Will Paddy Power & Betfair’s SP Move Change Racing Betting?
Race goers pictured during Betfair Chase Day at Haydock (Image © PA)
The decision of Paddy Power and Betfair Sportsbook to move away from the norm and continue trading their own prices instead of the industry standard ‘show’ prices in the lead up to races in Great Britain and Ireland appears to have been greeted with a general shrugging of the shoulders from the betting industry.
Of course, this isn’t the first time a bookmaker has tried to change the SP model, with Blue Square – who were sold to Betfair by The Rank Group in 2013 but are now defunct – attempting, rather unsuccessfully, to break the mould in 2006.
But an SP system that was first introduced to horse racing in 1874 and has barely changed since betting shops were legalised in 1961, has started to creek under the pressure of a digital revolution.
Why would anyone place a bet without knowing what they stand to get back? On the face of it, it sounds like a pretty strange concept but the reality is the majority of horse racing bets struck in off-course betting shops are settled at ‘starting price’.
But change is coming. All the trends indicate that more and more punters are moving online thanks to the lure of price boosts and BOG (Best Odds Guaranteed), so is there a thirst for modernisation of the SP system among the bookmaking fraternity? The news from Paddy Power and Betfair Sportsbook suggests there is, in some quarters at least.
Bookmakers have continually moaned about the SP system, complaining that, unlike any ‘normal’ business, it means that the pricing structure is out of their hands.
More thoughtful operators share that frustration but feel that, on balance, a system that is seen as independent is preferable to one of their own making, which could be dismissed as a stitch-up.
However, the Starting Price regulatory Commission (SPRC), appears powerless to prevent extortionate overrounds, the most infamous of which came in 2015 when the SP of the 39 runners in that year’s Grand National represented an overround of 165%, so things are hardly hunky dory in the SP world.
Betfair’s Influence on Racing
The arrival of Betfair has changed everything. Even at many of the bigger meetings – perhaps all bar Royal Ascot and the Cheltenham Festival – the pre-race market on Betfair is many times bigger and more active than its on-course counterpart.
The market at the track is now so weak that it is much more easily influenced by a few hundred pounds, particularly in the minute or so before the off.
The Exchange market is proving the single biggest influence on on-course prices, with layers on the track simply trading the exchange price plus their own margin – so a horse trading at 2.74 on the Betfair Exchange would, more often than not, be no bigger than 6/4 (2.5) on track.
This particular modus operandi means that the on-course layer can easily lay-off any unwanted liability back into the exchange market.
It has always been easy to leap to conclusions when an SP is significantly shorter than the last show, but Betfair's own robust starting price is pointing up so many anomalies that what might once have been dismissed as blips are beginning to form a pattern.
It is becoming increasingly clear that if the SP system is going to survive, a way has to be found to incorporate the Betfair SP given the exchange market is in nearly all cases away from the big meetings a good deal sturdier than it is on course.
Will it Catch On Elsewhere?
So, there are clearly areas where the current SP system can be improved. But does the sport even need such a mechanism? I’m not convinced.
There is no SP option when placing a bet on Liverpool to beat Manchester United or Tiger Woods to win The Open, just the certainty of knowing what price you are taking.
It’s not as if punters aren’t able to shop around for the best prices nowadays. Sites like Bookmakers.co.uk are invaluable tools for those that want to ensure they are getting the best price, and mobile versions will become even more valuable should more individual layers switch to trading their own prices rather than conform to the ‘show’ prices around 10 minutes before each race.
So, as betting shops continue to modernise, edging their way towards a real-life version of the online model where BOG is available on every British and Irish horse race, then the reliance on SP bets will organically dwindle and ultimately disappear.
At which point, a ‘starting price’ is only really required for settlement of BOG bets.
The question now is, will more individual organisations want to break away and police their own prices or commit to bringing the outdated current system into the 21st century?
If they do, supply and demand dictates that the ordinary punter SHOULD be the main beneficiary as the layers compete for their custom by offering competitive or even ‘industry best’ starting prices of their own.
That’s the theory, but as we all know, capitalism isn’t bombproof.
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