# Bookmaker Margin Survey

### Introduction

A key consideration when choosing a sports betting service is the margin each bookmaker uses to calculate odds. Unfortunately, the task of comparing margins is arduous, so most punters won’t make the effort. At Australia Sports Betting we’ve done the work for you by conducting a survey of margins used by popular bookmakers. This survey has been completed using April 2011 data on head to head and line bet odds for various sports. This article first discusses what margins are and how to calculate them. The key survey results are then provided.

### What are Bookmaker Margins?

The bookmaker margin is a measure of the bookmaker’s profit for an event, and can be regarded as a hidden transaction fee for punters. For example, in a coin toss where heads and tails each have a probability of 50%, a bookmaker won’t offer 2.00 odds on each outcome. Instead it will offer odds of, say, 1.95. If even amounts are placed on heads and tails, the bookmaker will secure a profit regardless of the result. This profit is how the bookmakers finance their services, but bookmakers vary in the scale of margins used. Obviously from a punter’s perspective, the lower the margin, the better.

### How to Calculate Bookmaker Margins

When using the decimal odds system, which is common in Australia and Europe, calculating the bookmaker margin for an event is easy. The margin equals the sum of the reciprocals of the the odds. Below are calculation examples using two- and three-outcome events.

### How to Interpret a Bookmaker Margin

The margin measures the bookmaker’s profit on an event in the case where the bookmaker receives bet amounts on each outcome that are in proportion to the bookmaker odds. Suppose the bookmaker offers odds a on outcome A and odds b on outcome B. If proportion b/(a+b) is placed on A and a/(a+b) is placed on B, then the bookmaker will receive the same profit regardless of the result, which is measured by the margin. This margin is amount by which the actual ‘book’ exceeds 100%. For this reason, you will always get a value of at least 1.00.

Let’s look at the bookmaker margin for the two-outcome event above, which is 1.035, or 103.5%. Suppose \$100,000 in total was wagered on the market, with [1.64/(1.64 + 2.35)] x \$100,000 = \$41,102.76 in bets placed on Oklahoma City and [2.35/(1.64 + 2.35)] x \$100,000 = \$58,897.24 placed on Denver. Depending on the outcome, the bookmaker will pay out one of the following two amounts:

If Oklahoma City wins: \$41,102.75 x 2.35 = \$96,591.48
If Denver wins: \$58,897.24 x 1.64 = \$96,591.48

Recall that the bookmaker took \$100,000 in bets, but only has to pay out \$96,591.48. If we divide the intake by the outgoings we get \$100,000/\$96,591.48 = 103.5%, as calculated earlier.

To give some perspective on how odds relate to margins, the table below compares various equal line odds (bets with a 50% chance of winning) to their respective margins. Note that 2.00 odds equate to a margin of 1.00, where the bookmaker makes no profit on the market.

Obviously the bookmaker will rarely receive bets that are perfectly in proportion to the odds, but over the countless number of bets offered, the margin will equate to the average profit margin across all events.

### Bookmaker Margin Data

Bookmaker margins have been calculated for nine popular bookmakers that offer Australian dollar accounts. The margins in the table below reflect the average margin across a sample of events logged for each sport. The margins have been calculated for both head to head and line bets. A head to head bet is one where you bet on the event outcome, i.e. Oklahoma City to win. A Line bet is typically designed to have a 50% chance of winning, and is created by giving the underdog a head start. For example the line bet could be:

Oklahoma City Thunder (+3.5): 1.91
Denver Nuggets (-3.5): 1.91

In the results below, the bookmaker with the lowest average margin for a given market is highlighted in green, while the bookmaker with the highest margin is highlighted in orange.

Pinnacle Sports dominates the results, with margins that are often half that of its competitors. Pinnacle Sports markets itself as a low margin bookmaker, and its claims certainly appear to be valid. Australian bookmakers tend to offer similar value, with the exception of TAB Sportsbet, which consistently has the highest margins. Note that Readbet has since closed down.

