16 July 2008

Educating The Internet About The Value Of Lower Track Takeouts

Someone picked up a post I made over at Pace Advantage and started a thread over at the Del Mar Forums. Here is the original unedited post:

Think of it as a pie: the big picture

Racing makes money from what people lose. Forget what the takeout is for a second.
Outside of slot revenues,total money that goes towards purses, track owners and ADWs is what people lose.

Collectively, there is only so much money current horse players will lose per year on betting horses.

A lot has to do with competition, and what gives a gambler more bang for his buck. A gambler who wants to make decisions (non slot, non lottery player) may choose online poker or betting exchanges or sports betting over horse racing simply because they know they will last longer, and with that comes the idea that they might be able to beat the game if they get lucky enough or do more research on how to play properly.
Most gamblers are not price sensitive, but as Chick states, they realize where the seem to have no chance versus where they might have a chance, and they tend to avoid games where they lose faster.

Of course, horse racing with an average takeout of 18-21% will cause players to lose faster.

And at those rates, yes, lotteries with large million dollar jackpots and 50% takeouts are more attractive to many over a 25% takeout on a triactor where the average $1 payout is $400-500.

The only chance to grow the game in light of all the competition, is to lower the takeout. I say across the board, but rebates are acceptable for now.
Lowering takeout won't cost the tracks any money that they make over the long run from collective players, but it could bring new players in, who will add to the amount lost by players, which is good for the tracks, horsemsen, and ADWs.
All that will happen is that most players will be able to last longer, whether they realize it or not as to why, they will be more inclined to bet more races, and as more time is spent by one handicapper in the family, chances are family members and friends will be forced to get involved to some degree, much like it was when horse racing was a monopoly.

The buzz created by winners or even those who come close to breaking even will create more players as well as word goes around that the game is now beatable if you do enough homework and are lucky enough.
Most of those people who perceive they are breaking even will most likely be losing just as much or perhaps a little less over a long period, their ROI though will go down enough to make it appear that they are close to winning. They will just be betting a lot more and probably making bigger bets.

And the odd person that wins, will be great for the game creating a lot more players. They are the best advertising the game could have regardless if they took away a small amount of the pie money. The pie will grow big time thanks to them, unless they are quiet about it.....like that would ever happen.

Check out the forum responses. I had to register there to put a few clueless horsemen (and possibly racing execs) in their place.

I also started a thread over at Pace Advantage last week while the Pick 7 pool at Woodbine was growing (not by much):

Woodbine Is Really Going Down The Toilet

If it wasn't for slots, the racing execs there would be lining up for jobs at McDonalds.

Here is what I wrote on Jen Morrison's Blog this morning (editor's note: it was last week):

A $40,000 carryover going into last night. Very little betting competition, and they could only add another $15,000 (before payouts and takeout)????
Woodbine only did $1.3 million in handle last night. Less than $2 million on Sunday.
Something is broken.
When a government wants to stimulate the economy what do they do? They lower interest rates in most cases.
Seems Woodbine has sucked their non growing fan base dry and they are unable to attract new bettors because it is impossible for people to win because of extraordinarily high takeouts. No winners equals no buzz.

******************************************
Today they did just under 1.4 million in handle, and they added another $7,000 to the Pick 7 Pool for tomorrow(probably meaning that only around 12,000 was bet today on it).

A $50,000 carryover at Santa Anita would generate probably an additional $100,000 or $150k added to the pool (I'm guessing).

Fort Erie did over $1 million in handle for Monday and Tuesday and there is an allowance race at Woodbine on Saturday that is almost equal to what Fort Erie purses pay out in a day.


Interesting feedback from a couple of former Woodbine regulars on that thread:

Times have changed
WO is my home turf. I have spent more time there
than with my wife of 29 years. I am and always will
consider myself a horseplayer, but
I have pulled back the time/money i devote to
horseracing by 75% and WO is almost off my radar.
Yes the facility is excellent and i am occasionally overcome
by nostalgia and make the trip out to the track.
The racing surface was the final straw for me and
any attention i do pay is to the Turf racing.
Poker has become the focus of my dollars/time.
I can play from anywhere, anytime. I can risk the
same dollars and get into great tournaments with
LARGE payouts. I play tournaments exclusively.
Yes is enjoy poker, but i love racing. I am greatly
disappointed in the industry, they have made it
impossible for a junky like me to continue with
my passion.
I have 2 sons in there 20's, neither
of which goes to the track. They both play poker
online. We share that interest and enjoy discussing
and playing. I used to look forward to passing my
handicapping knowledge on to them, explaining
breeding and spending a day running from the paddock to the post parade.
I made a decision years ago not to involve them in
a dieing game. It pains me greatly, but i am not
in control of the direction this industry is going.
I am a mature adult and i realise that everything
changes and nothing is forever.
I hoped that racing was.As the opening of
Saratoga draws closer i wonder if this will be yet
another year of decline in this once CLASSIC meet.
I have thought about taking the boys before this
experience disappears completely, but i just can't
muster the enthusiasm. How sad!
Michael Gotkin
Life long horseplayer


Ponyplayerdotca also chimed in:

And they are building it....
Money wrote:

"That is exactly what the Racinos want you to do. Forget the horse racing, play poker and pull on those slots. The race tracks & local governments don't make enough money on racing. They would love for the public to lose all interest, so that they can tear down the tracks and build hotels, shopping malls, casinos and high priced condos."

===

And that's exactly what the Willmot bluebloods are doing here at Woodbine. They're constructing a mini-community called "WOODBINE LIVE!". They're erecting a shopping mall complete with restaurants, spas, performing centres, probably another slots casino, condos, etc. (Similar to Mountaineer and other tracks that have gone that way.)

