You and nine friends place a friendly wager on something happening. Whatever the situation, you all put $500 on yourselves winning. You have a pool of $5,000. Since this is a friendly wager, there is no takeout, and whoever wins will take the entire $5,000.
Now let's take this same situation, but apply it to horse racing, where there is takeout. You all go to the track, and you each bet $500 on a different horse in this ten horse field. You also happen to be the only people wagering. The pool, again, is $5,000, but this time the track is taking their cut. Let's say the cut is 20%. $1,000 is taken from the pool, leaving $4,000 to go to the winner. This leaves each of the ten horses at a 7-1 price. If the takeout was nothing, like in the friendly wager, each horse goes off at 9-1. If the rake is 10%, each horse goes off at 8-1.
Let's apply this situation to a few different racetracks.
Northlands Park offers the lowest win takeout in North America, at 14.5%. In the 10 horse, $5,000 pool situation, $4,275 is left for the winner. Each horse goes off at 7.55-1. A $2 win bet would return $17.10.
In California, win takeout is 15.43%. This will make for some fun math. After takeout, $4,228.50 is left for the winner. Each horse goes off at 7.457-1. A $2 win bet returns $16.914, but that would be rounded down to $16.90.
In New York, and at Keeneland and Kentucky Downs, win takeout is 16%. After takeout, $4,200 is left for the winner. Each horse goes off at 7.4-1. $2 win bet returns $16.80.
At Churchill, win takeout was raised to 17.5% for the spring meet. After takeout, $4,125 is left for the winner. Each horse goes off at 7.25-1. $2 win bet returns $16.50.
Finally, we'll look at Turf Paradise. They're a popular weekday track, and they feature North America's highest win takeout, 20.75%. After takeout, $3,962.50 is left for the winner. Each horse goes off at 6.925-1. A $2 win bet returns $15.85. I'm not sure if that would be rounded up or down.
Just to throw in an Ontario Harness comparison, Western Fair is our most popular B-track. Their win takeout is 21.4%. Grand River, on the other hand, takes 16.95%. At Western Fair, a $2 win bet in this situation returns $15.70. At Grand River, the $2 win bet pays $16.60.
Now of course, these differences seem like nothing, but you need to remember that an extra $1 does make a difference to a $2 bettor. If you're a $20 bettor, your $20 win bet in this situation pays $6 more at Northlands than at Churchill. That extra $6 allows that bettor to invest a bit more into an exotic wager later in the day. At the very least, he can buy lunch.
Lower takeout leads to higher payoffs. There's no way around it. If you're a bettor, your job is to find value. A big part of finding value is the part that everyone understands, finding horses offering odds higher than they should be offering, overlays. However, betting into pools that will return more money to the player is another important part in finding value.
Don't bet into a high rake pool when you can get better value elsewhere.