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Why do bookmakers pay out early?

6/5/2014
Over the last fifteen years the practise of bookmakers paying out early has become increasingly common. Bookies usually pay out on results which are regarded as extremely likely to happen. Usually, they do happen, sometimes they don't. Either way they are guaranteed publicity from the media.

Betfred first paid out on Manchester United to win the league in 1998 and repeated the trick in 2012 and 2013.

The firm pioneered early pay-outs and carried out what they claim was the first in March 1998 when the Old Trafford side were twelve points clear of Arsenal with seven games remaining. The Gunners had three games in hand though and two weeks after the pay-out had narrowed the gap to three points as United dropped points to West Ham and Sheffield Wednesday. Two further draws at home to Liverpool and Newcastle ensured that Arsenal were crowned champions and Betfred lost £500,000 as a result. Fred Done claims that Manchester United's manager Sir Alex Ferguson then told him never to pay out early on United again as he felt he had jinxed the team. Done ignored him, paying out early again in 2012 (when they finished second after Sergio Aguero's last minute winner for Manchester City) and 2013 (when they won).

Betfred are not the only bookmakers playing this risky game. Irish bookmaker Paddy Power have also got in on the act. In 2009, they boldly paid out on Stoke being relegated after the first game of the season. Stoke finished twelfth and their fans sang "are you watching Paddy Power?" throughout the season. Paddy Power took out a full-page advert in the Stoke Sentinel and responded: "Are you watching Paddy Power? Well, yes we were. We were watching closely. And by the time the plucky Potters despatched Arsenal in November we were already hitting the panic button. Yes we're not too proud to say you all proved us completely and spectacularly wrong. We are not only eating our words but also a great big slice of humble pie. We've got egg on our face and been caught with our pants down. We cocked up." Later that year, they cocked up again by paying out on Tiger Woods to win the US PGA championship before having more luck when paying out early on Leinster to win the Heineken Cup and Barak Obama to win the American Presidency.

Is the money bookmakers can lose worth the risk for the publicity? Well an early pay-out often gets coverage across national media and the internet. It also gets sports fans talking in pubs and workplaces. When you think that a half-page advert on page 5 of the Daily Mail is over £40,000 and that early pay-outs can receive a half-page's worth of coverage in several national newspapers then the reasons behind the trend become more clear.

Still, if it was clear-cut that the move is worth it then all bookmakers would be doing it. Yet the biggest bookmakers like William Hill, Ladbrokes and Coral have been sternly traditional – waiting for the result to be decided before they pay out.

Why is this? Probably because Paddy Power and Betfred have specific brand images that they use early pay-outs to reinforce. Paddy Power as the cheeky, edgy, slightly controversial and laddish bookmaker and Betfred as the Mancunian bookie, linked to their founder's Salford roots and Manchester United. Paddy Power boss Patrick Kennedy told the Telegraph in 2007 that paying out early was driving turnover and attracting more customers who were betting more per stake.

So what is the future of early pay-outs? Well to make the news, an event needs to be unexpected or newsworthy. The more early pay-outs happen, the less newsworthy they are. They may have already hit their peak and become boring to journalists and their readers and so we may see less over the next few years. As they become rarer though, they become more newsworthy and worth doing again so peaks and troughs will probably be seen in the rate of early pay-outs over the years.

It isn’t just early pay-outs which can endear bookmakers to punters however. In March this year a strange incident took place when Betfred refunded the bets of all customers who backed Manchester United to win the league.

Company boss Fred Done was born in Salford and is a huge Manchester United fan. He told the Manchester Evening News that the move was to reward his fellow fans’ loyalty, who he assumed were the same people betting on the Red Devils. "One of the reasons I'm doing this is because of the way the fans were still singing for their team even though we were losing 3-0 to Liverpool," he said. "I couldn't believe it and they deserve a team much better than put out by David Moyes." The move cost Betfred £200,000 and we will never know if the publicity and goodwill generated was worth more than this.

In 2013, Paddy Power had a special offer to refund losing bets if Robin van Persie scored the first goal against Real Sociedad. Van Persie was injured in the warm-up, robbing gamblers of their hopes of their money back, and the game finished 1-0 to the Red Devils after Wayne Rooney's shot hit the post and deflected in off an opposing defender. It went down as an own goal but Paddy Power called it Rooney's goal, seemingly so as not to take advantage of Van Persie's bad luck. Those who won that bet as a result are sure to have spread the good news and praised Paddy Power to their friends – invaluable publicity for a small but growing bookmaker.

Joe Lo
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