Back and Lay Jedward?

From Sofabet:

Eurovision 2012: Are you backing Jedward now to lay them later?


When Daniel and I started Sofabet in 2010, I didn’t expect to write any articles on Eurovision. Daniel is the master of this subject, whereas my primary fascination lies more with the autumn staple of Sofabet’s coverage, The X Factor – specifically, attempting to dissect the often-masterful techniques employed to generate hype and manipulate public opinion.



Last year, though, the worlds of Eurovision and X Factor-style hype came crashing into each other in the bequiffed shape of Jedward. The brothers Grimes were, of course, unleashed on an unsuspecting public by the 2009 UK X Factor are are still managed by their mentor in that show, Louis Walsh. A remarkable late gamble saw the twins plummet in the Eurovision 2011 win market from around the 50/1 mark to as low as 11/4 second-favourites on the morning of the big day.



This year, again, Jedward are representing Ireland. And this year, again, they are trading at juicy double-figure odds a couple of weeks out from the contest. So will we see another late plunge bringing them down towards favouritism during semi week? And can we cash in on it by backing them now to lay them later?



Daniel and I reckon it’s a possibility well worth considering. So while he packs his bags for Baku, I’ll lay out the reasoning.



For any Sofabet readers who are not conversant with betting exchanges, here is a quick explanation of how a “back-to-lay” works. Suppose you back Jedward with £10 at odds of, say, 30.0. (At the time of writing, their current odds in the Betfair win market are 32.0). As it stands, if Jedward win, you are +£290 and if they lose you are -£10.



Now imagine that Jedward’s odds come down to, say, 10.0. At which point you go onto Betfair and lay them, to the tune of £270. In effect, you are accepting the bet of another punter who wants to back Jedward with £30 at odds of 10.0. From this bet, if Jedward win you are -£270, and if they lose you are +£30.



Taking these bets together, then, you have just locked in a £20 profit either way. Jedward win, and you’re up £20 (your profit of £290 on the first bet minus your loss of £270 on the second). Jedward lose, and you’re up £20 (your profit of £30 on the second bet, minus your loss of £10 on the first).



In a back-to-lay bet, you don’t have to have any view at all about Jedward’s chances of actually winning the thing. You can be completely agnostic on this question. (For Daniel’s views on this matter, see his review of Waterline after the Irish national final). What you’re betting on is the proposition that Jedward’s odds will contract significantly before the contest.



In this example, effectively you’ve bet £10 at odds of 3.0 that Jedward’s odds will contract from 30.0 to 10.0. Obviously, if their odds contract to a lesser extent, then you could lock in a smaller profit. And if their odds drift, then you would have to accept locking in a loss – that’s the downside.



So, what are the chances of Jedward’s odds contracting significantly?



To answer that question we need to speculate about what caused their odds to plunge last year. There are two obvious possibilities. One is that, a few days before the contest, punters around Europe started thinking “hey, you know, Jedward’s chances have been grossly underestimated in the betting so far.”



The other possibility is that someone with an interest in Jedward’s success started placing some strategic bets, with the intention of causing the odds to tumble. Why might someone do such a thing? In a word: hype. Dramatic odds plunges have the effect of generating a sense of buzz and garnering headlines in the media.



We’ve seen a similar dynamic play out on X Factor a couple of times, most notably with Jedward themselves in 2009 and Wagner in 2010. In both cases, acts which had been deservedly rank outsiders for the win were backed right down to unlikely-looking short odds soon before being eliminated.



As we wrote at the time re Wagner, such gambles are a win-win for all concerned. The show gets column inches, the tabloids get an easy headline, and the bookies get some nice free advertising with their representatives quoted in the press.



With Eurovision, of course, the stakes are somewhat different. There would be no point in triggering an odds plunge on Jedward unless it were going to have some effect on their position in the vote. So, did it? Well, Jedward scraped through their semi-final in 8th place with the hype just starting to build; and then, with the hype reaching tidal wave proportions, they also – much more impressively – placed 8th in the final.



