While people do earn money from sports betting (with some even making a profitable career out of it), sports betting companies make the most money in the long run.
How can they make a lot of money and still pay off the winning bettors? Here is how sports betting companies make money.
Sports Betting Companies Vig
As a bookmaker, or the company taking in the bets, the goal is to take in more money than the payouts for the winners. Every bookmaker uses all the mathematical and statistical strategies they know to make sure that this would be the case for every game.
The most common way sports betting companies make money is the vigorish, or simply called the vig. The vig is the "fee" you pay bookies for every bet placed. Vigs are the reason why sports betting is not a zero-sum game. Most of the time, this is not fully explained in the odds and lines, which is why a lot of bettors, especially newbies, are unaware of it. Online casinos also make money this way where they have a sportsbook section that takes in vig.
A good analogy that can help you understand how the big works would be by applying it to a coin toss. A coin toss has a 50-50 chance of either landing on heads or tails. If the betting companies would offer real odds, the odds would be +100 in moneyline, 2.00 for decimal odds, and 1/1 for fractional odds - this applies to both options.
Read our betting odds format guide to learn about the different types of odds (decimal, fractional, American, Malaysian, Indonesian, Hong Kong, and more).
The betting companies make money by adding their vig to the real line. So instead of the decimal odds being 2.0 for either side, they would instead be 1.90 for either side. This ensures that betting companies make money no matter the result.
Importance of Odds Compilers to Sports Betting Companies' Profits
Odd compilers, also known as the traders, are the ones responsible for setting the odds for the betting companies. The job of an odds compiler is essential as they make sure to set odds that ensure betting companies make money.
A good odds compiler would need to find the perfect balance on the odds that they would set - one that would still stay close to the "true" probabilities of the game, but would give the company a good profit, too. After all, odds that are obviously fixed to give profit to the bookies may deter people from betting on their site.
This strategy is called "pricing the market."
An odds compiler also needs to have a considerable amount of knowledge about the sport - whether it's basketball, baseball, football, etc. as well as the market it covers. Based on a number of factors and data points such as player/team popularity, statistics, and records of previous performances, the odds compiler sets what they think is the best line for the market.
An odds compiler also helps sports betting companies decide whether to accept a huge bet or not, as it can force them to tip the odds in a different direction just to maintain the profit margin, lest they end up taking the risk of paying more should the huge bettor win.
Sports Betting Companies' Balanced Books Explained
Aside from determining the odds and ensuring a profitable line for their betting companies, odds compilers also work on balancing their books. This can affect how much the bookmaker earns for every game.
What makes a balanced book?
It's when the amount of action (bets) is balanced on both sides, taking into account the odds difference.
With a balanced book, the sports betting companies make money regardless of who wins the game. With an imbalanced book, the amount of profit is reliant on who will win the game. Sometimes, the results of the game can even incur losses to the bookies.
The only risk then would be the off chance that the game ends with a push. A push is when the bets on both sides would be returned to the bettors, including the vig. For this to occur, the game result must not be one offered by the sports betting companies. The most common occurrence is in moneyline betting in American football.
For example, you've bet on the Falcons against the Eagles at +10, so they need to win by more than 10 points for the bet to win. However, the final score is 41-31 to the Falcons - exactly a 10 point difference. This scoreline would result in a push.
This leaves the sports betting companies with no income nor loss, but only a loss of time and effort.
Established Sports Betting Companies
Thanks to the increasing popularity of online gambling, particularly online sports betting, new betting companies are becoming more and more common. However, there are still those who have already established a name for themselves in this industry:
Kindred Group is comprised of 9 well-known online bookmaker brands and is known as one of the biggest sports betting companies. It saw a huge growth in 2018, thanks partly to the 2018 FIFA World Cup that brought a huge number of new users to its platform.
The company also made its first step in penetrating the US betting market by penning a ten-year contract with the Casino Atlantic City and Hard Rock Hotel in New Jersey. With this deal, the company is now able to cater to online bettors from the United States.
Kindred is not only into sports betting. They also have their online casino games that bring in a huge amount of money as well.
William Hill is a name that you cannot avoid hearing, regardless of whether you are into online casino gaming or online sports betting. In the United States alone, William Hill US has a market share in online gambling of around 30%, which makes it one of the biggest sports betting companies not only in the US but also in the UK.
Currently, it continues to grow its share and road to dominance in the US market, offering mobile gambling technologies and risk management solutions to states that have opened their laws to online gambling.
Paddy Power Betfair's name came from a merger between Paddy Power PLC and Betfair Group in 2016. Paddy Power Betfair is invested both in online casinos and online sports betting and has its business across multiple websites such as Betfair.com, PaddyPower.com, TVG.com, SportsBet.com.au, and the US site for Betfair.
How Betting Companies Make Money: FAQ
We've collected and answered the most common questions about how sports betting companies make money:
What are sports betting company vigs?
The vig, or vigorish, is the amount the sports betting companies earn for every bet placed. This is their main way of making a profit by offering betting lines.
Are bettors' losses the only source of income among sports betting companies?
If the bookies managed to get a perfectly balanced action on both sides of the game, then they are ensured of making a profit regardless of who wins the game. In this way, it would not matter who they pay and who loses their bet.
What are odds compilers?
Odds compilers make sure that the odds presented are adjusted to give profit margin to the betting companies. They also work on helping bookies balance the action on both sides of the game.
Why is a balanced book important among sports betting companies?
With a balanced book, the risk of losing money on the part of the betting companies is reduced to virtually zero. No matter which team or player wins, the sports betting companies make money.
Are professional punters hurting a sports betting companies' bottom line?
Sometimes, a sharp punter would place huge money on a team and, therefore, ruin the balance of the line. This is not good news for the betting company and would result in them either adjusting the odds to balance the action, or outright denying a huge bet from a sharp punter.
At the end of the day, sports betting companies do not care if you win or lose your bet. The way they're structured, sports betting companies make money regardless of the outcome of the game.
This article was published on October 11, 2021, and last updated on October 25, 2022.