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A Guide to Bookmakers
As discussed in the Betting Basics section, a bookmaker is an individual or business licensed to take bets on sporting or other events.
Although most people commonly refer to betting shops as bookmakers, the term actually applies to the person who makes the bets, by offering odds on certain eventualities, and adjusting the payout odds in response to demand from the market. This process is known as the art of bookmaking, which has existed as a professional science since around 1820.
The Bookmakers job is to calculate the odds as accurately as possible. Infact, their livelihood depends on it so they use the principle of the over-round. This is the element of underpayment within a set of odds from which bookmakers makes a profit. To put it more clearly you can use the example of a Tennis Match. Two players are evenly matched so the bookmaker may offer odds of 4/5 on each player. If a total of £1000 is bet on each player, the bookmaker receives £2000. When one players wins, the bookmaker would pay out £800 in winnings, as well as returning the winners stake of £1000. This would leave the bookmaker with £200 profit.
The above is a very simple example – things get a lot more complex with large numbers of people betting different sums of money on the various outcomes of an event at different times. In such circumstances, the odds will constantly be adjusted to ensure the market remains balanced and the bookmaker’s profit margin remains intact.
In the UK a large proportion of gambling takes place in high street betting shops which are normally the permanent establishments of major bookmaking chains such as William Hill and Ladbrokes. It is only in the last 30 years or so that these establishments have been permitted to take bets on an increasing range of activities, provide in-store live coverage of events and enjoy other concessions.
What is a Turf Accountant?
A Turf Accountant is a more traditional term to describe a Bookmaker. They offer odds and take money on a number of different outcomes in an event (often referred to as a book) and then pay money out to those who predicted the outcome correctly.
The aim of a turf accountant is to balance their book, ensuring a profit is made regardless of the outcome of the event. To help achieve this, they will offer odds that are slightly less than the calculated probability of an event taking place. In this instance the book is described as being over-round. This means that they will offer odds which exceed the combined probability in an event. In other words their odds will add up to more than 100%.
The Bookmakers Over-round
To help explain the Over-round process, lets take the example of a toss of a coin. There is a 50% chance that the coin will land on either heads or tails. Converting this chance to odds means we have Evens (or 2.00 decimal) for each possible outcome.
If the bookmaker was to offer bets at evens, and assuming he took equal amounts on each outcome, he would simple break even which is no good for his bank balance. For example, if someone bet £50 on heads then someone else bet £50 on tails, the bookmaker would take in £100 and whatever the outcome, would give out £100. With no profits made the bookmaker would quickly go out of business.
The bookmaker will make the book over-round by offering odds less than evens on each event occurring, 4/5 (1.80 decimal) for example and this 1/5 shortening of the Odds is known as the Bookmakers Overround.
Using the same example as above, the bookmaker would still take in £100 but whatever the result would now only pay out £80, therefore securing a nice £20 profit!
This may not sound like a lot of money but when you multiply it by the many thousands of pounds staked on each event, and then also consider that this is only one of the thousands of betting events that happen each and every year and you can see why they have made so much money over the years.
If the bookmaker was to offer odds of 6/5 (2.20) on each outcome, then the book would be under-round and so in favour of the punter. The punter could bet £50 each on heads and tails and guarantee a return whatever the result. The above example will never happen at a Bookmakers as they are far too clever with the odds they quote, but by comparing the odds across different bookmakers, this situations can often arise - this type of Betting is known as Arbitration Betting.
Bookmakers and Odds Compilers
In the real world, Bookmakers don't have it that easy. Predicting the outcome of Sporting Events is much harder than a coin toss, they need to work hard at getting those odds correct. The major bookmakers employ a team of odds compilers to set their prices. For example, A horse racing odds compiler may have a number of contacts ranging from private handicappers and form experts to gallop watchers at various stables. The odds compilers analyse all available information and convert it into the percentage chance of each runner winning the race.
The odds compilers will work to certain profit margin or over’round. They may decide that they want to make £10 for every £110 they take and set their over-round on that market at 110%. When calculating the odds for each runner they build in the over’round by shortening the odds offered. The over’round leads to Bookmakers receiving criticism (which is justified) as punters find it too difficult to judge what the "True Odds" are.
Another factor when Bookmakers set their odds, could be selections that receive high volumes of support. A popular trainer or jockey will often be supported regardless how low the odds. There might be a dark horse in the race from a known gambling stable and the odds compiler might want to be particularly careful about getting stung!
Bookmakers and The Betting Market
Some firms are well known for being the first to price up events and they may make their odds available at an early stage sometimes several days before an event. Others might be more cautious, looking what other bookmakers offer so they can entice customers with longer odds on selections they don't fancy and want to "lay" while they will look to shorten odds on selections that they might feel strongly about. Some bookmakers will look to the betting exchange to see which selections are being supported before posting odds.