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.