Interestingly, Betfair occasionally has the worst odds, despite marketing itself as offering better value than standard bookmakers. This result is due to a combination of the events chosen and the timing of the odds recorded. Because Betfair is a marketplace it requires a certain level of member activity to achieve a low margin. Typically the closer you get to the start of an event the lower the margin, but many of the odds were recorded 24-36 hours prior to the start of the respective events. Also, events that aren’t popular tend to have higher margins due to less betting activity, so these results will vary depending on the specific events chosen. For example, a Champions League football game will typically have a lower margin than a lower league English football fixture.

### Bookmaker Margin Variation

As well as recording the average margin for each bookmaker, it is of interest to note the variation of margins within a sport for a given bookmaker. Some bookmakers operate using very strict margin settings, while others seem to exercise more discretion, resulting in more variation in margins across events. For example, in an AFL round, a bookmaker may have a lower margin for the head to head market between North Melbourne and Richmond than it does for Fremantle vs. Western Bulldogs. The table below provides the standard deviation for each sample of betting margins recorded.

Pinnacle Sports has the lowest variation in its margins, while not surprisingly Betfair has the highest variation. Interestingly, Sportingbet’s line odds follow less rigid margin settings than its head to head odds. This is in contrast to every other bookmaker surveyed.

### Conclusion

This article has discussed bookmaker margins, including what they are and how to calculate them. Survey results for popular Australian and international bookmaker margins have been provided using April 2011 odds data. Pinnacle Sports dominates the results, with margins that are consistently below its rivals. TAB Sportsbet consistently uses the highest margins.

Keep in mind that higher margins enable bookmakers to offer better services. Pinnacle Sports offers a simple betting service, while a higher margin bookmaker like bet365 offers a flashier user interface, live video feeds and access to team statistics. If you bet for money rather than for fun, however, then margins are everything, and a Pinnacle Sports membership is a must have.

While high margins may deter you from obtaining membership with a particular bookmaker, it can still be beneficial to maintain an account with that service within a portfolio of memberships, because the bookmaker may still provide the best odds for a particular outcome. TAB Sportsbet frequently offers odds that are in contrast to other bookmakers, so while its margins are higher, it is often the best value for a particular bet. This was observed on numerous occasions during the data entry process for this survey.

Also of interest in the results was the variation in margins across sports with the same bookmaker. For example bet365 offered 102.7% margins on baseball head to head betting and 107.2% on men’s tennis head to head bets. This is not surprising, because it is common for bookmakers to advertise lower margins on selected popular sports to attract members.

Another finding was that many bookmakers are not consistent in the margins applied for the same sport. For example, in the AFL head to head market, bet365 had a margin of 104.7% on Carlton v Adelaide and 105.6% on Hawthorn v Geelong at the time the odds were recorded. In contrast, Pinnacle Sports was incredibly consistent in the margins used across events.

Finally, note that this survey was conducted in April 2011, and that the margin averages were dependent on the sample of sporting events chosen. Comparative margin levels may change over time, and may vary for sports not covered in this survey.

### Further Notes

• The Betfair odds were adjusted to account for transaction fees for a punter with a low level of betting activity.
• For each sport, the markets recorded were the same for each bookmaker, however some bookmakers may employ different terms and conditions, such as in the event of retirement during a tennis match. This may have a material impact in the relative margins.
• Another term for ‘head to head’ is ‘Money Line’. Apart from the football odds, which have three possible outcomes, all other bets were recorded for head to head betting with two possible outcomes.
• Line bets can also be referred to as ‘Handicap’ or ‘Spread’ bets. They typically represent odds with a 50% chance of winning. One exception to this are NHL line bets, that often create an underdog when the head to head odds are very even.
• Where insufficient or no data were available, the corresponding box has been marked ‘N/A’.
• A minimum of five events were included for each sporting market.
• The margins recorded were dependent on the timing of collection prior to the event. Based on punter activity, bookmakers often tweak their odds leading up to an event, which can impact the margin.