Part 1 - “THE HOUSE ALWAYS WINS”
There are few common phrases that hold less true than what I'm sure a number of people reading this have heard before. “The House Always Wins”…just writing it makes me shake my head. The house does not always win. In fact the player wins quite often. If the house were to always win the player would have no incentive to play. Going outside sports betting to understand, imagine a standard roulette table that only had one option to bet and that number was -1. If this were an actual house game, then yes, in fact the house would always win. I have never seen a table game like that and even if I did it's difficult for me to imagine someone betting on that -1. The concept does hold some truth to it though if phrased correctly. I'd like to change this common phrase to “The House has a very high probability of winning OVER TIME”. I'll get behind that definition as it relates to the average sports bettor. In this two part blog post we'll be going over two aspects. The first part today we will focus on that high probability of winning and why it exists - The Book's Strengths vs the Player's Weaknesses. Stay tuned for Part 2 where we will turn the tables and focus on the Player's strengths vs. the Book's Weaknesses.
Why focus on the strengths of the sportsbooks? “If you know the enemy and know yourself, you need not fear the result of a hundred battles”. Sun Tzu said it best. From a battle perspective that makes sense and has proven true on a number of applications outside of war. I prefer not to look at sports betting as a battle though. Treating it as a business, for me, has proven to be a much better strategy. If I am a business I want to know what strengths and advantages the competition has on me. Let's break these sportsbook strengths down to three categories, each of which we will dive into.
- 1) Sportsbooks have more capital than you.
- 2) Sportsbooks can charge you to make wagers.
- 3) Sportsbooks can pick and choose who they allow to place wagers.
1) Sportsbooks have more capital than you
This one should be quite obvious. Most sports books will have more capital than you have in your bank roll. Not to single out DraftKings, but as a public company their numbers are easily accessible. In 2021 DraftKings reported cash on hand @ $2.63 billion (yes, billion with a “B”). My guess is that beats anyones bank roll following along. If not feel free to correct me. Why does this matter?
Starting out with the most obvious and easily explainable advantage, they can outlast you. Drawdowns need not apply. If they lose 100 bets in a row…chump change to them. If you as a buck bettor w/ $10k in your bankroll have the unfortunate circumstances of losing 100 bets in a row it's game over. At least I would hope you'll get the picture in this circumstance and it's game over. This often overlooked factor should be easy to understand with a rudimentary understanding of Risk of Ruin.
Outlasting is not the only advantage to more capital though. With money comes the ability to buy things. They can use this war chest to pay the best sports analytics individuals and firms, employ marketers that know how to trick their customers, acquire traders, pay data analysts…the list goes on. Let's try to break down a couple of these. Sports analytics is broad encompassing. It could include anything from making opening lines to the data and charts made available to their traders (the sportsbook employees whose job it is to make sure you do not profit). The better this data is, the more they can derive from their lines. Knowing the theoretical probability of each outcome is what sports betting boils down to. Do the Eagles have a 68% chance of beating the Cardinals or a 62% chance? The answer to that is everything. With superior analytics comes the ability to model these events more accurately.
What about data analysts, why mention this separately? To drive home the point that books are not only modeling sports outcomes, they are modeling their customer's behavior. Yep. You. They are tracking every bet you make, what sports you like, what sports are you winning at? Losing at? Are you what they judge to be a sharp bettor? With this information they can do a number of things. Let's take Steven the Sharp Bettor who bets mostly all NCAABB 2nd Half Lines and is winning at a clip of 56.42% of the time on -110 lines. On the other side we'll have Johnny who bets all sports year round, different line styles, at irregular times of the day, favorites a majority of the time and has a winning clip at 46.56% on -110 bets. If Steven drops a limit bet (most money allowed to bet on a line by book) Duke -3.5 2nd Half against Wake Forest, this is very valuable information to the trader or algo system at the sportsbook. Maybe they even move the line from this one bet or widen the markets? If nothing else its sends an alert that, “hey, we may have this line wrong. Better watch carefully” Now let's say Johnny drops the same bet rather than Steven. Does the trader/sportsbook move the line? Likely not. They probably get on the phone with their marketing team, email johnny and say “hey bud, we've increased your limits if you want to bet more on Duke” I'm exaggerating a bit, but hopefully the picture has been painted.
2) Sportsbooks can charge you to make wagers
While not easily evident when first starting out on your sports betting journey, every line has a built in cost to it. This pay to play comes in the form of Juice/Vig the book (generally) charges on each line. We won't go into this topic too much because sportsbettingintel.com already has a lot of information on Juice available free to the reader. Who are you paying to play? The sportsbook. This juice they receive is how most sportsbooks remain profitable. If you were betting $100 on the Carolina Hurricanes vs. the Florida Panthers and the line was +100 on each side you, as the bettor, would pocket $100 on a win with either selection. The book you are betting against would be offering lines at even value paying $100 to each winning bettor, collecting $100 from each losing bettor. Collecting no profit is a tough business model to be successful with. To account for this they will not set lines at +100 on each side. Very often they will set lines for an even match like that @ -110 each side, which means they are keeping $100 from the losing bettor and only paying out $90.91 In profit to the winning better. That $9.09 is their profit. 4.54% of the total amount they collected before settlement. This is a simplified example for the purposes of understanding, but any other juice would function in the same way.
3) Sportsbooks can pick and choose who they allow to place wagers
In my opinion this is the biggest advantage the books are going to have in maintaining profitability. To understand what this means let's bring Steven the sharp and Johnny the not so sharp back into the picture. Put yourself in the place of a sportsbook operator. Who would you prefer to be betting on your platform, Steven or Johnny? Should be quite obvious, you want Johnny betting on your platform and Steven betting on the competitions. There are multiple ways the sportsbooks will go about ensuring this happens. First they may send Johnny more promotional material and boost offers to get him wagering more, while Steven's inbox stays empty. Another step they will start giving Steven lower limits than they allow Johnny and others. This prevents Steven from “making too much money” off them. You'll remember that Johnny only bet NCAABB 2nd Half lines. While originally limited opportunities, there is now even less opportunity than before if Steven is limited to only betting $50 on the plays he sees with edge. This might not even be worth his effort of daily analysis and work put into finding the correct theoretical values and betting them. Let's just say it is though and Steven keeps betting. His system is profitable and the book sees this, so they will ”kindly” no longer accept his bets. Usually it does not go exactly like that, they will limit his bets to under a dollar or even to the cents exactly. This provides the book some recourse in that they are not actually refusing bets, by their terms anyway as we all know that is the same thing as refusing a bet. As of now there are no regulations or laws, that I'm aware of, to prevent the books from doing this. They can legally offer a product to one customer, but refuse the exact same product to another customer. Not many businesses or industries that operate en masse have this luxury (generally on account of it being illegal), but for now the books do and they take full advantage of it. Hopefully regulations are put in place to prevent this type of behavior in the future as it allows the sportsbooks to act in a predatory way. Once becoming a consistently profitable sports bettor, the focus shifts from how to profit to how to keep your opportunities open. Crazy right? But that's the concern of the sharp.
Knowing the challenges you will need to overcome is key. Trying to be a profitable sports bettor is not for everyone. Maybe casual betting is your thing and that's great. Just be aware of what you're getting into and if the risk is acceptable enjoy yourself and wager responsibly. For those that are trying to be profitable sports bettors stayed tuned for Part 2 of this two part series as we will go into the advantages, we as a sports bettor, have over the sportsbooks. From sizing to selection to free information, its not all an uphill battle. Knowing your strengths as a sports bettor (and the books weaknesses) can lead to more informed wagering decisions.
Wager Wisely
