How Sportsbooks Generate Betting Odds

How Sportsbooks Generate Betting Odds

Learn how sportsbooks generate betting odds.

Key Points

– Generating betting odds is done with the help of computer technology.

– The human factor is still involved in generating betting odds and lines.

How Sportsbooks Generate Betting Odds

Over time, sportsbooks have undergone a significant change in how they create their odds and betting lines. Old-school Vegas oddsmakers used to control the sports betting market, but a lot has changed since the introduction of online sportsbooks and the optimization of sports betting software and algorithms.

So, how exactly are lines and odds generated by sportsbooks? Everything you need to know about the procedure, the participants, and the development of oddsmaking will be covered in this post. It all starts with understanding the goals of the bookie.


Bookmakers' Goals

The ultimate goal set by the sportsbooks – to balance the action on both sides of a wager – hasn't changed much since the beginning of sports betting. Understanding this can help bettors do things like win more NBA first half bets.

If you understand odds, you are aware of how to calculate implied probability. Remember, that implied probability in a sporting event rarely adds up to an even 100 percent. That’s because betting lines are not made to represent the likelihood of either outcome.

Smart bettors know that placing a wager when one believes there is a discrepancy between the actual probability and implied probability is one of the best ways to gain an advantage over a sportsbook.

The bottom line in understanding lines and odds are calculated is to remember that bookies and sportsbooks are in the business of making money, not in predicting the outcome of sporting events.

How Do Betting Odds Get Calculated?

The odds and/or lines are designed to generate the same amount of activity on both sides of a bet. A sportsbook would profit 5–10% on the juice (also known as the “vig”) in an ideal world where there is equal betting volume on both sides of a wager.

As a result, it's crucial to comprehend that oddsmakers' primary goal is to reduce risk for the sportsbook rather than to paint an accurate picture of reality. Think of today's oddsmakers as risk management experts as well as knowledgeable sports forecasters.

Old-School Oddsmaking

Although bookmakers' goals have not changed since sportsbooks first appeared, their strategies undoubtedly have. 

Oddsmakers used to congregate around chalkboards in messy backrooms of Las Vegas to brainstorm the right numbers long before the spread of computer technology.

Many of the most renowned and famous oddsmakers were born and lived in Las Vegas and the surrounding areas. That’s  because sports betting has been permitted in Nevada for such a long time. Numerous consulting companies for oddsmaking still have their headquarters in Las Vegas.

Power Rankings

Before the advent of online sportsbooks, oddsmakers made their own distinctive power ratings for the various sports. The bookie community has always kept how they develop their power ratings a secret.

The general consensus is that these rating systems are similar to those used by media organizations. Traditional sports statistics and intangible factors were combined to create power rankings while balancing schedule, team performance, and individual player performance.

Power rankings take into account, for example, how NBA odds history impacts the current season. Power rankings consider historical factors.

After establishing their own power rankings, oddsmakers would produce an opening number by taking into account the injury report and what some old bookies called “horse sense,” which was really just gut instinct. Oddsmakers then adjusted the line and the odds associated with it as more money came in.

Today’s Bookmaking

More people than ever before have responsibilities in oddsmaking today. A bookmaker's “gut feeling” isn't nearly as prominent as it once was, but the “horse sense” that handicappers used to build odds is still used in the process.

In today's oddsmaking, statisticians and mathematicians play a big part. The creation of odds is done using a variety of formulas, numbers, stats, and more. With the help of modern computing power, mathematicians and statisticians pore over decades' worth of data, incorporating trends that can be found in a matter of seconds. 

Power ratings continue to serve a very important function in the process, but there is much more to it. Calculating mathematical risk management, analyzing the public's response to particular lines, and comprehending bettor behavior all play significant roles in determining odds. 

Outsourcing Betting Odds

It costs a lot of money to employ a team of statisticians, mathematicians, and handicappers. This eats into overhead costs. As a result, many sportsbooks today outsource their oddsmaking. 

Sportsbooks are reportedly spending less on internal oddsmaking and risk management and more on advertising and promotions. It’s more cost-effective to pay someone else to set the betting odds and lines.

Betting sites then spend more money on keeping players betting at their sportsbooks

It’s a Copycat Industry

The global sports betting market is bigger than it has ever been. It is showing no signs of slowing down either. Sportsbooks have less room to stand out from the competition. Everybody has instant access to odds at online sportsbooks, and some sportsbooks simply copy lines and odds from one another.

Books put less emphasis on original lines and betting odds. They spend less money on oddsmaking so they can focus on what pays the bills – bringing in more bettors. 

Some sportsbooks do continue to set their own betting odds and lines. In the industry, many sportsbooks get their opening lines from offshore betting sites. They will then modify those numbers to suit their bettors and achieve the goal of equal action on both sides of the bet.

Independent Oddsmaking Consultants

There are third-party companies in the industry that provide betting odds and lines to sportsbooks. These companies will use data analysis and proprietary algorithms to generate odds and lines. 

Sportsbooks contract with these consulting companies and pay a fee for lines and odds for their entire betting board. It’s a huge savings and that money can be spent elsewhere (typically advertising).

There are some unique situations where a sportsbook will set its own odds. This happens in situations where a book is offering an unusual or exotic bet. This might be a bet on a TV show or a presidential election. The sportsbook may still utilize its consulting firm, but the sportsbook will have the final say in terms of betting odds and lines.