Sportsbooks, An Inside Look

As in where’s the money. Naturally you understand right up front that the sportsbook provides a service in order to earn a profit. No profit, no sportsbook. Got it? So with that in mind, it may well be instructive for you to have a handle on the profit a sportsbook can expect. If nothing else, having a good basic understanding of the business of the sportsbook can make you a more informed sports bettor.

To bring this discussion home so that it is simple and easy to understand, let’s work with a real world example. So for the purposes of this illustration, why don’t we use a fairly standard vigorish of -110. As you already know, that -110 means that you are in essence pulling out $110 from your wallet and handing it over to the sportsbook.

When or if you wager correctly and end up winning, you can walk away with $210. In other words, you win $100 plus you get the original $110 investment returned to you. Fairly simple right? And from a pure numbers point of view you have made a nice tidy profit. On the other hand, if you happen to lose the wager, you are out the $110, case closed, move on.

But what does it look like on the other side of the table, from the perspective of the sportsbook that is? So taking the exact same figures from above, the sportsbook would receive $10 of the $220 combined betting action. Now if you take the $10 and then divide it by the total for that one bet you will end up with 4.5%. That number, the 4.5% is the profit margin for the sportsbook.

Looking into this a bit further, if you take the time to crunch the numbers, you will discover that the person placing the wager will need to win a bit more than 52% of the time to actually break even. The other side of that statement is that the sportsbook only needs to be right about 48% of the time to come out ahead.

If you carry this example a bit further, you can see that in the long run, the profit margin for the sportsbook remains at around 4.5%. Interestingly, this long term profit margin tends to remain constant no matter what the public actually does in terms of sports bets placed.

Bottom line is this: the sportsbook is a business and like any business must generate a profit to stay in business. Perhaps more interesting is the fact that sportsbooks can be successful with what looks to be small profit margins.

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