I know there are numerous reasons why you can’t translate directly from semi result to final expectation – different countries vote, one semi may be stronger than another, and so on – and I leave those to Daniel and the many Sofabet commenters more steeped in Eurovision lore than myself. Still, at least one of those reasons – the running order – should have worked against Jedward. They got through their semi from the plum draw of 19th of 19, whereas in the final their strong result came from a much tougher draw, 6th of 25.



It seems fair to conclude that Jedward placed better in the final than you would have expected if you’d known their result in the semi. The question then becomes: is there a plausible mechanism by which we might trace this improvement to their plunge in the betting?



We can find an unlikely analogy in the 2006 election campaign to succeed Charles Kennedy as leader of the UK political party the Liberal Democrats. Frontrunner (and eventual winner) was party elder statesman Ming Campbell. But a then-unknown MP called Chris Huhne was the subject of a remarkable plunge, being backed in from 300/1 to odds-on favourite.



There was a widely-held suspicion that people with a desire to see Mr Huhne succeed might just have been strategically punting on him, with a rationale pinpointed at the time by Mike Smithson on his blog politicalbetting.com – “that he should get the tag so beloved of journalists – “the bookies’ favourite”.”



In other words, in a world where the media look to the odds as a quick guide to who should be taken seriously as a contender, you may be able to get yourself taken seriously as a contender by engineering yourself towards the head of the market. (Mr Huhne finished a respectable second to Mr Campbell, and failed by only a whisker to beat the current incumbent Nick Clegg when the position next became vacant).



How might this kind of thing work in Eurovision? It seems plausible – although I can think of no way of testing this theory scientifically – that being among the market leaders might cause a song to perform better than it would have done as an outsider. The speculative reasoning is that when casual televoters hear their national broadcaster’s commentator say “and coming up next is one of the favourites, there’s been a lot of talk about this one”, they may be more likely to listen attentively.



Intriguingly, the jury vote increased by even more for Jedward in the final compared to the semi than did the televote. Is it possible that national jurors were susceptible to the hype, too? One would expect them to be more immune to hype than the casual televoter – but, then again, also more exposed to it.



Is this speculation feasible in terms of what kind of sums might be required to bring an act down from the 33/1 to 50/1 range into low single figures in the Eurovision win market, and whether those sums would be likely to be within the scope of an act’s promotional budget? We can only guess – though, to some extent, such a strategy might perhaps partly pay for itself by starting a snowball effect: That is, initial bets trigger price cuts; tabloids report the big gamble taking shape; casual punters jump on the bandwagon, depressing the odds further and allowing the original bets to be laid off at a profit.



One would expect this snowball effect to be much more likely to happen with acts hailing from the UK or Ireland, for reasons Daniel explained in his preview of the UK’s chances this year: Betfair and many other high-profile bookmakers are British (or Irish) based, and likewise much of their clientele – especially their casual clientele, the kind more likely to place an impulsive bet in a High Street betting shop after reading a story in their morning paper. I’m guessing it would take a significantly bigger budget to cause and sustain a similar odds plunge on acts hailing from outside of the British Isles.



There’s also something about the betting patterns on Jedward in 2011 that suggests a highly targeted approach.



Whilst Jedward’s odds plunged in the high-profile win market, this was not mirrored in more niche markets such as the top ten market, where their price remained more static. Had there been a general sense among Eurovision-savvy punters that Jedward were underestimated, you would have expected this to be reflected in the likes of the top ten market as well as the win market. There would, however, be practically no media mileage in “Jedward well-backed in top ten market” headlines.



If this speculation is anywhere near target, then one would imagine that there must have been satisfaction with last year’s outcome among those who set the ball rolling. In the X Factor, if something seems to have worked once, then chances are it will be tried again. Will the same be the case here?



At current odds, a “back-to-lay” makes Jedward effectively a price of about 2/1 to be single-figure odds on the day of the final. Of course, they might get knocked out in the semi (although being drawn in the pimp slot again here does help them), but you could hedge against the possibility by laying them in the qualification market (currently around 1.35, meaning you could pay £3.50 for the insurance of getting your £10 back if they fall at this hurdle).



This hedge means you can get somewhere around 5/4 about the proposition that if they progress through the semi, then Jedward will be backed down to single-figure odds by the day of the final. Are you tempted, or are there holes in our reasoning? Do let us know below.