Bookies make money through real businesses by providing services

One would think that any word that includes "book" is positive. Shouldn’t all of us read more books? In 2018, though, after the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act, too many the word “bookie” continued to bring visions of baseball bat-wielding Soprano characters looking to collect.

Anybody who has placed a wager on the Super Bowl through a bookie, which is probably most of us, will tell you that’s never been the case. Bookmakers provide a service that allows their customers to wager on the outcomes of events. Bookies set odds, and then after the event, they pay their customers or collect from their customers.

It sounds more like running a food truck than getting a job in Tony’s gang. The best way to define a bookie and discover how bookies make money is to compare bookmaking to something we’re all familiar with, stock investing.

Bookmakers are like stockbrokers

When someone decides to buy something like gold, they often call a broker or head to a platform to put in a bid to either sell gold or purchase gold. The price of gold goes down or up depending on what a buyer is willing to spend. It also depends on what price a seller will accept.

Have you ever wondered how bookies set odds? Study buying and selling stock for clues. Bookies set odds based on how many sports gamblers will "buy" or “sell” the favorite or underdog.

In an American football game, if the odds on a team like the Kansas City Chiefs are -3, a gambler who wagers on the Chiefs to “cover the spread” is buying the idea that the Chiefs are 3 points better than their opponent. The bettor is also selling the idea that Kansas City’s opponent is 3 points worse than the Chiefs.

The opposite is true for the gambler who wagers on Kansas City’s opponent. The person who bets on the Chiefs opponent, who takes the 3 points, is selling the idea that the Chiefs are 3 points better than their opponent. They’re buying the idea that Kansas City’s opponent isn’t 3 points worse than the Chiefs.

Oddsmakers set betting lines to attract the same amount of money on both sides to have an even number of buyers/sellers for the Chiefs and an even number of buyers/sellers for their opponent. For this service, bookies charge a fee, usually around 10% of the money wagered. That fee is how bookies make money.

Gambling software allows individuals to start online sportsbook businesses

Companies that offer bookie software are allowing anybody to start and run an online sportsbook. Per some industry experts, the advantages for the sportsbook industry as a whole are massive.

Pay per head agents are to the sportsbook industry what individually owned used car dealerships are to the U.S. automobile industry. Before there were pay per head agents, massive online sportsbooks dominated the space.

Media companies have invested in the sportsbook industry through companies like DraftKings and FanDuel. Without pay per head organizations, there’s a real chance that giant conglomerates could destroy the industry, possibly price-fixing odds and forcing customers to choose among a handful of sports betting software platforms.

Competition is a good thing, and pay per head allows any person to run a sportsbook that can become successful. It's also vital for bookmaking customers. Anyone who wishes to sign up with an online sportsbook or a company like FanDuel must hand over private information.

Playing through an individual bookie allows for information containment because pay per head companies aren’t in the business of signing up players, the name the industry uses to describe gamblers. Some companies, like PayPerHead, have online payment and collection systems.

Many of their customers no longer meet sports betting clients in person. Instead, they use the organization’s Agent Payment System to facilitate payments and collections. Bitcoin’s and other cryptocurrencies’ rise in popularity has further strengthened the privacy aspects of running an individual sportsbook.

Privacy is a significant reason many bettors have continued to wager with their current bookies even after the Supreme Court’s decision. That won't change for a long time, if ever, which is why the future for pay per head agents is bright.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes