17 November 2010

Ray Paulick, C'mon Man

I like The Paulick Report. Great source for news stories on horse racing. They also allow comments on many stories and editorials over there. It opens the door for lots of fact from informed readers, innuendos, debate, etc.

Over the past few months, it appears that Ray Paulick has drank the CHRB Kool-Aid and has fallen for all the bs coming from them when it comes to the takeout hike that is going to happen at all major thoroughbred tracks in California on December 26th.

There is some question whether his judgment is being influenced because of the fact that he is getting advertising dollars from California racing groups. I honestly don't know. I actually hope that is the case, for Paulick's sake. I'd hate to think he was either that stupid or gullible to believe a takeout hike will help horse racing in California.

Anyway, Paulick has hit a peak when it comes to either selling out or just plain stupidity with his post California's Push For Purses.

In the article he mentions "cost of putting on the show." Sorry, but the cost of putting on the show has absolutely no connection with what takeout should be. The only thing that matters with regard to takeout is the optimum takeout percentage (the percentage where tracks and horsemen receive the most money collectively from bettors).

He compares horse racing to blackjack when it comes to cost of putting on the show. Last I heard, it costs millions a year to operate a casino. But casino operator know if they made a push go to the house in blackjack, the blackjack tables would be empty. They also know is they raise the hold on slots from 7% to 12%, their bottom line would suffer in a big way.

The point that most tracks have higher takeout rates even after this hike is just bad propaganda. Any takeout hike anywhere helps kill the game. As you move away from optimum takeout, this is a gimme. There is no good rationalization for a takeout hike.

He also writes that "to my knowledge no studies have proven the point that reducing the cost of a bet will increase the revenue to tracks and purses."

Either he has a short memory or he doesn't bother reading many of the comments on his site. I know for a fact that the Cummings Report has been linked there on many occasions.

As Caroline Betts states in the comment section: Google Scholar is your friend. There have been many studies regarding track takeout and optimum revenue.

Two things are certain regarding these studies. Racing has ignored all these studies. Racing has never tried to find out what the optimum takeout really is (all studies conclude that it is much lower than 20%).

Again, I don't blame the horsemen here (though they aren't looking out for the future of the industry). They are now getting a higher percentage of the pie. For the life of me, I can't see how the track owners allowed it to happen. Again, if handle drops by around 15%, horsemen will still get the same money they did last year (obviously they are hoping handle will at least stay stagnant), but the track owners will absorb the total loss. On any extra handle loss over 15%, it will be split between horsemen and tracks.

The track owners would have been best advised to just change the split to December 26th new split, and even lower overall takeout, or at least keep takeout rates the same. 

This takeout hike has massive failure written all over it. Bigger purses, possible bigger fields, and a dirt track will not save the day.

In the comment section, well known handicapper/author Barry Meadow chimed in:

There are two types of bettors–those who care very much about the takeout (e.g., professional gamblers, big bettors, rebate players, etc.) and those who don’t.

An increase hurts both. A professional works off a tiny margin; if he bets $1 million to earn $50,000 after rebates (5%), an increase of just 2% in the takeout can cut his profits nearly in half. At that point, he may feel there is no reason to continue betting on that track. Handle is unlikely to increase after a takeout rise, and every dip in handle forces him to cut his bets; already, it’s virtually impossible to bet any serious money on a daily double in northern California, which on November 10 featured a live crowd at Golden Gate of exactly 753 patrons.

The casual fan who knows little or nothing about takeout is affected as well, since he has less money in his pocket. He may not notice it after ten races, but after 500, the effect kicks in, whether he realizes it or not. He cannot contribute to churn because he has gone broke faster. If this doesn’t seem realistic, imagine a 90% takeout and you will quickly get the idea.

What most people may not realize is that racing handle has been artificially propped up for years:
In the 1980’s, the advent of cash-sell machines resulted in handle jumps since patrons didn’t have to run to five different lines to make and cash their bets.
In the 1990’s, simulcasting exploded, so fans who wanted to bet Santa Anita could do so from 400 locations instead of from one, again resulting in handle gains.
As 2000 dawned, rebate houses made it possible for big players to turn losses into profits, and begat the high-powered computer groups who dominate rebate play today. (Some track executives complained of “Handle up, purses down,” but failed to understand that without the hundreds of millions of dollars bet through rebate houses, they would have had “Handle down, purses down” instead.)

Some people think that exchange wagering will be the next big thing to save racing’s handle, but exchange betting, while it will increase the action, won’t prove a panacea. It’s just for win betting, you need a computer (who is going to lug a computer to a racetrack?), and if the liquidity isn’t high enough right from the start, the whole enterprise may be reduced to just a sidelight.

Certainly, it makes little sense to raise the price of a product during an economic downturn, particularly when it’s been shown that fewer people each year care about the product. Yes, it’s nice that we have films like Sea Biscuit or Secretariat, and Zenyatta thrilled us all, but none of this has much to do with the overall trend of the game, which is on a straight downhill slide. The comments of the CHRB members show how out of touch they are with the realities of the game (Racing as entertainment? So why do networks pay the football and basketball and baseball leagues millions to televise their games, yet racing has to shell out millions to get its own product on TV?)

