Favourites are of course more likely to win but at the same time they will have shorter odds compared to the underdogs, so which is better for the bookie? You might look at instances like when Leicester won the league at 5000/1 or when Mon Mome won the Grand National at 100/1 and think that is surely worse for the bookmaker. In actuality in most instances it isn’t, the bookies tend to make less money when the favourite wins. Especially so when a series of favourites wins at a race
The favourite is the favourite for two main reasons. Firstly stats and models that odds traders and algorithms use will identify that selection as having a good chance and that will naturally make the initial odds offering shorter than others. Secondly the favourite is the most popular market, because once odds are set the thing that moves them is people betting on them. A heavy favourite will therefore be heavily bet on and so by that logic the bookie will likely not want it to win and stands to make a greater profit if it loses. This is why sometimes terrible odds can be offered on favourites as bookies try to discourage bets and promote them on other selections instead.
Favourites winning doesn’t necessarily mean a bookmaker will lose money, if they have a balanced book they should never lose in theory. It does mean the can stand to make less money though and in some instances when they can’t balance a book and have to take a position it can indeed result in the bookies losing money.
When the Favourites Win
It is easy to understand that the favourites are the favourites because not only are they expected to win, but because most people bet on them. The more people back an outcome, the more a team or horse or player is considered the favourite. Of course, bookies can highlight a favourite from the get-go as well, just based on the statistics they have achieved from previous games, for example. Therefore, regardless of whether you’re choosing to bet on football, golf, tennis, volleyball, cycling or anything else, that fact remains the same.
In this instance, if the favourite team or participant comes out on top, then proportionally more punters will win. Considering this as the outcome, then it stands out as being bad for bookies when the favourites do win. Granted, the odds may be shorter when betting on favourites, but the payouts are being spread out across more players. And to add to that fact, fewer punters will have losing bets to compensate for those receiving payouts.
You don’t have to look that far to see examples of when bookmakers have lost out on huge sums of money because too many favourites have secured the win as expected. And thanks to players backing those favourites, they have received the expected payouts, leaving the bookmakers in more of a high and dry situation. Take the Royal Ascot meeting of 2014 as one example of such. Even prior to the event finishing, eight favourite horses had won at the event in the first two days. Bookmakers were of course forced to pay out to the successful bettors, as is normal practice. And this has been the case with several events over the years.
In 2015, sportsbooks were bracing themselves for a massive £50 million loss when the first four favourites of the day at Cheltenham Festival won their races. Many bettors had added the favourites to their accumulators, which always pay out better odds than a single bet. It didn’t come to light in the end because Annie Powers took a fall at the last fence, leaving the accumulators to be passed off and the bookies to be saved a huge payout.
Bettors will frequently wager on football matches when the season is in action, with Saturday afternoons playing host to various matches across the United Kingdom. Punters love placing a bet on these matches, often backing the obvious favourites in such circumstances. If those favourites end up winning, then the bookmaker pays out. A surprise result of an underdog claiming a victory is what helps the bookies secure a profit more often.
When the Underdog Wins
Many people understand that underdogs or outsiders end up costing bookies huge amounts of money. Why? Because they tend to have big odds attached to them, meaning that if they do win, a larger reward is paid to bettors. That’s not really the main point to focus on in these circumstances, though. While a batch of people will win at those higher odds in these situations, the vast majority of people won’t have wagered on the underdogs, and instead will have backed the favourites and will have lost.
With this being the case, the losing stakes from those backing the favourites will generally more than supply the payout of those who backed the outsiders. It is also the case that when someone believes an outsider will win, they will utilise smaller wagers, because this reduces the risk involved. Underdogs are, after all, underdogs for a reason. They are less likely to win a match than a favourite, so bettors won’t commit as much money to backing them as they probably would when opting to back a favourite option.
Take a look back in time at when Leicester City came out on top of the Premier League in 2016, as an example. Once that had happened, a variety of stories broke about bettors securing huge wins after backing Leicester from the start of the season. What wasn’t made apparent when those stories broke was that everyone who had wagered on teams like Manchester City or Chelsea with larger stakes had lost their bets. Instead, the focus was on the Leicester City backers, who had won their share after backing the outsiders. This became excellent publicity for the various bookies who had provided these players with their underdog payouts.
