In betting and gambling, the odds on display do not actually stand for the true chances that the event will take place, but are the exact amounts that the sports bookmaker will pay out on winning bets once a winning bet is spotted.
During the formulation of the odds on world cup winner to display, the sports bookie will have included a certain profit margin which efficiently means that the payout to a successful bet is less than that represented by the true chance of the event that is taking place. This particular profit is known as the ‘over-round’ on the ‘book’ where the word Book refers to the ledger in which bettors were recorded, and is also the origin of the term ‘bookmaker’ that evolved lately as one of the most lucrative industries).
Taking for example the horse betting, in a 3-horse race, the real bet probabilities of each of the horses to win based on their relative abilities might stretch from 10% to 50%,. These figures are nothing but the bookmaker’s ‘odds’ multiplied by 100% for expediency and convenience.
The amount of all 3 percentages is 100%, therefore representing an appealing payout and a fair book. Furthermore, the true betting odds against winning for each of the 3 horses are respectively 1-1, 3-2 and 9-1.
For the purpose of generating a certain profit on the wagers accepted by the 2014 world cup bookmakers, the bookie might take the decision to increase the values to 60%, 50% and to 20% for the 3 race horses, offering odds against of 4-6, 1-1 and 4-1.
These values have a total of 130%, which means that the book has an overround of 30 or 130 – 100. This particular value of 30 displays the amount of profit for the horse racing betting bookmaker if it accepts horse racing bets in the correct proportions on each of the horses.
Note that the art of sports bookmaking is that it will take in $130 in wagers and only payout $100 back to the winning bettor regardless of the winning horse.
The money odds or amounts of money that the bookmaker’ payout are directly linked to the total amount that has been betted. They reproduce the balance of wagers on either sides of the event, and would include the inference of a bookmaker’s brokerage fee as well.