The old days of huge crowds and huge handles are long gone, gone the way of the telegraph and the stagecoach–and they’re never coming back. Not with rock concerts (the youngsters who attend these have no time, no money, and no interest in betting thoroughbreds). Not with social media (it’s like having a huge mailing list filled with non-prospects). Not with catchy slogans (how many serious bettors came from ”Go Baby Go”?). Not with T-shirt giveaways or mugs.

We’d all like a minuscule takeout, but there are costs to run the show. But that doesn’t mean the customers have to absorb all the costs. The talk of a players’ boycott, whether it materializes or not, is the customers’ visceral response to being asked, time and again, to pay a higher price for a lesser product. The customers are simply fed up. And no industry can survive with fed-up customers.

This triggered a response from yours truly:

Barry, that was an excellent post, but I will take exception to your comment about “cost to run the show.” The cost to run the show is separate from what would be the optimum takeout (the takeout which creates the biggest revenue for the tracks and horsemen). If that takeout number is 30%, then takeout should be 30%. However, we know it isn’t for the reasons you mentioned. You can’t have optimum takeout when there is money that could be on the table that from former horseplayers, or potential horseplayers that won’t go near the game because they know it isn’t beatable.

Takeout needs to be reduced because players who last longer are great for growth. Their family and friends are almost forced to see what the fascination is all about. Some may start going. The opposite happens when players don’t last as long. Letting players last longer opens up the possibility for new money for purses and tracks, from new players being exposed to the game.

Secondly, not all rebate players make money, far from it. But they all last longer, and most believe that with rebates, if they start improving on their skill and have a few more lucky breaks, that they can beat the game. This is the way it was back in the 60’s and 70’s for many who played horses every day (of course, without rebates). Especially because there were not very many exotics (collective takeout was much lower), there was no intertrack betting…you had 8 races to play, and there was a good likelihood that you would leave with enough money to keep your interest so that you couldn’t wait to come back the next day that was free in your calendar. There was also lots of dummy money in the pool (money which is now gone to casinos and lotteries) Those using speed figures back then were in the same boat as many rebate players today…some were marginal winners, and some were marginal losers…but there was a feeling that the game could be beat.
That feeling is gone today for almost any horseplayer who doesn’t get rebates or who isn’t able to bet on an exchange. With high takeout exotics every race, which temp just about everyone, and the ability to play 4-15 cards a day, it doesn’t take long before any horseplayer is completely discouraged.
It was a shame that horse racing couldn’t pick up new players thanks to the movie Secretariat and the build up to Zenyatta’s last race. The reason why is simple. Horse racing is about gambling, and the only way to get the masses interested in gambling is to have visible winners.
You can’t have them in today’s high takeout environment. It is impossible.
Poker gained momentum with the movie Rounders. Why? Poker is gambling, and it is possible to beat the game. Even if very few do it in a big way, they are in our face. This attracts new players galore. The fact that if you can have a beatable game that someone with a little study and a fairly inexpensive learning curve, can move from their parent’s basement to become a King. This is what gambling is all about. This is how horse racing needs to be marketed. But we need lower takeouts to begin with, so players can last while they are learning, and winning players need to have the light shone on them.

Racing can do it right now with those who make money at rebate shops, but that is pretty much a secret society, unlike the poker stars. Racing won’t embrace these players because it is an admission that takeout is way too high, and that the only way to win today or even have a chance is to play with a substantial rebate.

But doing what California is doing is just putting another nail in the coffin when it comes to growing horse racing. Shame on California, and shame on the Paulick Report for supporting their action in any way shape or form.

I do give Ray Paulick credit for allowing comments on his ridiculous post and also linking to Pull The Pocket's post Has Paulick Jumped The Shark

Not sure if it was done out of fairness, guilt/remorse, fear of losing readership, or maybe he just likes being compared to The Fonz.

Where do I stand on the California takeout hike? I think my comment over at Pull The Pocket sums it up:

I proudly haven't wagered on any California race since the bill was signed.

When a California race is on TV, I view it like a commercial, I either get up to grab a snack, handicap a race at a venue I do play, get up to take a wizz, or, if my wife is talking to me at the time of the race, I actually listen to what she is saying to me.


FLC said...

The first thing all North American racetracks need to do is to go to a peer to peer trading exchange, much like Tradesports.com used to be, or how BetFair.com currently is. You get the exact odds and at the best available market price.

If the above happens, there is no need for my second point, which is breakage. In a day of vouchers, why is breakage necessary? You should get exact payout, to the penny. When you cash in a voucher, take breakage at that point, if at all.

<a href="http://www.ponybettor.com>PonyBettor.com</a>

Anonymous said...

Ten years ago or so, I tried to explain to Paulick about takeout. He didn't get it then -- and he doesn't get it now.

Clearly, thousands of serious horseplayers have since left for gambling opportunities where the bettor has a better chance to win.

California once recognized that takeout was very important to its success. New decision makers, aided by Paulick-types ( but ignoring advice of seasoned gamblers who know when the breaking point has arrived )
naively and shortsightedly raise takeout with a band-aid in a vain effort to stop a hemorrhage.

A 25% increase in purses in the long run will be at the cost of losing the battle for suvival.

Anonymous said...

Ray Paulick is a big Liberal,a big Huffington post fan.So,It only makes sense that he would be in favor of a tax/takeout increase.

markinsac said...

Anonymous claims the takeout increase is a "big liberal" idea. Well who do you think thought it up? Surely you don't think liberals run horse racing. Most industry leaders are Republicans who believe in lower taxes, except for the poor souls they call "customers".