Some interesting reading....
The payouts from successful win bets on the Tote will diminish significantly later this month, following a decision by the recently privatised pool-betting business to increase the deduction from its win pools by 22% from 22 October.
Totepool, which currently holds a monopoly licence to operate pool betting in Britain, was sold to the bookmaker Fred Done for £265m in June 2011. The company said on Tuesday that the sudden jump in the deductions from its win pools, from 13.5% to 16.5%, is designed to encourage "co-mingling" of bets from overseas punters in British pools to increase their overall strength and stability. There will also be a small cut in the deduction from two pools, the Exacta and Trifecta, from 26% to 25%.
The announcement marks a complete reversal of the last significant change to pool betting's payout structure in March 2003, when the takeout from the win pool was cut from 16% to 13.5%, also with the intention of improving the liquidity of the pools. The rise in totepool's takeout, previously among the lowest in the world, moves it closer to the figure which applies in countries such as South Africa, where the deduction from win pools is 20%, or Australia, where it is 16.5%.
However, the pari-mutuel systems, the equivalent of Britain's totepool, which operate in most major racing nations enjoy a monopoly on off-course betting, while in Britain pool betting faces fierce competition from both traditional bookmakers and, more recently, betting exchanges such as Betfair.
Phil Siers, managing director of totepool, insists that gamblers will eventually enjoy a much improved betting product as a result of the change. "This is a move which will benefit punters in the long term," he said. "We've had problems trying to get the big international totes co-mingling into ours because the rates are pretty different. What this will mean is that those customers who are betting with us will have a product that is much more stable.
"[At present], the guy who wants £1,000 on a 12.00 shot will invariably see it move from 12.00 to 6.00 or 5.00 [as a result of the bet distorting the pool]. With the extra money in the pools, the punter will find instead that they are getting 11.60.
"We would hope that co-mingling will improve annual overall take by between £100m and £200m, which is a very significant amount of money."
However, Peter Jones, the chairman of the Tote from 1997 to 2007, said that the jump in deductions is "a surprising thing to do".
"All the research we ever did suggested that the win pool is more elastic in its demand than the Trifecta and Exacta pools," Jones said. "We thought at the time [when the deduction was cut to 13.5%] that it was very much a matter of credibility and trying to maintain the Tote's presence in the market and its share of it. There is a segment of the racecourse market which is not price sensitive at all, but the off-course punter is much more value-conscious. It's a bit of a shame to cut punter value back again. It's a sad day, in many respects."
The ultimate success, or otherwise, of totepool's move on deductions will probably be measured over years rather than months, but a 22% rise in the cost of any product is unlikely to stimulate demand in the short term. If many millions do indeed arrive from overseas, it will improve the quality and stability of the pools, though the interest of foreign punters is most likely to focus on top-quality Flat racing such as the Derby and Royal Ascot. The pools for novice hurdles at Fakenham in January are unlikely to receive a big injection of cash from Hong Kong or Australia, yet gamblers will still suffer the higher rate of deductions.
Perhaps totepool's British customers will embrace higher deductions if the pools are more robust. Then again, unlike their counterparts in most major racing nations, they do have a choice.
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