How much profit does a bookmaker bring?
How Much Do Bookies Make? A Simple Guide to the Sports Betting Business Model
Throughout college, I always had many friends who were wagering hundreds of dollars on sporting events every week. As someone with a passion for sports and monetization, I immediately became curious on the business model of the industry, and decided to look into it to gain a greater understanding.
What is a Bookie?
To fully understand the business model I think it is important to define a “bookie.” I would describe them as people who accept and pay off bets from gamblers, generally through online platforms. The online betting platforms are referred to as the “book,” and for the purpose of this article, I will assume that the bookie and the book-owner are different as many betting websites have various bookies working as agents for the sportsbook.
How Do Bookies Accept Bets?
For bookies to be able to accept bets, they must have a platform as well as odds/lines. Most of the bookies that I have met use online “pay per head” services that deliver sharp betting odds, and client management systems to the bookmaker, which allows for bets to be placed online by gamblers. The bookies use these odds to create their gambling websites, as pictured below:
How Does the Book Make Money?
Let’s assume a gambler places an $110 bet on a game where both teams have the exact same projected chance of winning. These bets are referred to as pick-ems (PK) and the odds are always listed as -110 on sportsbooks (meaning you risk $110 in order to win $100). This showcases how even on an even game the bookie always takes a 10% rake. Statistically the average gambler will win this bet 50% of time.
Win: Net gain of $100 Lose: Net loss of $110 Expected Value: (.5*100)+(.5 *-110) = -$5
Therefore, for every $100 you wager, the book will earn $5 and a gambler will lose $5. This showcases how a gamblers odds are much worse on sports betting then typical casino games; according to WizardsofOdds, in blackjack the casino will earn $1.17 and a gambler will lose $1.17 on every $100 wagered.
So How Much Do The Book-Owner and Bookie Make?
As showcased above, an $100 bet will on average result in $5 in profit for the book, but that $5 will get split in between the bookie and the book owner.
Let’s assume this simple 3 person structure, gambler → bookie → book owner
Bookies are usually paid a commission at the end of every week on their total books losses. From interviewing a variety of bookies, these commissions often vary from 10-20% (let’s assume 20% because those are the ones that I have seen more often). Meaning that if a bookie has 25 gamblers on his book that each bet an average of $200 in a week, on average the book will go down $10 per gambler ($250 total). This results in $50 of profit for the bookie ($250*.2) and $200 for the book in just one week. Obviously, there might be some marginal costs, like customer acquisition, or a pay-per head service for the book-owner, but raking in $200 a week amounts to over $10,000 a year.
For $100 you bet… on average:
You will retain $95. The Bookie will earn $1 in commissions. The Book Owner will earn $4.