5 June 2011

Handle Continues To Fall, Where Is The Bottom?

Handle was down another 7.8% in May compared to 2010. Racing dates were down, races were down, and so were purses. So much for less is more.

California racing is responsible for a good chunk of the drop, as the powers that be there continue to hold out against rescinding that idiotic takeout hike that occurred at the beginning of the year. Exotic wagers had an additional 2-3% takeout increase tacked on. Taking money faster from a dying customer base is hardly a way to grow a business.

Sure, the economy isn't helping, but horse racing's handle was dropping well before the recession hit, in fact, when the economy was growing, handle was on the downswing too. At this rate, 2011 handle will be close to 1995 levels. Absolutely disgusting since horse racing is probably the best gambling game out there (not taking takeout into consideration) for the thinking person, and taking into account that it has become a whole lot easier to wager on horses from anywhere over the last 16 years.

Even the heat on online poker sites that were ramped up again in May didn't help horse racing handle. But then again, the main reason poker players don't play horses is because of the ridiculous takeout rates which makes it impossible to beat the game in the long run (if you don't get rebates, and even with rebates, it is near impossible to beat the game, though there is a lot more hope).

In 1990, handle for the US and Canada combined was $10.2 billion. Inflation since then is up 75%. This means that if horse racing was keeping pace with inflation there should be $18 billion wagered. Population rates have increased around 20% since then, so the real number should be closer to $21 billion. It is only slightly higher than half that.

What happened? On the positive side, internet and phone wagering has made it easy to play many tracks a day. That definitely helps handle immensely. However, by taking gamblers away from the track, it takes away growth. Most Horseplayers alive today were weaned at the track by parents, friends, and/or other relatives. Those days are gone. Focusing on getting those days back will be a waste of energy as technology improvements and a day at the racetrack just don't jive anymore.

Another bad consequence to being able to wager on any race at any time is that the gambler just doesn't last anymore. Bankroll breaks become more frequent, and new hobbies take the place of horse racing.

Too many high takeout wagers have been added in recent years, taking money faster from Horseplayers. There are triactors and superfectas in every race these days, and with that are takeouts that are on the much higher end. Today's blended takeout rate is higher than 21% compared with a blend rate below 20% in the early 90's. One or two percent coupled with the ability to play many more tracks just kills the Horseplayer, who was a lot more likely to end the day with at least some money in the 90's giving them incentive to play the next day.

Of course, the biggest killer to handle has been alternative forms of gambling. Slots and lotteries have grown substantially since 1990 taking away lots of the dummy money that made it easier for Horseplayers who had half a clue to last a lot longer. The dummy players were also responsible for some growth, as they would bring out friends, and some would become regular Horseplayers over time. Now these potential newbies go play slots with their addicted friends or family members instead.

Low takeout games like sports betting and poker have also taken out a lot of Horseplayers, but more importantly, potential Horseplayers, who could have easily replaced the Horseplayers who have died since 1990. The main attraction to long term gamblers who are thinkers is that they get involved in a game that is possibly beatable in the long run. Both poker and sports betting is perceived as such. Horse racing, no chance. There is no reason to get involved in racing's learning curve for a newbie.

With internet poker on the outs (at least in the USA) and rebates becoming more readily available to the majority of Americans, one would figure that we should be at the bottom, but it just isn't happening.

The takeout increase in California has hurt the chance of finding a bottom just yet, as they do a significant amount of handle per year, and even though most Horseplayers aren't cognizant of takeout when wagering, they get back less and become disenchanted a lot quicker. They wind up devoting less time to the game.

Also, we are seeing signal fees on the increase. This is hurting the rebate player who makes up a lot of the handle.

It is a misconception that most rebate players win money. Most lose, they just last longer than if they didn't receive a rebate, though they have a greater incentive to become better and possibly win money in the long run. An increase in signal fees is like a takeout hike to rebate players. They end up with less to churn, and that is bad for handle. Value players have less plays as well going into a race. Again, handle suffers.

It appears that signal fees are now going in the opposite direction of optimal levels. That and a slightly higher collective blended takeout rate are probably responsible for the decrease in handle we've seen over the past year or so. Both work against having visible long term winners, the one thing racing desperately needs if it ever going to grow again.

Tracks closing or cutting days doesn't help at all. If you are a player, there are still tons of ways to erode your bankroll every day. Less racing means less growth because there are less people being exposed to live racing (not that this is a major source of growth these days, everything helps though).

Looks like the HANA Boycott of California racing is still on.
It is disheartening to see that California Fairs, which start up in a couple of weeks, have decided to increase takeout (2% on exactors and doubles, 3% on all other wagers). Despite all the empirical evidence against a takeout hike, it seems California is just a hopeless jurisdiction for Horseplayers.

Fort Erie handle is still terrible. Looks worse than last year. Reminds me of a deer in the headlights. Sure, they are working their butts off trying to get people to the track, but they have their head in the sand when it comes to what it takes to get gamblers to play the track. A 26% takeout on exactors and doubles turns off cognizant players (a lot more players are aware of takeout today than ever before) all across North America. It also creates less value for value players with lower probable payoffs. And when it comes to the live players Fort Erie attracts, taking their money faster just isn't the way to go. More people leave broke and if they are broke, they are a lot less likely to return.

Fort Erie needs to drop takeout rates at least on doubles and exactors, and they should also introduce a $1 Pick 5 that can be carried over.

The Plate Trial and The Oaks At Woodbine

Today we'll find out if I am right and Bears Chill is the best 3 year old right now in North America. The only 3 year old in his ball park this year is the injured Uncle Mo. Lets see what kind of rating he can get going around two turns. To complete the exactor I like long shot Sandy Gully. I'm hoping they don't kill each other, and it would be nice if it isn't a closer's track. Bowman's Causeway looks to be bred for the polytrack, but may need one off his last disastrous performance.

Can a recent $20,000 claim win the Oaks. Maybe. I like Spooky's Kitten today. She should be closer to the lead this time out, and may have needed the last one. Inglorious may bounce so she is worth betting against. Marketing Mix could improve enough to be right there today, and might find the distance to her liking.

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