Once that is built, that will become their prime money maker operation. The track's focus will be even more greatly diminished in the eyes of them, and the public.

Like others, I stopped watching/caring about Woodbine when they put the fake track in. For an outfit so steeped in tradition and memories, they threw that all away when they changed the track.

And given how much maintenance costs to maintain synthetic tracks (after originally promising that maintenence costs would be next to nothing), it seems to me it would have been just as easy to have left the dirt there in the first place.

Never have I encountered an organization so far out of touch from their core audience as I have with those running WEG.


The new HANA (Horseplayers Association of North America) website has a repost called Opinion: Low Takeouts Are Our Friend It is well worth reading.

Horse In Ellis Park Race Wonders Where Is Mary Poppins?


Woodbine Bias Report Inside posts and speed did better at Woodbine last week than it has most of the year in sprint races. Trainer Terry Jordan is hot. Analisa Delmas continues to struggle. Is Josie Carroll really 4 for 84 at Woodbine this year? Well at least we know she doesn't use EPO/DPO or snail venom:)

MORE NEWS

Ellis Park To Memorialize Luke Kruytbosch before the first race today

FORT ERIE TIDBITS

Jockey agent and former jockey, Paul "The Squirrel" Souter, has picked up the task of booking mounts for Chris Griffith and Kris Robinson at Fort Erie. Dave O'Connor, their former agent, left on a bang as Robinson recorded four wins at the Fort on Monday.
So far, O'Connor officially only has the book for Constant Montpellier (a correction from my last post).
Apprentice jockey, Melanie Pinto, has moved her tack to Fort Erie and has top agent Scott Lane booking mounts for her.
Equispace, a blogger from New York state writes about his Prince Of Wales day experience at the Fort.


Beverly Smith of the Globe and Mail writes "Horse Racing Changes Could Have Devastating Consequences"

Woodbine chief vizuzu David Willmot on the Sadinsky Report:
"The whole basis of the funding and the financing is so fundamentally flawed, you're not going to have much of a racing and breeding industry if you don't have any racetracks. … There almost seemed to be a presumption that there will just continue to be racetracks."

If anyone knows flawed business plans, it is Willmot.

Ontario Professor Wants Internet Gambling In Canada Regulated

Quarantine at Charles Town Pending Test Results

For lots of interesting stories check out the Paulick Report

8 comments:

railbirdbraf said...

Why is it that in every big race,any stakes at Woodbine,or the princ of wales at fort erie,Both announcers scream like they are falling out of the tower.its awful,just listen to Daryl Wells sr,he never got too excited ,he was the greatest,even jr.followed his actions,but Loiselle and Kyte,needto take a pill,pay attention boys ,its about the sport not about you.

RAILBIRDBRAD said...

The total domination of Woodbine runners,winning at the fort this year must have to do with more than class relief.
There is one vet at te Fort and plenty at Woodbine,clearly some trainer's at the Fort are forever missing there vet,Dr.Victoria Banks, she left town to head for Woodbine this year.

railbirdbrad said...

When a trainer is introduced to possible client as an owner,he should reach out his hand and say 'you are going to lose $20000 this year.if you can afford it ,im your'e man.

Steve Zorn said...

Railbirdbrad is completely right about the way to make the realities of owning a race horse clear to prospective owners. If anyone wants to check the figures, I've just posted a pretty comprehensive analysis of what it costs to own a horse in NY on my own TBA blog, The Business of Racing.

As for takeout rates, yes, lower takeout should mean more volume, but in practice it hasn't worked that way. Lots of experiments with reducing takeout have been done over the past decade or so, with, at best, inconclusive results. I think the problems are(1) that the average on-track or OTB bettor doesn't have a clue about gambling math and (2) that the "whales." who account for a very large fraction of total handle, are already getting substantial rebates, which means lower effective takeout, through their ADWs or casino sites. As long as the venues where the whales bet can make a percent or two, passing on the balance to their favored bettors in the form of rebates, those bettors, who do care about takeout rates, won't be affected.

Which brings up the real challenge of the effort by horsemen to get a fairer split of simulcast revenue. If the takeout were split, one-third each to purses, the sending track, and the place where the bet was made, there would be only 6% or so available for rebates to the whales. Then, the takeout rates might begin to make a meaningful difference.

Cangamble said...

Steve, I made a post on how much it costs to own a horse at Woodbine and Fort Erie. Similar to yours.

As for takeout experiments, I've outline why they failed in the Del Mar Forum. Check it.

As for the whales, etc. That really has nothing to do with growing the game. They are just taking advantage of a very bad set up.

Free Bet said...

free bet

im tired of these types of races, they are all the same....

Richard R said...

Short term reductions in takeout and single-pool reductions (as in Pick4) are marketing gimmicks and lack the level of commitment that will draw players from other venues. Add to that the often poor product (short fields, low-level claimers, stumblebum maiden-claimers)and the issue is no longer about takeout levels.

Combine a good product with lower takeout and you will see a winner and you will see continued growth in handle and popularity. Keeneland and Tampa Bay Downs are two good examples.

However, there is truth to the idea that many horseplayers don't have a clue about what the takeout levels are at the tracks that they play and the sad thing is that they don't know why it's important to know that!

railbirdbrad said...

F.Y.I. did you know that the owner of Selective Shopper ,#2 in the first race on friday at woodbine is owned by the son of the owner which lost John Henry in a $20.000 claiming race,talk about taking an edge.....