17 August 2011

McKinsey Study Misses The Mark On Takeout

The McKinsey and Company report “Driving Sustainable Growth for Thoroughbred Racing and Breeding” totally misses the mark when it comes to figuring out the customer, and figuring out how to grow the customer base. So though not totally worthless, the report is nothing that will save the game, perhaps throw a few band aids on it, but that is about it. And really, there is nothing new there at all, other than some stats that just confirm what most insiders already know.

The report seems to put the horse owner ahead of the customer. Big mistake. The industry shouldn't focus on what is good for the owner, but what is good for the customer (the gambler). The more Horseplayers, the bigger the purses, the more horse owners. That is how it works.

Regarding track takeout:

The report acknowledged that 26% of core bettors consider pari-mutuel takeout a “top two concern,” but fewer than 2% of most fans know about takeout. Thus, the report makes no recommendations on an issue that has boiled over this year, particularly in California.

“We prefer rebates as the method to address the price-sensitive bettor,” Singer said.

When it comes to growth, it really doesn't matter what existing customers like. They aren't the big problem as Pull The Pocket points out. Price sensitive players are already getting rebates for the most part.

If slot players were given a similar survey, about 0% of the core players and casual players alike would state that house take was a major concern. However, it doesn't mean that slots charge a ridiculously high take (it is around 5-8% in most jurisdictions). Slots operate at something called an optimal takeout. A percentage that holds players attention the most so that they will lose the most money in the long run....not short run. A percentage that gives the player the illusion the game is beatable and/or they can get a good deal of enjoyment over time on average to keep their high going, and keep them wanting more after they leave the joint.

Horse racing operates in a way where they take as much money as possible whenever they can. The takeout is so high, that there is no chance to beat the game long term without substantial rebates, and the fact there are virtually no visible winners, makes it near impossible to attract new generations, like poker did.

The study failed to address this, instead focusing on trying to lure players by just teaching them to bet. Silliness. There has to be a reason for a newbie to get involved in the steep learning curve of horse racing handicapping. We need visible winners. We need lower takeouts.

No shocker:

But all major metrics have fallen since 2000, the study notes. Betting handle is down by 37 percent, attendance at tracks is down by 30 percent, starts per horse and race days are both down by 14 percent. If these trends continue, the findings say thoroughbred racing will lose fans at a rate of 4 percent a year.

Every year, the study said, 2 percent of fans die, 5 percent lapse and only 3 percent are newly attracted. If this trend persists, by 2020 the fan base will be only 64 percent of what it was in 2010.

I'll state it again. Horse racing is missing out on a fantastic opportunity right now with the closing of many poker sites in the US. Gamblers are itching for action, but they want to play a game that is at least perceived beatable by some.


Anonymous said...

An very astute analysis of the McKinsey report. Its a wonder that so many top (read well-paid) racing executives fail to address the existing high takeouts. Nor do they even want to experiment with temporary takeout reductions. If they're not careful the tracks they operate will end up like Rideau Carlton. Yesterday I happened to watch HPI.tv and some races from Rideau Carlton, first time in a few years.

To my utter astonishment the win pool for each the 2 races I watched was around $600. That is shockingly minute and clearly is a huge sign how gamblers have abandoned that track. Could this scenario be a harbinger of the future for all tracks that fail to grasp the significance of high takeout.

tankten said...

if you want more gamblers make the lowest odds on a horse 5to1 then rank all others from there. i am no sure what it would do to the purses or to the tracks but i bet it would encourag more gambling signed tankten

railbirdbrad said...

Tankten youve been told before not to use the Nurses Station computer,Now get back to your room its time to take your Meds and put on your straight jacket for the night.

tankten said...

no worries mate you must be a bookies agent maybe you should drop the r from your name and replace it with a j

Anonymous said...

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railbirdbrad said...

Tankten....You can play both parts in the sequel to Dumb and Dumber

Scott said...

who commissioned the report? That will usually tell you who it is designed to favour....