Lack of Parity in NFL Increases Sportsbook Risk

The Chicago Sun-Times has a nice article on the lack of parity in this NFL season. The NFL has been touting the "any given Sunday" line for years, stating that any week any team can beat any other team. This year, that tagline has been shown to be completely inaccurate. Do you really think the St. Louis Rams or the Oakland Raiders have a snowball's chance in hell of beating the New England Patriots, Minnesota Vikings, Pittsburgh Steelers or Indianapolis Colts? Nope.

Now TV ratings are not suffering, but there has been some impact with regard to attendance at the home stadiums of the poor teams. The lack of on-site attendance will have a future impact with regard to finances of the poorer teams as although there is sharing of television revenue, the teams use attendance revenue to assist with singing bonuses, etc. So, in this case the rich get richer and the poor get poorer.

Sportsbooks also suffer from lack of parity. That's due to the particulars of spread betting. Bettors put up $110 to win $100. So, for example if the Raiders and Chiefs were playing, with the Chiefs favored by 3 points, if you bet the Chiefs, they would have to beat the Raiders by more than 3 points in order to win the bet. If they won by just 3 points, the bet would be returned and if they won by less than 3 points (or lost the game outright), you would lose.

The sportsbook makes money by taking $110 from bettors on both the Raiders and Chiefs. They take in $220, pay the winner their $110 plus the winnings of $100, and the sportsbook keeps $10, or about a 4.5% profit.

This system works to ensure the sportsbook makes money if you can get equal bets on both sides - in the example equal bets on both the Raiders and Chiefs. Point spreads are set to help ensure this occurs. When the two teams are evenly matched, the spread is low, with the converse when they are unevenly matched. In theory, you can set the spread large enough to attract equal action. In practice, that doesn't always happen.

This is the problem with the current lack of parity in the NFL. If some teams are just horrible, they are just not going to attract betting interest, unless the spreads are set to a dangerous level. Usually, a very high spread may be 13 points. With the current disparity, a game between between a top team and a bottom team might have to have a spread of 20 points or more to attract ANY betting interest on the poor team. So far, favorites are winning and underdogs (particularly of the poorer teams) aren't winning (even against the spread). If all the betting action is on the favorites and the favorites win, there aren't losing bets on the underdogs to finance paying the winners. That means the sportsbook has to pay out of their pocket, which means the sportsbook actually loses money.

Parity in the NFL isn't just good for the fans - it's good for the sportsbooks too.