Betfair Premium Charges

[edmond1]

First of all I would like to thank PaceAdvantage for providing me with the opportunity to find out about Betfair a few years ago. Since then I have been able to play the horses and actually make a small profit after 30 years of constant losing betting through the TOTE.

Since joining I have had nothing but good things to say about Betfair (1-800 #,great customer service, timely withdrawals etc.). But now I have a disturbing problem - Premium Charges. I know this topic came up in a previous thread but I think it is important to let people know the outcome of conversations I finally had with them with regards to this. In short -> if you are a bettor as myself who primarily backs (ie. bet to win) horses "YOU WOULD BE BETTER OFF BETTING ELSEWHERE IF YOU DO NOT LIKE TO PAY UP TO 22.5 % IN COMMISSIONS" ........ what Burns(head of TVG) says is false ... you really don't have to be making or betting much to be in the Premium Charge Club ... I would know. BetDaq might be a better alternative - liquidity available only after English night racing ends.

[parlay]

In your discussions did you discover why they felt it necessary to
modify their model.

[edmond1]

Dear ******,


Thank you for your e-mail.

I will arrange a call for you at a time that suits but underneath is why we introduced the premium charge.

We do spend a huge amount of money on marketing, either to acquire new customers, retain existing ones, or reactivate former ones. For more than 98% of our *winning* customers, the commission they pay when they win meets that cost, because although they win overall, their betting has a healthy mix of wins and losses and its unlikely that they will ever need to pay the Premium charge.

For less than 2% of our winning customers that isn’t true, as the rate at which they win, in the long-term means that they remove money from Betfair having paid less than it cost us to get that money there in the first place.

We have introduced the Premium charge to enable Betfair to continue growing in the long-term, and for there to be ever-increasing amounts available to be won by all customers.

Please do not hesitate to contact us if you have any further enquiries.

Kind regards

Darren Barnard

Betfair Helpdesk

[edmond1]

Oh yes, if you are in this CLUB forget about avoiding the charges by opening other accounts etc. - they have a special investigation team monitoring your activity and will link these accounts together if they notice anything fishy....

[GameTheory]

So I guess you're in the 2%? Under what circumstances does it kick in?

[edmond1]

7) Premium Charges

In addition to the other charges detailed above, a small number (less than 0.5%) of our most successful customers will incur Premium Charges.

Please note that if you become eligible to incur Premium Charges, we will contact you before any charges are paid.

Calculating Potential Charges

Each week Betfair will calculate your ‘gross profits’* made, and your ‘total charges’** generated over the lifetime of your account. The details of these calculations are explained below.

You’ll only be considered for the Premium Charge if your account is in profit and only if the total charges generated since joining Betfair are less than 20% of your gross profits.

The vast majority of customers, and even the majority of those whose betting on Betfair is profitable since they joined, do not meet both these conditions and will not incur the Premium Charge.

While those conditions accurately describe our most successful customers, they might also apply to new customers who have only bet in a few markets, or those whose accounts are in profit because of a significant big win. To ensure that those accounts are not inadvertently charged, we’ve added two further conditions: any single win that constitutes more than 50% of lifetime gross profits will be excluded from the calculation, and customers will only be considered for the Premium Charge after they have bet in more than 250 markets.

Each customer will also have a £1,000 allowance against the Premium Charge. This means that every customer considered for the Premium Charge will be exempted from the first £1,000 of the charge incurred.

Please note that for the purposes of calculating the charge we will assume that the charge has been in place since Betfair launched in June 2000. This means that we will consider all customers to have generated charges equal to at least 20% of lifetime gross profits as of the 12th October 2009. However, this also means that for some customers, some or all of the £1,000 allowance against the charge will have been used prior to 12th October 2009 in order to offset hypothetical charges paid. Assuming hypothetical charges, less allowance, had been paid prior to introduction of the charge has the effect of reducing the amount that customers would typically incur.

Each week the customers who meet all the conditions set out above will be charged the lesser of:

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.

This means that customers will never be faced with a Premium Charge that is more than 20% of their gross profits for the previous week.

Please note that the second of the two calculations set out above can only ever reduce the Premium Charge and will apply on the rare occasion that the difference between 20% of gross profits and the total charges generated during the lifetime of the account is less than the same calculation for the previous week.

Premium Charges will be deducted from customer accounts weekly (on Wednesdays) in relation to the previous week’s activity (Monday to Sunday).