Bookies Essentially Prefer Underdogs To Win
While bookmakers cannot really show any bias towards one team or player either way, there will doubtless be a lingering desire for the outsiders to win their respective events. They may come across as being highly disappointed when a 400/1 underdog secures the victory in a game that people have wagered on, but there is most likely going to be an underlying sense of victory for them. Or at least for the sportsbook’s management team, if nothing else!
In most markets bookmakers don’t have much exposure. They balance their books by attracting bets in different proportions on different lines to ensure a profit whoever wins. This is precisely why odds drift in and out in response to how many people and how much has been bet on them. Bookies also use exchanges and wholesale clearance houses to balance books and minimise risk. In reality there are not many events where bookies actually lose but they are likely to make less if the favourites win more often.
Sometimes, though, the bookmaker can’t balance the book and must take a position and accept risk. A good example of this may be the favourite in the Grand National, so many people will back it from all over the world that bookies are in effect forced to take a position. If the favourite wins they can genuinely make a loss on the race. Then again favourites only win the National around 15% of the time so on that logic most years they make a handsome profit, which more than makes up for the years when the favourites win. Even when Mon Mome won at 100/1 in 2009 a few punters did well but the biggest winner was the bookies as the clear majority of bets went down.
Bookies Losing From Big Favourites Winning
One of the finest examples of bookmakers losing out on big sums of money came about in 2009. When the Prix de l’Arc de Triomphe occurred that year, Michael Kinane saddled up on horse Sea The Stars. That horse, as a result, became the very first to win the 2,000 Guineas, the Epsom Derby and the Prix de l’Arc de Triomphe.
Once the race was over, Kinane said, “I didn’t have any worries because I knew I was on the fastest horse in the race. His acceleration was fantastic”. Yet when the race was up, bookmakers were out in full force, moaning about the result of it costing them “a sizeable seven-figure sum”. Yet it had been labelled as the favourite going into that event, considering it had won its previous five races. The Prix de l’Arc de Triomphe served as its sixth victory in a row. This didn’t stop the bookies from lamenting the fact that the favourite had indeed gone on to win the race, because it meant that they were out of a plentiful amount of income.
In 2017, the William Hill brand issued a statement that spoke of its profits. The bookmaker, which is one of the largest in the United Kingdom and Ireland, said its margins had been affected by what it described as “unfavourable football and horseracing results”. A £20 million hit to its profits was noted, thanks to a “customer friendly” series of results which occurred in December of that year. A number of favourites were said to have come out on top, resulting in players obtaining masses of wins. In fact, the football results which occurred on Boxing Day of 2017 were highlighted as some of the worst for William Hill in 2017. According to official figures, a total of 18 of the most heavily backed football teams won on that day, with Tottenham securing a 5-2 victory over Southampton, Chelsea defeating Brighton 2-0, and Liverpool thrashing Swansea in a 5-0 result.
One final noteworthy instance of bookmakers being floored by favourites winning was earlier on in 2022. In March, the Cheltenham Festival took place, and on the final day of the races, four winning favourites sent them into a downfall. This included a winning race on that final day by A Plus Tard, which was a heavily-backed Gold Cup hero being ridden by Rachael Blackmore. That Friday went down as “one of the most expensive Gold Cup days in recent memory”, according to a statement released by William Hill. That victory reportedly cost the Paddy Power brand a seven-figure sum, too, while also being the best-backed horse at Ladbrokes and Betfair alongside.
Many people had backed A Plus Tard along with Vauban, State Man and Elimay in their races, constructing accumulators that resulted in some punters getting sizable payouts and sportsbooks not being very happy in the end. Some clients were said to have been celebrating “six-figure wins” after Cheltenham’s concluding day. In fact, one bettor who had wagered on the horses at Paddy Power, ended up securing a payout of €55,000 coming from a five-horse accumulator. That bet only cost him €10 at his local Galway sportsbook.