Why Vegas and the Oddsmakers Want Balanced Betting and What it Means When They Don’t!
When oddsmakers set their spreads and their odds they are essentially applying a penalty to the favored team (or, conversely, a point boost to the underdog) in a matchup. Oddsmakers use these two levers—spreads and odds—to have fewer bettors bet for the favorite team and to have more people bet on the underdog so they have relatively equal action on both sides of the bet.
Balanced betting keeps sportsbooks in business. If a matchup between Team Blue and Team Red results in 80 percent of the public betting on Team Blue to win then the sportsbook has a financial liability! If Team Blue does, in fact, win, the sportsbook must pay out a hefty amount of winnings.
Sportsbooks hire bookmakers to make sure that doesn’t happen. Bookmakers use information and statistical analysis to set the line and odds, usually in an effort to achieve balanced betting.
Understanding Oddsmakers’ Liabilities: Why Vegas Likes Balanced Betting
Let’s look at a balanced betting example to understand how much money a sportsbook takes in and must pay out when there is equal action:
The bet (a football game) : Team Blue -7 45 -110
We read this as: “Team Blue is a seven point favorite, the game total is 45 In order to win $100, you must bet $110.”
Assume Team Blue does win the game and they cover the spread.
|Team Blue||Team Red|
|Percent of bets||50 percent||50 percent|
|Cost of Bets||$10,000,000||$10,000,000|
In this example, with even betting, the sportsbook profits $909,101!
Wait, how’d that happen? Remember the vig.
Oddsmakers apply a vigorish to every bet that you make. The vig is written with either a + or – sign and then a number. The most common vig you will see looks like this: -110. A vig of -110 means that in order to win $100, you have to bet $110. The vig is a ratio.
This vig is how sportsbooks stay in business. Oddsmakers collect $110 on every loss and they pay out $100 on every win.
To calculate a sportsbooks payout (or liability), you do the following:
Money Collected from the WIN Bettors multiplied (x) by 100
Divided (÷ ) by the vig (110)
In our example above we had:
$10,000,000 x 100
Therefore, Vegas profits $909,101 on the balanced bet. This is why the vig is so important for them and why they strive for balanced betting. Because of balanced betting, no matter which side wins, Vegas wins. That’s the goal.
Bookmakers get paid to find a line that is going to get equal public action. And if they miss equal action on the initial line they set, their charge is to get the betting action to equal as quickly as possible. There’s a huge liability for a sportsbook when a matchup is not getting equal action.
Of course, there are frequently incidents or developments that require shifting a line later in the betting, such as an injury to a star player. And in these cases bookmakers need to adjust the line quickly as well.
A Look at an Unbalanced Bet
|Team Blue||Team Red|
|Team Blue WIN||- $36,300,000||$20,000,000|
|Team Blue LOSE||$40,000,000||-$18,000,000|
If in the event that bookmakers were unable to adjust the line well enough to end betting with a balanced bet, they have a liability on the side where the most betters are sitting. If Team Blue wins and they have to pay out winnings to 66 percent of bettors, they lose approximately $16.3 million in this example.
Sure, if Team Red wins the sportsbook collects approximately $22 million. That’s a risk, though. Sportsbooks don’t like the exposure. This type of unintentional unbalanced betting is what gets bookmakers fired.
Attempting to Achieve Balanced Betting
Team One -7 45 -110
The above line reads as, “Team One is a seven point favorite. The total points will be 45. In order to win $100, you have to bet $110.” The seven point spread is a key figure in football.
If, as a sportsbook, you start with this as your line: Team Blue -7 45 -110.
And 80 percent of the public takes that bet and bets on Team Bkye, you are not happy as a sportsbook bookmaker because you have a liability on that side. Most of the time, you want balanced betting, where 50 percent bets on one side of the line and 50 percent on the other side of the line.
As a bookmaker you have two levers you can pull to influence betting. You can move the spread line or you can move the odds.
Watch how adjustments to both the spread and the odds shifts betting:
|Blue Spread/Odds||Team Blue Bets||Team Red Bets||Red Spread/Odds|
|-7 -110||80%||20%||+7 -110|
|-7 -120||70%||30%||+7 +100|
|-7 -130||65%||35%||+7 +110|
|-7.5 +100||60%||40%||+7.5 -120|
|-7.5 -110||55%||45%||+7.5 -110|
|-7.5 -115||50%||50%||+7.5 -105|
Adjusting the Odds
For example, in the first move the bookmaker adjusts the odds from -110 to -120. This move will discourage Team Blue betting because bettors will have to risk more to place that bet.
- With the starting odds of -110: in order to win $100, you have to bet $110.
- With the updated odds of -120: in order to win $100, you have to bet $120.
Oddsmakers increase the risk to the favored team, making them less appealing to bet on.
