LEEDS (Reuters) - Thousands of miles from the NFL American football action, science graduates sit in a nondescript British office sifting through data on past games to produce the complex equations that underpin the fast-growing global business of sports betting.
William Hill (WMH.L), Britain's largest bookmaker, has set its brightest mathematical minds to work on analysing American football after buying three businesses based in the state of Nevada.
Laws on gambling in much of the United States are strict but the company hopes to offer "in-play" bets on the games as they progress in the retail outlets it has acquired in Nevada later this year.
Bookmaking has come a long way since it was dominated by turf accountants at the racetrack, who only took bets before a race started and set odds with the aid of a sidekick waving his arms around in a curious signalling system used to communicate prices between bookies.
Now, growing numbers of punters are opting to bet online on more and more incidents occurring during football matches and a widening array of other sports, using smart phones and tablet computers to bet from their sofas on matches they are watching on television.
As a result William Hill and its rivals have shifted to a more automated, statistics-based approach in setting odds, which can boost turnover as it can handle bets on more matches and improve margins thanks to more accurate forecasting.
Three years ago, William Hill set up a Research and Development (R&D) team under the leadership of Terry Pattinson, an Australian with extensive knowledge of the gambling industry in Asia.
Last week the team was busy studying NFL statistics in William Hill's office in Leeds, northern England, poring over diagrams and spreadsheet data dating back a decade on the 170 plays made in an average game to fine tune their programs.
"We completely rewrote our model in the off-season and have improved our performance greatly with the new model," said Pattinson, now William Hill's group trading director who oversees the company's worldwide bookmaking operations.
"Early indications are that we will double our margin with this piece of work," added Pattinson, a 43-year-old from Darwin in northern Australia.
William Hill takes live bets on sports including football, tennis, baseball and basketball and even added beach volleyball to its computer models during the Olympics.
For its NFL model the company's team of six researchers looks back over past seasons at whether a team decided to pass, rush, punt or attempt a field goal in their plays. They even factor in the wind speed as this affects the success of field goals.
TURF ACCOUNTANTS TURN TO TECHNOLOGY
The programs written by William Hill's R&D team are now used by more than 100 of its traders who for decades set odds by studying form, monitoring the flow of money and plain intuition.
Pattinson says the company increasingly trusts its mathematical models to deliver accurate probability forecasts and only rarely shifts its prices to reduce its risk if a lot of money is staked on a favourite.
This can backfire on the bookmaker.
"We lost 250,000 pounds on (football club) Barcelona last Saturday night," he said. "They were 2-1 down going into injury time but ended up winning 3-2."
However, Pattinson said the company has doubled its margins on football over the past three years and thanks to its algorithms can now take bets on as many as 30,000 games a season. It can also make more "markets" - bets taken on specific events occurring in matches, such as the timing of players being shown yellow cards.
"In the past one trader managed four markets on one football (football) game at a time," Pattinson said. "So on a Saturday I would have 10 traders in just looking at the English Premier League, trading a combined number of 40 markets over the 10 games.
"Now we can produce up to 100 matches at once, over 100 markets on each match, overseen by one senior trader."
But Pattinson says in-play betting is still seen as complementary to more traditional forms of gambling, not replacing them.
"Since 2008 our in-play business has grown by approximately 500 percent, but during this time pre-match sports (betting) has risen substantially, as has horse racing," he said.
Founded in 1934, William Hill still operates more than 2,300 betting shops in Britain and has maintained its high street presence while expanding its William Hill Online operation, a joint venture which is 29 percent owned by software company Playtech (PTEC.L).
It is now seeking to expand its online operations abroad but earlier this week its 350 million-pound ($563 million) informal offer to buy Sportingbet SBT.L, the London-listed market leader in Australia, was rejected.
(Editing by Greg Mahlich)