds up down the line.

If you like to play parlays, find a book that offers good returns for a winning parlay bet. Some books offer a percentage on top of your winnings depending on how many teams are in that parlay. If you are a big point spread player, some sportsbooks offer up lines higher or lower (depending on what side you're playing) than other sportsbooks and some sportsbooks have a points rewards system. If you look hard enough you will find something that fits your style of play.

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