Accounts that relate to one person, entity, API subscription or a Master Account with related Sub- accounts (Trading version only) are treated as one customer for the purposes of calculating Premium Charges. Note that no Betfair points will accrue for Premium Charges.

*By ‘gross profits’ we mean the amounts won, excluding total charges, less the amounts lost, on all Betfair markets. Please note: the Premium Charge only applies in respect of bets placed on the Betfair betting exchange and it does not apply to any bets placed on other Betfair products.

**By ‘total charges’ we mean all commission generated by Betfair as a result of your betting plus any Premium Charges you’ve incurred. ‘Commission generated’ includes the commission paid on winnings, but also the commission that Betfair makes from the other customers who win in markets in which you’ve lost, which we call ‘implied commission’. When you win, Betfair collects commission at your rate of commission, but when you lose, the commission collected by Betfair from the winners is at their rate. So we’ll determine the commission generated by your betting activity to be:

Commission generated = (Commission + Implied Commission) ÷ 2

where

Implied Commission = market losses x 3%

We divide by 2 because otherwise we’d be counting each pound of commission twice.

Premium Charge Summary

You will only be considered for the Premium Charge if, over the lifetime of your account, you satisfy the following criteria:

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 further conditions reduce the likelihood that you will be required to pay the Premium Charge:

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.
Each week the customers who meet all the conditions set out above will be charged the lesser of:

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.

[Native Texan III]

Examples

Example 1

You have won gross profits of £10,000 since joining Betfair having bet in 800 markets. You have paid total charges of £980; all of which has been paid through commission generated. You have not been charged any Premium Charges to date although you have fully used up your allowance of £1,000.

During the previous week you won £500 and paid total charges of £80. You are therefore charged £20 in Premium Charges ((£500 x 20%) - £80 = £20).

Example 2 – Charge Allowance

You have won gross profits of £10,000 since joining Betfair having bet in 320 markets. You have generated £1,050 in commission and paid no Premium Charge to date.

During the previous week you won £500 and paid total charges of £50. In the absence of a charge allowance you would have been charged Premium Charges of £50 ((£500 x 20%) - £50 = £50). However, the £50 is offset against the £1,000 charge allowance meaning that no additional Premium Charge is paid. You then carry over the balance of your charge allowance (£950) to offset against potential future Premium Charges.

Example 3 – Excluding ‘big’ wins

You have won gross profits of £8,000 since joining Betfair having bet in 500 markets. You have paid total charges of £1,025, all of which has been paid through commission generated.

During the previous week you won £5,000 from a single market and paid total charges of £125. As the win constitutes more than 50% of your total gross profits since joining Betfair, it is excluded for the purposes of calculating the Premium Charge. However, the commission generated on the win does contribute towards total charges paid.

After the win is removed you have gross profits of £3,000 and total charges of £1,025 and therefore incur no additional Premium Charge.

[HUSKER55]

So, if you are losing then there is no charge but if you win you pay 22.5%. You would do better at the track.

[Robert Goren]

I guess this goes to show that things are never quite as good as they seem at first glance. I guess the question I have for you. Is the fees in total more than you than lets say the takeout of 18% if you had made the wagers in a parimutuel pool? In other words as an American bettor, is Betfair a better deal than what we have now?

[Seabiscuit@AR]

I am not a fan of the Betfair premium charge but a tote with 15% to 20% takeout is still a much worse deal than the Betfair premium charge. To qualify for the premium charge you need a big positive ROI in the first place then the premium charge is a tax on profits not turnover

Tote takeout is a tax on turnover which is far more onerous and will effectively eat up a much greater share of "winnings" than a tax on profits

[Seabiscuit@AR]

The fixed odds nature of betting with bookies or Betfair is also better for the player. It is much better to know where you stand before a race is run (eg you have bet $1000 and stand to collect $5000 if you are correct). No more worries about the odds dropping after the gates open

One problem with a rebated tote system is that those with the biggest rebates dictate the odds of all the other players. Now this issue does arise with Betfair too as they have a sliding commission rate of 2% to 5% so some players on 2% can still take lower odds than someone on 4% to 5%. But it is not as bad when the odds are fixed as you know what price you are getting taking into account commission. It is up to you if you want to take the price or not. With the tote you don't know your odds until after the race is run

[teddy]

Its stupid to think any of the tracks are going to take a cut in their money or horsemen take a cut in purses just to add a new betting model. The money has to come from takeout or the casino inside.. The betfair advantage if their is any cant be more than you would get with a rebate program. Which cuts the take down to under 10% anyway.

