As the days count down toward this year’s Academy Awards ceremony, Hollywood’s brightest stars nominated for an Oscar are probably busy working out their chances of winning a much-coveted golden statuette. But thanks to a growing number of Internet-based wagering venues, the public may have already done the math for them.
Betting on the Oscars has become something of a national pastime in the United States, with offices around the country setting up betting pools. Oscar betting also is becoming big business for online wagering sites around the world, where it is gaining in popularity and proving in some cases to be an uncannily accurate predictor of who will actually win on the night, analysts say.
A case in point is Intrade.com, a Dublin-based platform for trading futures based on sports, politics or other events. Last year, odds offered at the site for Oscar winners in the big categories such as best actor or best director proved to be 90 percent accurate according to Mike Knesevitch, communications director for Intrade.com, which has 45,000 members.
“If you take a snapshot a week before the event, the favorites on [Intrade.com] will be the ones that win,” he said. “It was the same thing for the political election we had last November; if you had taken a snapshot one month, or a week before the election, all of the results that we predicted were 98 percent accurate. We only missed one incorrect market and that was the Alaskan Senate race. All of the rest were dead-on.”
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Betting exchanges and betting Web sites are a relatively new phenomenon, having grown alongside the development of the Internet. They are growing rapidly and acquiring a new-found respectability, analysts say, although most of the wagering is done in Europe and Asia, as betting online is still illegal inside the United States.
The theory that betting markets can offer very accurate predictions about future events is also relatively new. The thinking is that when an opinion on an event is backed by a bettor’s hard-earned money, it is likely to be carefully considered. That bettor is likely to have put a lot of thought and research into a decision to place a bet, rather than simply relying on a feeling about the outcome of a certain event, observers say.
More is more in Web site betting
Liquidity is the key. The more bets placed on a Web site, the more accurate its predictions are likely to be. Indeed, during last year’s presidential election, when Web sites like Intrade.com took in millions of dollars from gamblers placing bets on a very close presidential election and a handful of close Senate races, betting sites were more accurate in their predictions than a host of political pundits or public opinion polls.
The amount of money wagered on this year’s Oscars isn’t likely to measure up to the millions spent on the November election, but Knesevitch still expects Intrade.com’s Oscar odds to be just as accurate.
“I think people put their money where their mouth is, and the elegant thing about exchanges, whether it be financial exchanges or exchanges that price entertainment risk, is that when individuals come together to express their opinion through price discovery, it’s a much more accurate prediction of future events,” Knesevitch said.
Betting exchanges are likely to offer the most accurate predictions of who will win a golden statuette Knesevitch adds. When you are dealing with a bookmaker the odds are skewed against the bettor because the house determines the spread, he said. “At the Intrade.com exchange, you have over 45,000 individuals making a market, so I’m going to get the best price here than I will at any bookie shop,” he added.
Intrade.com works like a stock exchange, except that site members trade contracts for various future events (Martin Scorsese’s “The Aviator” winning the best film prize at the Academy Awards, for example). These contracts have a scale from one to 100 and traders buy and sell them based on how likely they believe an event will take place, just as equity traders buy and sell stocks based on whether they think their value will rise or fall.
The growth in the popularity of online betting exchanges, like Intrade.com, and a host of others, has improved their accuracy in predicting events like the Oscars, says Leighton Vaughan Williams, director of the Betting Research Unit at Britain's Nottingham Trent University, who has studied how well efficient betting markets predict future events.
Vaughan Williams points to Jamie Foxx, who is the favorite in the best actor race for his portrayal of blind singer Ray Charles in “Ray.” Betting Web sites are offering strong odds that Foxx will win the award, suggesting that the market has made a determination of who will win, based on the Oscar wagering already made.
“This year, more than any other year, the markets are seeing a clear favorite in the best actor category, and the odds on Jamie Foxx winning are astonishing,” Vaughan Williams said. “So I think Oscar betting is becoming much more sophisticated. And it’s improving because there are so many betting markets out there now, and they’re giving people the hard data and the confidence they need so they can make their own decisions instead of using guesswork.”
Vaughan Williams says betting markets are likely to be just as accurate in their Oscar predictions as they were at predicting the outcome of last year’s election: “There’s only a small pool of voters for the Academy Awards, but there’s also more scope for insider information to leak out. So some people out there have a pretty good idea who will win, and they could influence the odds.”
Online betting experts like Vaughan Williams and Knesevitch see the popularity, and accuracy, of betting exchanges and Web sites growing in the years ahead, potentially helping film studios to hedge against the risk that their next movie is a flop, or other unforeseen costs.
“We think that eventually [Intrade.com] will be the type of robust market where commercial interests like studios will come to hedge that risk,” Knesevitch said. “Let’s say you’re Miramax and you want to hedge the risk of ‘Aviator’ not winning the Academy Award. You know that it costs over $100 million to produce a film like that, and you have a great deal of reputational and financial risk on the outcome of this event. Would you like to take some of that risk off the table?”
Additional reporting by MSNBC.com’s Ashley Wells.