Betting Odds and Profit Margin of the Bookmaker
Betting odds play a crucial role in determining the potential winnings for punters, but they are not just arbitrary numbers. The bookmaker's margin, also known as overround or vigorish, influences these odds to ensure a profit for the bookmaker, regardless of the event outcome.
The bookmaker's margin is the difference between the total implied probabilities of all possible outcomes and 100%. To guarantee profit over time, bookmakers inflate this total to more than 100%, building in their profit [1][3].
For instance, if the fair probabilities for outcomes add up to 100%, the bookmaker adjusts odds so their sum implies, for example, 120%. This means the bookmaker expects to receive 20% more from bets than it pays out [3].
The European coefficient, used in betting calculations, is a value set by a bookmaker for the outcome of an event. The formula for calculating winnings using European coefficients is Winnings = European coefficient × Bet amount, and Net winnings = (European coefficient - 1) × Bet amount [2].
In the case of the match "Inter" vs. "Palermo", the coefficients were 2.0 for an "Inter" win, 3.3 for a "Palermo" win, and 3.3 for a draw [4].
British coefficients, represented as fractions like 5/8 or 19/4, are another method used in betting. The calculation formula for British coefficients is Winnings = (British coefficient + 1) × Bet amount, and Net winnings = British coefficient × Bet amount [2].
American coefficients, used in bookmaking, can be -120, +365, -221, +85, etc. The calculation formulas for American coefficients are Winnings = (1 + American coefficient/100) × Bet amount and Net winnings = American coefficient/100 × Bet amount, or alternatively, Winnings = (1 + 100/American coefficient) × Bet amount and Net winnings = 100/American coefficient × Bet amount [6].
The size and reach of a bookmaker's operation can influence its margin. Established bookmakers with significant turnover take a 5% margin, while smaller companies vary their margin between 10-20% [1]. The lower margin of established bookmakers allows them to offer more competitive odds, appealing to a broader bettor base [1]. In contrast, smaller bookmaking companies, with less betting volume and higher risk exposure, tend to apply higher margins to protect profitability, resulting in shorter odds and less favorable pricing for bettors [1].
Occasionally, some bookmakers offer 0% margin markets, where odds are set without any margin, providing fair payouts to bettors and no guaranteed profit for the bookie. These promotions are typically offered on selected markets [5].
In the example given, the odds for "Everton" to win were lowered from 3.3 to 2.6 [7]. Similarly, the odds for "Manchester City" to win were lowered from 2 to 1.8 [7]. The odds for a draw were lowered from 5 to 3.0 [7].
In summary, the bookmaker’s margin shortens odds to guarantee profit, and the size of this margin varies mainly with the bookmaker's scale and risk strategy—established companies offer smaller margins, smaller firms higher ones [1][3][5].
[1] Betting and Gaming Council
[2] Betting Explained
[3] Betting.org
[4] Inter vs Palermo Match Odds
[5] 0% Margin Markets Explained
[6] American Odds Explained
[7] Everton vs Crystal Palace Match Odds
Investing in casino-and-gambling can be a lucrative venture for bookmakers due to implementing strategies like margin, which ensures their profits. The margin, or the difference between the total implied probabilities of all outcomes and 100%, is deliberately inflated by bookmakers to generate more revenue [1][3].
Trends in gambling indicate that smaller bookmaking companies often apply higher margins compared to established ones, offering less favorable pricing for bettors, as they aim to protect profitability [1].