[edmond1]

Robert Goren :

Found out (Betfair provides portal link to Premium Charges) that I will be docked approx. $1000 CDN on Wednesday as a result of having an extremely good week. This is on top of approx. $600 CDN in regular commissions that were incurred during this period from my winning bets. I estimate that my average takeout for the period now was 9% instead of my regular 3.5 % rate. Note that I had many losing bets during this period as well or else I would have had to give them more.

[gm10]

Robert Goren :

Found out (Betfair provides portal link to Premium Charges) that I will be docked approx. $1000 CDN on Wednesday as a result of having an extremely good week. This is on top of approx. $600 CDN in regular commissions that were incurred during this period from my winning bets. I estimate that my average takeout for the period now was 9% instead of my regular 3.5 % rate. Note that I had many losing bets during this period as well or else I would have had to give them more.

Has this ever happened to you before or is it the first time you pay premium charges? I've managed to avoid them so far, so I've not paid much attention to them.

[edmond1]

gm10:

This will be the third week in a row that I will have to pay. Would have been 4 but they wave the charge the first time. Check the following link for the status of your account :
https://premiumcharge.betfair.com/PremiumPortal/portal. (https://premiumcharge.betfair.com/PremiumPortal/portal)

Must be logged on to your account for it to work. Start to worry if your Lifetime Total Charges % nears 20 %....
(https://premiumcharge.betfair.com/PremiumPortal/portal)

[gm10]

gm10:

This will be the third week in a row that I will have to pay. Would have been 4 but they wave the charge the first time. Check the following link for the status of your account :
https://premiumcharge.betfair.com/PremiumPortal/portal. (https://premiumcharge.betfair.com/PremiumPortal/portal)

Must be logged on to your account for it to work. Start to worry if your Lifetime Total Charges % nears 20 %....
(https://premiumcharge.betfair.com/PremiumPortal/portal)

"Your account has not incurred Premium Charges. If you become eligible to incur Premium Charges in the future, we will contact you before any charges are paid. "

I like the choice of the word Eligible. It's almost worth looking forward to!

It's a stupid rule, that's for sure.

[Seabiscuit@AR]

Where the Betfair premium charge can get nasty is if someone has a really good run for a few weeks or months and then has a bad run which cancels out the profits from the good run. Income tax is assessed yearly but the Betfair premium charge is assessed weekly. If you make 20K one week and qualify for the premium charge they might charge you up to 4K commission for that week. But if you then lose 20K the next week you have made nothing across the last 2 weeks but have had to pay the extra commission on the first week. Betfair don't pay any refund on the premium charge from the week before. The weekly assessment of your profit situation can make it look like you have made a profit which is only illusory in the long run

If you have a method that works on low ROI but lots of churn you won't have to worry too much about the premium charge though

[classhandicapper]

I'm not going to spend a lot of time trying to understand all the details because I can't play at Betfair, but leave it to the horse racing industry to take something great and figure out a way to kill it with a dumb rule.

If the model doesn't work as is, then they need to raise the commission rate slightly or adjust it according to activity not according to profits vs. action.

[lurker]

It's really quite simple. Betfair is saying " If you don't like it play elsewhere". Unfortunately there really aren't many other options.

[Hoofhearted]

I find that Betdaq is a eminently suitable alternative for me.

In 2003 I opened accounts with both Betdaq and Betfair -- for the past 2 years I have not put a single bet through Betfair. All my betting is exclusively transacted on Betdaq.

For my purposes, Betdaq provides ample liquidity on British/Irish racing, and is often stronger on soccer and golf markets. Prevailing odds on Betdaq are comparative to Betfair's due to bot activity, the overround on Betdaq is similar to Betfair at ~101% ................. again due to the presence of market bots. Most relevant of all is the Betdaq commission of 2.5% max.

The one circumstance imo where Betdaq could be compared unfavourably to Betfair is in the instance of In-Running betting on horseracing. (But then, Betfair doesn't provide In-Running markets on U.S. racing.)

[Kelso]

the overround on Betdaq is similar to Betfair at ~101%HH,
What does "overround" mean, in this context?

Thank you.