Betfair, the major online betting exchange, launched Betfair Premium Charges, an additional charge for the customer on top of the basic commission, which was nonexistent during the several years of operation of the betting company.
Although the specific charges are not applied to all bettors, but only to winning players, their impact on the profits of a betting system is huge. If we take into account the 5 percent commission charged on all bets, we could easily understand that Betfair DOES NOT offer 20 percent better odds than other bookmakers, as the betting exchange claims for years.
Betfair Premium Charges are applied to customers who meet certain conditions
In brief, according to the official site of Betfair, you will be subjected to premium charges only if you meet the following criteria during the lifetime of your Betfair account:
- Your account is in profit;
- Your total charges generated are less than 20% of gross profits; and
- You bet in more than 250 markets.
Two additional conditions reduce the likelihood of having to pay the premium charges:
- Any single win that constitutes more than 50% of your gross profits over the lifetime of your account will be excluded from the calculation; and
- Each customer will have a lifetime allowance of £1,000 against the Premium Charge.
Every week customers who meet the conditions described above will be charged the lesser of the two:
- The difference between 20% of the previous week’s gross profits and the total charges generated during the week; and
- The difference between 20% of gross profits and the total charges generated during the lifetime of the account.
For comparison, in 2005, when Betfair was not calculating premium charges, a player who won €106,000, paid €6,000 commission. If the same profitable betting system applied today, the system bettor would have been incurred an extra Premium Charge fee of about €15,200. This translates to a 15 percent loss in total winnings.
How this premium charge is affecting true betting odds
Say we want to bet on 2.00 currently available for a football game. Since we are already charged 5 percent commission, the real odds are decreased to 1.95, as already explained in the post about the significance of commission on our betting system. Now, if we win €120,000 and lose €14,000, we end up at a gross profit of €106,000. Yet, the actual odds for the bet decrease even further to 1.822, when we take into account the 15 percent additional charge due to the premium charges!!
How did I come up with that figure? Consider the following calculation:
Suppose a gambler lost 1,400 bets of €10 and won 12,000 bets of €10 at odds of 2.00. Winnings are decreased by €6,000 because of the 5 percent standard commission. Moreover, profit is further chopped by €15,200 due to Betfair Premium Charges in question.
At the end of the day, 12,000 winning bets of €10 do not return €120,000, but in fact €98,800.
So, for each winning bet the player actually made a profit of €8.23 instead of €10, which should have received if odds were trully 2.00. As a result, premium charges decreased the odds to 1.822, instead of the initial listed value of 2.00.
Obviously, we have highlighted some extreme cases. The reason was to show how significantly increased the total commission is due to the premium charges Betfair applied under certain conditions.
So next time you hear about 20 percent better odds, don’t get overexcited!