Running a sports bookmaking business may seem like a lucrative business for some people. After all, with the right know-how and the correct strategy, one can really earn a huge amount of money by becoming a bookie. However, do bookies also lose money? Can they end up not making a profit after everything? Here are the things you should know.
Can Sportsbooks Lose Money
The short answer is that yes, sportsbooks can also lose money. In fact, they sometimes lose a lot of money. In order to offset the occasional losses, they implement strategies and make sure that while they lose some, they still earn a lot more. This is where working with a balanced book comes in.
In the simplest terms, a balanced book is a perfect scenario that every sportsbook aims for. With a balanced book, the bookies expect to payout the same amount regardless of the outcome, This way, they are guaranteed to make money out of the game. However, the challenge is that achieving a balanced book does not happen all the time.
How Do Online Sportsbooks Lose Money
Now that you know that sportsbooks do lose money, the next question would be how does it happen? What needs to go wrong for this to happen?
Improper Sportsbook Vig Pricing
For those who don't know yet, the vig - or the vigorish - is the amount that the bookies take from each bet as their "cut." This is mainly where they get their profit.
To give you an idea of how the vig works, consider a football game where you and a friend bet on the opposing teams. You wagered for the favorites, while your friend wagered for the underdog. You both wagered $100. With an odds of -110, this means that whoever wins gets a payout of $90 profit. Thus, the bookies win in this scenario wins - they get a profit of $10 each et regardless of who they need to payout.
The above example is an ideal situation. But what happens if the bookies made a mistake in calculating the vig? This is why the role of the odds compiler is a crucial one. The odds compiler makes sure that the set odds by the sportsbook reflect the real probabilities closely, at the same time have enough room for profit for the sportsbook. The trick is to also make sure that the vig is not too high compared to competitors, since a huge vig can turn off a lot of bettors and steer them away from that bookie.
Not Updating Sportsbook Odds Properly
The thing about collecting bets is that you also need to strategize how to achieve a balanced action, or at least as close to balanced as you can get. If you leave one action being inclined more to one side, you risk losing a lot of money.
Take for example a situation wherein, for some reason, a huge part of the bettors is pouring in money to the underdog. This does not look good for any bookie since they are looking at a huge payout and little money from the other side should the underdogs win. In a worst-case scenario, they would need to pay out more than they are able to take in, resulting in huge losses.
In situations like this, they would then "adjust" the odds, giving less value to the underdogs and more value now to the favorites. This is an attempt to balance the action, as the public would then be inclined to bet on the favorites more (since it now holds better value).
However, this strategy is not foolproof, and there is no way to tell if it will work or not. It will all depend on how the public would react to the updating of the odds.
No iGaming Security Against Hackers
With most of their operations relying on the internet and virtual servers, online sportsbooks are prone to cyberattacks. While there is no way to keep any system 10% secure for all time, it is still highly important for an online sportsbook site or app to have a strong level of protection against attacks. After all, they are dealing with two precious digital assets here: money and personal information.
In a cyberattack, an online bookmaking business can either lose all of their money through a hack, have their bettor's personal and financial information leaked (which will ruin their reputation and in turn cost them a lot of money, too), or both.
The solution is a sound investment in cybersecurity: an updated security system for their servers, high-end encryption, trained technical team, and the latest authentication technology, among other things.
Sportsbooks are still businesses, and as with all businesses, there will always be risks. If you are thinking of moving away from being a bettor and maybe starting your own bookie business, these are only some of the pointers you ought to remember.
This article was published on March 3, 2022, and last updated on February 28, 2022.