A World (Pool) of pain – A parimutuel perception problem

While only one in six dollars on domestic racing is spent on parimutuel betting, Australian punters are accustomed to the feed of winning tote dividends as the horses cross the line.

But the instant nature of the dividends has proven cause for a different type of discussion this autumn, as a critical eye has been cast across World Pool dividends in major races.

There have been 18 Australian Group 1 races involved in the World Pool this spring, with just four instances where the World Pool dividend for the winner was equal to or higher than that which would have been available via Tabcorp’s fixed odds at the jump.

Notably, variation in tote price as compared to starting price came in Saturday’s Sires’ Produce, where the winner Campione D’Italia paid $2.70 on the Tote as compared to $3.90 on TAB fixed odds, and the Doncaster Mile, where Sheza Alibi was $1.60 on World Pool and $1.90 on fixed odds.

Joliestar was $3.70 fixed and $2.90 on World Pool in the TJ Smith, while the outlier was Australian Derby winner Green Spaces who was 4.60 on fixed odds, but slightly longer, $4.80, on World Pool.

There are a couple of factors behind the lower dividends, the most obvious being World Pool’s increased take-out rate.

The average market percentage – that is the implied probability of all horses in a race based on their World Pool odds – across those 18 Group 1 races has been 122.8 per cent.

Variation of those numbers depends on how round downs etc work out, but the range of market percentages on World Pool has been from 121.3 per cent to 125 per cent.

In comparison, the average market percentage of the fixed odds market for TAB across those races has been 116.4 per cent.

The average difference between World Pool and TAB fixed market percentage has been 6.3 market percentage points per race. That is six cents per dollar.

This situation has been compounded by the higher percentage of favourites winning these Group 1 races. Since the Lightning Stakes, the first Group 1 race operated on by World Pool this autumn, 13 of the 18 Group 1 winners have been at the top of the market.

Nine of those have been odds-on favourites on World Pool, a market dynamic which tends to attract greater focus on favoured runners, and a shorter tote dividend.

In fact, 11 of the 18 winners of these Group 1 races have been the horse in the market whose World Pool price is at the greatest discount to that on offer from fixed odds.

It is little wonder that Australian punters are restless.

The reverse impact of this heavy favourite bias is that there are more horses in the market which actually start at a longer price on World Pool than on fixed odds.

Across the 192 Group 1 starters in those 18 races, 103 horses, or 53.6 per cent started better odds on World Pool than they did on fixed odds, while 77, or 40.1 per cent started at a shorter price. There were 12 starters who were at the same price.

These stats, while interesting, are of little consolation for World Pool punters this autumn who have seen favourite after favourite salute at an inferior price to fixed odds.

Which brings us past the stats and into the broader discussion of how this affects perceptions of parimutuel betting.

When you bet in a tote context, you are forgoing price certainty. In that way, it is an inferior product. In fixed odds, you can choose when to bet, and, in theory, can get the market percentage much better in your favour if you shop around.

The reason you would rationally bet on the tote is if you believe you will get a better return. At a professional punter level, this can, in the World Pool context, take the form of rebates.

This level of “smart money” is seen as a contributing factor to the lopsided World Pool dividends we have seen throughout the autumn. Professional punters are happy to take an inferior price if their effective take-out rate is considerably lower.

The general punter betting into these pools isn’t afforded such a luxury. Compounding this is that we don’t get a clear view of how much of the market is taken up by ‘rebate’ punters.

Parimutuel was founded on the notion of all being equal in a pool. TAB’s marketing slogan in the 80s and 90s was ‘get a run for your money’, but there is evidence in a World Pool contest that this is less and less the case. Some punters are more equal than others.

For the better part of 18 months, Tabcorp CEO Gillon McLachlan has been pressing the virtues of a national tote. The past couple of months have been spent trying to get PRAs behind the notion that a single national pool could prove a revival point for parimutuel betting in Australia.

If McLachlan thought getting stakeholder support was hard, the recent run of publicity around inferior World Pool dividends will likely mean Tabcorp’s biggest challenge is getting punters to change their habits from fixed odds back to the tote.

A look at data on non-World Pool races data at a recent metro meeting shows tote market percentages at around 117-118 per cent, superior to World Pool and competitive, albeit slightly inferior, to fixed odds.

That may give punters some more incentive, but it’s hard to market that when tote bettors are effectively being punished for betting on the biggest races. Those instant dividends are not doing parimutuel punters and favours.

It might be that increased pools and liquidity of the national tote may incentivise Tabcorp to cut take-out rates, and that may see a turnaround in parimutuel’s sagging fortunes.

But as things stand now, parimutuel punters fronting up to Group 1 races run under World Pool are getting an inferior product (due to price uncertainty) at a greater expense (in terms of take-out rates). The sour taste of that may among punters take some time for Tabcorp to dislodge.