What Is Net Pool Pricing?

By Derek Simon

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NOTE: This a re-print of an article I wrote back in 2008 regarding net pool pricing.

With new bets littering the horse wagering landscape like bruised egos at a sports fantasy camp, perhaps the greatest boon to pari-mutuel bettors — Net Pool Pricing (NPP) — was greeted with little fanfare when it was first introduced to an American audience as a result of the 1996 Breeders’ Cup, which was held at Woodbine race course.

Arguably the biggest Canadian import since John Candy, NPP allows for different breakage, takeout and currency exchange rates to exist harmoniously within the same pool — something that has become increasingly more important as simulcast betting continues to expand globally. Yet, Net Pool Pricing didn’t become the norm at most U.S. tracks until just a few years ago.

“I believe the first track to use Net Pool Pricing in the U.S. was Arlington Park — and they started in 2004,” noted Liz Bracken, vice president and director of simulcast sales and content acquisition for the New York Racing Association (NYRA). “Net Pool Pricing was instituted at all NYRA tracks approximately October 19, 2005.

“I remember it was about a week before the Breeders’ Cup that we held at Belmont that year,” Bracken added.

While NPP has had little effect on win bettors, those seeking value in the place and show pools have surely noticed a positive change, especially in races featuring a heavy favorite. Because the amount returned to winning ticket holders is divided after the takeout and currency adjustments have already been accounted for, the days of severely discounted place and show payoffs on every horse whenever a chalky choice hits the board have become a thing of the past.

Take, for example, the Grade III Victory Ride Stakes run at Saratoga on Aug. 23, 2008. Listed below are the top three finishers in that race, along with their closing pool totals:

6-PORTE BONHEUR

Win: $32,786 ($27,868 minus 15% take)
Place: $13,378 ($11,371)
Show: $11,522 ($9,793)

5-INDYANNE

Win: $278,912 ($237,075)
Place: $50,252 ($42,714)
Show: $178,658 ($151,859)

4-INFORMED DECISION

Win: $ 53,736 ($45,675)
Place: $19,798 ($16,828)
Show: $12,245 ($10,408)

POOL TOTALS

Win: $477,850 ($406,172)
Place: $128,267 ($109,026)
Show: $233,093 ($198,129)

Using the “old school” method of computing win, place and show payoffs, the various odds are computed thusly:

Porte Bonheur

Win odds: ($406,172-$32,786)/$32,786= 11.35 (adjusted for nickel breakage).
Place odds: ($109,026-$13,378-$50,252)/2/$13,378= 1.65.
Show odds: ($198,129-$11,522-$178,658-$12,245)/3/$11,522= 0.05 (minimum legal odds).

Indyanne

Place odds: ($109,026-$13,378-$50,252)/2/$50,252= 0.45.
Show odds: ($198,129-$11,522-$178,658-$12,245)/3/$178,658= 0.05.

Informed Decision

Show odds: ($198,129-$11,522-$178,658-$12,245)/3/$12,245= 0.05.

With net pool pricing, the approximate odds are as follows:

Porte Bonheur

Win odds: (($406,172-$27,868)/$27,868+1) x (1-0.15)-1= 11.35 (adjusted for nickel breakage).
Place odds: (($109,026-$11,371-$42,714)/2/$11,371+1) x (1-0.15)-1= 1.90.
Show odds: (($198,129-$9,793-$151,859-$10,408)/3/$9,793+1) x (1-0.15)-1= 0.60.

Indyanne

Place odds: (($109,026-$11,371-$42,714)/2/$42,714+1) x (1-0.15)-1= 0.35.
Show odds: (($198,129-$9,793-$151,859-$10,408)/3/$151,859+1) x (1-0.15)-1= 0.05.

Informed Decision

Show odds: (($198,129-$9,793-$151,859-$10,408)/3/$10,408+1) x (1-0.15)-1= 0.55.

Notice that, under the NPP model, only the place and show odds on Indyanne are lower than those computed before, while the corresponding odds on Porte Bonheur and Informed Decision are all considerably higher. This is particularly significant to show bettors, as it allows value-oriented players to find viable alternatives to a heavy favorite without needing them to win. Such was the case in the 2008 Preakness Stakes when Big Brown paid $2.40 straight, while the show returns on Macho Again and Icabad Crane checked in at $10.40 and $5.60 respectively.

But the real bonanza for bettors occurs when the chalk finishes off the board (worse than third). Suppose, instead of finishing second in the Victory Ride, Indyanne had finished out of the money and Palanka City, who finished fourth, had grabbed the show honors. What would that have done to the payoffs? Take a look:

2-PALANKA CITY

Show: $8,311 ($7,064)

Porte Bonheur

Show odds: (($198,129-$9,793-$10,408-$7,064)/3/$9,793+1) x (1-0.15)-1= 4.75.

Informed Decision

Show odds: (($198,129-$9,793-$10,408-$7,064)/3/$10,408+1) x (1-0.15)-1= 4.50.

Palanka City

Show odds: (($198,129-$9,793-$10,408-$7,064)/3/$7,064+1) x (1-0.15)-1= 6.70.

In this scenario, Pete Bonheur returns $11.50 to show and Informed Decision $11.00. Given that most negative pools — those requiring the track to kick in money in order to compensate winning bettors — are generated in short fields, these types of generous payoffs add a whole new twist to value wagering, as they provide horseplayers with a relatively high-percentage method of beating the races.

Under NPP, simply by limiting one’s wagering to the best one or two non-favored entrants in races featuring a negative place or show pool, sharp handicappers can realistically expect to break even or show a slight loss while holding out for the occasional windfall that puts them solidly in the black.

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