How Do Bookmakers Make Money?

The Quick Answer

How do bookmakers make money?

Bookmakers make money ultimately from punters that gamble or bet on events (typically sports) and lose.

How do bookmakers make money is a great question, but is quite a simple answer really…

Traditional bookmakers offer odds on sporting events with a built-in margin or edge that is designed to swing those odds in their favour over the punter. This margin helps the bookmakers cover the cost of the services they offer and make a profit from losing punters. Other bookmakers use money lines that give them an edge, while some make a profit by charging a commission on all winning bets.

There are lots of different types of bookmakers who have found their own niches in the betting industry by offering a variety of different types of betting.

Types Of Bookmakers

Bookmaking has changed dramatically since it started. There was a time when you could only legally bet at racecourses. We then witnessed the rise of high-street shops and telephone betting, and now you can bet online with lots of different bookmakers.

Some bookmakers now offer their services on-course, in shops, by phone, and online, while many more stick to just online betting. But bookmakers tend to fall under one of three banners nowadays, fixed-odds betting, exchange betting, or spread betting.

Fixed Odds Bookmakers

Fixed odds bookmakers are what most people refer to as traditional bookmakers that offer fractional or decimal odds on a variety of sporting events, such as football, horse racing, tennis, golf, cricket, etc.

Fixed odds bookmakers offer odds on a sporting event that are over-round, which means they would be guaranteed to make a profit if all the possible selections in that event were backed to lose an identical amount of money.

For example, betting on a football match has three possible outcomes, a win for team-A, a win for team-B, and a draw. If the probability of three of these outcomes were deemed to be equal, the odds of each one would statistically be 2/1. But as the bookmakers bet over-round, you may only be able to get odds of 7/4 about any of them.

If a bookmaker could, for example, take £4,000 on each of the three outcomes, his turnover on the event would be £12,000. But he would only have to pay out £11,000, regardless of the result. While bookmaking is rarely such an exact science, you can now see how fixed odds bookmakers stack the odds in their favour and make money.

The same principle works for other sports, whether it’s a two-player tennis match, a 10-runner horse race, or a golf tournament with 156 players, providing the bookmakers stacks the odds in their favour. Of course, the demand and supply for players is rarely equal, so bookmakers do lose on some events, but normally win in the long run.

Spread Betting Bookmakers

Spread betting is a type of betting that was inspired by how traders bet on stock exchanges. Traders make their money betting on whether the value of stocks and shares will rise or fall and spread betting is very similar.

Rather than trying to let punters bet on match results, spread betting bookmakers set money lines on markets such as total goals in a football match. They may set a money line at 2.1 to 2.3 goals. Punters that think there will be less than the spread sell at 2.1 and those that think there will be more buy at 2.3. Spread betting bookmakers make their profit from the bit between the spread, which is like fixed-odds bookmakers betting over-round.

Before the invention of betting exchanges such as Betfair, people that wanted to gamble on sports had no choice but to either bet at fixed odds or risk spread betting. However, betting exchanges revolutionized the online betting industry.

Betting exchanges work very differently form fixed odds bookmakers in that they simply work as a facilitator between two parties. One party agrees to lay the bet of the other party, and the betting exchange charges the winner a commission for matching the two bets.

What Types Of Bets Do Bookmakers Offer?

Bookmakers traditionally offer three types of bet, whether they’re fixed odds, spread betting, or exchange bookmakers. These types of bets are pre-event, in-play, and ante-post.

Pre-Event Bets

A pre-event bet is when a bookmaker gives odds for all possible outcomes either on the day or in the lead up to the event. In horse racing, pre-event betting comes after the final declarations, with any non-runners after this point subject to a rule-4 deduction.

In-Play Betting

As the name suggests, in-play betting is available while the sporting event is taking place. For example, this can be during the one-minute of a sprint race, the 90-minutes of a football match, or over the four-days of a golf tournament.

Ante-Post Betting

Ante-post markets are often seen as risk and reward markets and bookmakers offer them on a variety of sports. Horse racing is the most popular one. For example, you can normally bet on the following year’s Cheltenham Festival races before the current one finishes.

Punters are happy to avail themselves of big odds about horses they think will be much shorter come race time but know that they will do their money if that horse does not line-up for some reason.

Can You Beat The Bookmakers?

While bookmakers stack the odds in their favour to make money, they tend to make their money from punters that treat gambling as a bit of fun. While there’s nothing wrong with having a bit of fun, professional gamblers have proved you can make money from gambling. What you need to do is find a way of beating the odds.

We hope that’s answered your question, how do bookmakers make money.

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