Getting A Handle On Handle Drops

Total handle was down a whopping 12.3% in August, as horse racing continues with a deer in the headlights approach.

Why is this happening? Let me try to cover all the bases.

First the negatives.

Net Loss Of Horseplayers

According to the McKinsey Report "2 percent of fans die, 5 percent lapse and only 3 percent are newly attracted." Less players means less handle unless horse racing is attracting big players to overcome the loss of smaller players. It is not. In fact, horse racing is more likely losing big players while gaining small players. There is no reason for big gamblers to entangle themselves in horse racing's steep learning curve, as the perception that the game can be beaten in the long term is not there.

Less Racing Days

Less racing days doesn't mean that Horseplayers will bet more to make up for those days on existing cards, though it doesn't take long for a multi-race track player to burn themselves out no matter how many days are cut.
Less racing, kills the continuation, especially for the live one track player. They go less, and bet less.
Less racing generally means less horses, and less owners. Owners bring friends to the track. Less owners means less potential players both today and in the future.

The Hurricane and One Less Sunday

In August Hurricane Irene caused a few key weekend cancellations. Weekend handles are generally much higher than weekday handles, especially for A and B tracks. There was one less Sunday this year as well, and that was replaced with a Wednesday, which is a weak betting day.

A Focus On Pick 5's and 6's

Low takeout bets are always good, but some are much better than others when it comes to keeping players in the game and creating more churn and handle. Some racetracks have begun promoting low takeout pick 5's lately. It works out as a gimmick, and just a way to get a player to play that track as opposed to another track with at least some betting funds.
The problem is that these wagers mostly produce fewer winners, and very little churn as payoffs are large enough for winners to take some money off the table, at least temporarily.
And there is also the tax consequences of hitting large payoffs in the US. Withholding takes quite a lot of money out of the churn circulation as well.
If these low takeout gimmick pick 5's were attracting new money, it would be a good thing, but evidence seems to indicate that it is just cannibalizing other pools.
For the sake of the game's future, tracks should focus on low takeout WPS, exactor and double bets, not lottery type of wagers.

California's Takeout Hike

Old news: California raised takeout on exactors, quinellas and doubles 2%, and all other exotics 3% in January. Since then, they've seen a substantial drop in handle. Pretty simple, players have less money to churn.
However, not only do those who play California tracks have less money than last year to churn back on California tracks, they have less money to churn back on any track.
This is cannibalization of the worse kind. The less players get back, the more likely they are to leave the game or in the very least come back and play so quickly. When they do take their leaves, the more likely they are to find a new hobby. Also, the less likely they are to expose friends or family to horse racing.

More Exotics In More Races

Nowadays there seems to be a superfecta in every race at every track. More Pick 3's, Pick 4's, and Pick 5's, more High Fives too. The one thing most of these bets have in common is that they are offered at a higher collective takeout than doubles and exactors in most jurisdictions. Again, this is cannibalization, and current Horseplayers are losing at a faster rate than ever before. It doesn't matter if the super has a dime minimum bet. If the average bettor makes $20 worth of superfecta bets a day at a 25% takeout, they will go broke faster than if they wagered $20 on WPS or exactors, no matter the minimum.

The Economy

The USA economy sucks right now, but it was arguably worse a year ago. Meanwhile, things are flying in the Macau casinos.

Higher Signal Fees

This has a major affect on rebate players (the fastest growing segment as far as Horseplayers is concerned). The higher the signal fee, the higher the net takeout is for those who get rebates, including the biggest Horseplayers on this planet. Signal fees have been inching up the past two years. Jurisdictions like California increased significantly when the takeout hike occurred.
The effect of this is that there is less value, and therefore less plays (less handle) made by the most sensitive Horseplayers, which include the biggest bettors.
One offshoot is that many rebate players have shifted their action to tracks that have either kept their signal fees the same or even dropped them slightly, but overall, I would guesstimate that the shift doesn't exactly match the monies not wagered at California tracks, for example.


Now the positives, though the impact of these two things seem next to negligible at this time:

More Horseplayers Are Discovering Rebates

More Horseplayers are getting benefits from ADWs and Track ADWs (like HPI) experimenting with rebates. And many are discovering that in most jurisdictions in the USA (at least two thirds), player rewards can be found, even for not so large players.
Horseplayers getting rebates keeps them in the game longer, and gives them hope the game is game is beatable (which causes new money, money that wouldn't have been allocated to horse race betting if rebates didn't exist, as the more a player stays in action, the more they don't have other hobbies). This, of course, means higher handle. Unfortunately, the negative factors are winning the war right now.

Poker Players Itching For Action

Horse racing has been slaughtered by gambling competition. Mostly slots, but horse racing has lost many a potential customer to skilled games where takeout or rake is much lower enabling a few players to be actual visible long term winners. The US government has come down very hard on online poker of late making it very hard to be an online poker player.
There is a slew of gamblers (many poker players are price sensitive) now itching for action. However, most want a game which has the possibility of winning in the long term. Many will get their feet wet in sports betting, some will try horse racing.
The ones that do a little homework will discover ADWs that give decent rewards back, and they are the ones most likely to become a new wave of Horseplayer, something horse racing desperately needs.


I know I left out field size and purses and handle generators. True, that races with more horses generally get more handle, however, this is strictly a cannibalization effect. Existing players only have so much to lose over mid term stretches. When it comes down to it, big fields will attract betting that may have gone to another track with smaller fields, but it doesn't attract new money, and in fact, again, larger payoffs cause the tax man to get involved sometimes, so churn money is taken off the table.
As for purses, studies have shown that if you double purses, handle only rises around 6%. This is negligible in the scheme of things, though higher purses can potentially mean more owners and more exposure from newbies (friends of the owners).