We saw in our example that the first move from -110 to -120 did discourage some Team Blue betting, but the action was still unbalanced. To keep discouraging bets on Team Blue, bookmakers keep moving the vig (or odds) so that it requires bettors to incur more risk.
In general, oddsmakers will stop moving the vig around -125 or -130. Every time they move the vig to discourage betting on one side, they are also encouraging betting on the other side. Thus, odds for Team Blue at -130 imply that the odds for Team Red are +110.
- Team Blue with odds of -130: in order to win $100, you have to bet $130.
- Team Red with odds of +110: betting $100 wins $110.
Each side of the bet starts at -110 and the sides are negatively correlated. As one side becomes less attractive to bet on, the other side becomes more attractive to bet on.
Adjusting the Spread
After oddsmakers moves the vig as dramatically as they feel comfortable doing, they’ll turn to adjusting the spread if they still do not see balanced betting.
In our example: Team One -7 45 -110 we need to move the spread off of a key figure. Moving off of a key figure is a thing oddsmakers do not like doing. If they must a drastic move like this—and move the point spread from 7 to -7.5—they will readjust the vig to compensate. They don’t want to move the betting too drastically in one line adjustment. We see that dual adjustment in the fourth line above.
For a bookmaker, adjusting the line is similar to flying a plane. The pilot of a plane has the stick and the rudders. A bookmaker has the point spread and the vig (or odds).
Most bookmakers prefer adjusting the vig rather than the point spread. Adjusting the point spread is far more likely to result in volatile betting, particularly in football betting, because of key figures. Bookmakers are less cautious about a point spread move if the spread is not around a key figure.
Approximately 70% of betting lines start around a key figure.
When oddsmakers have unbalanced action, they are naturally rooting for the team where they have less liability (fewer bettors). We often see conspiracy theorists have a field day with a game or matchup when Vegas has liabilities. As the game plays out some Vegas watchers will view beneficial calls for the underdog as a sign that oddsmakers influenced the result. To be frank, some conspiracy theorists believe powerful Vegas sportsbooks pay off or unduly influence umpires, referees, or players. In 2016, for example, there were widespread suspicions that individuals or organizations fixed several Australian Open matches.
This is one reason why the American sports leagues (such as the NFL, NBA, and NHL) lobbied to prohibit sports betting in the US. They are worried about the integrity of their games. While sports betting scandals are few and far between in the United States to-date, we have seen a few scandals in recent decades:
In 2008 an NBA official pleaded guilty to betting on games he officiated and offering insider tips to others. And in 1996 officials found that several members of the Boston College football team bet against their own team in a game against Syracuse. Similarly, three college basketball players from Northwestern faced criminal charges for fixing games in their 1994-5 season.
Selecting Your Bet
Identifying Reverse Line Movement
There are times when oddsmakers do not want equal betting action. If, for example, a sportsbook has insider information that the favored team’s star player is injured (but the injury has not been made public yet), they may try to encourage more betting on the favorite team in advance of the game. In this scenario, oddsmakers know that the favorite team is no longer likely to win without the star player, and they’re attempting to generate uneven betting in the sportsbooks favor. That way, when the public favorite loses, oddsmakers collect more money than usual!
In our example from above, reverse line move would be when the spread moves from Team Blue -7 to Team Blue -6.5. Before, Team Blue had to win by more than a touchdown to win the game. Now, they just need a single touchdown to win.
Given that Team Blue was already the favorite, bettors would reasonably expect the line to apply more of a penalty to Team Blue as it moves. In this case, though, we see the penalty easing. This is reverse line movement.
There are many historical examples of oddsmakers engaging in reverse line movement, attempting to get the betting public to bet for the favored team, and then right before the game the team announces that their star player is injured and out for the game. In these cases, commentators all cry out, “Oh my gosh! Who knew?!”
We smile, because Vegas knew.
There is value in identifying and correctly interpreting reverse line movement, but it can be incredibly difficult to do for beginning or intermediate bettors. For advanced bettors, there is data available that reveals public betting information (which makes identifying reverse line movement easier).
Fundamentally, contrarian betting is doing the opposite of most bettors. Sometimes is is doing the opposite even if you don’t understand why you’re doing the opposite.
As a general rule, if everybody is on one side of the boat, you want to be on the other side. There are excellent pieces of long term evidence that show that if you are betting with the minority, you win more times than you lose.
Contrarian betting is a relationship between how you are betting and how most the public is betting. A contrarian bet is not related to other aspects of betting such as the spread, moneyline, or vig.
There are plenty of underdogs out there that, despite being underdogs, are still really popular with the public. For example, Team USA versus Team Russia in men’s hockey. Most years Team USA is not nearly as good as Team Russia in real life (please, don’t shoot the messenger!), but the US public will overwhelmingly bet on Team USA. A contrarian bet in this case would be a bet on Team Russia, regardless of how the moneyline or vig is set.