2 July 2012

Statistics Point To A Dying Game That Needs To Change

NYRA's Oversight Board Member Richard Aurelio recently stated "The sport is dying. Every time you look at the obituary page you’re losing a racing fan.” This made DRF's Mike Watchmaker very mad.

Though Watchmaker brings up good points, like the stands have always been full of older people, which, because of the lack of younger people in the crowd, leads to the false conclusion that when the older players die, it is over for horse racing. The reason this wasn't true in the past is that 45 year olds and up have more disposable cash and more time to finally embrace the game that hooked them when they were younger.

Watchmaker doesn't address why things might be different this time around: A much smaller amount of the new 45 year olds today were bitten by the race track bug at an earlier age, and going forward the percentages will even be smaller.

A brief history is needed to explain this. Back in the 60's, horse racing was mainstream, many sitcoms on TV had at least one episode devoted to a racetrack theme. Outside of Vegas, it was the only game in town. You had to go to the track, or by the early 70's an OTB, to place a bet (except for those who played with bookies, but even these players went to the track often). The stands were packed, not only with 45 plusers who were regulars but their kids as well. The Horseplayers were limited to WPS bets most races, as there was maybe one double and a couple of exactors tops for a typical card of racing.

The fact that WPS wagers were predominant meant that collective takeout back then was in the 15-16% range, which meant more churn, and more gambling satisfaction as a limited 8 race card ensured that most patron would leave the track with at least some money, which for a gambler lead to one thing: Looking forward to the next day that the track was open and/or the next day they can make it to the track....and who needs to pay for a babysitter when you could bring your kid in for free.

The game was beatable by a few too back then. Those who made their own track variants had a huge edge (this was taken away gradually, as the DRF provided some archaic variants culminating in 1990 when Beyer figs were in every Form). There were visible winners, thanks in part to a lot of dummy money, as there was pretty much no other gambling competition, which meant that there was a lot of money in the pool that came from guessers (only 1 in 4 or 1 in 5 players actually bought the Form).

The 70's came along and so did lotteries and also a lot of sports franchises began to pop up. The Toronto Blue Jays had a noticeable negative affect on the attendance numbers at Woodbine, especially on weekends. Dummy money was still out there, but exotics started to become available in every race, and this drove up the collective track takeout and it reduced churn as well. Players were going home with less money, and they also needed a bigger bankroll to enjoy the card. This weeded out a few more, and stands started to see a drop off in kids (today's 45 year olds).

The 80's saw even more exotic wagers, collective takeout continued to creep upwards, and intertrack wagering came into play. You didn't have to go to the live venue to place a bet. It is very tough for a regular to bring a kid to an intertrack without looking like a complete degenerate. Kids could not have any fun in that setting, it is light years away from the live racing experience. Still, kids became scarce at racetracks, as gamblers were starting to go broke much faster, as they now had a lot more races and betting types to play on any giving day. Horse racing had more plays an hour, the takeout should have dropped in the direction of blackjack and slots, but went the other way instead.

With the 90's came Charity and Indian Casinos. More bang for the buck for gamblers, as casino games have much lower holds. Handicappers were starting to get discouraged as dummy money started disappearing quickly, it was good handicappers versus good and great handicappers. The playing field was equalized too with the track variant adjusted speed figure. Horseplayers were losing more quickly, many didn't realize why, but enjoyment started to drop, however, the fact that more tracks were available meant that those who did play, played with a bigger bankroll. Lets not forget that those who were playing in the 90's, were mostly got the needle in their arm as a kid in the 50's to early 70's. However, there were less and less visible winners as the Century turned.

In the early 2000's, there was still a nice spike up as the majority of people in Canada and the USA could now play at local restaurants, intertrack locations, and finally from home. Except for those who reside in States like Arizona and Texas, a Horseplayer can now pretty much play a race from anywhere anytime. If Watchmaker's 45 year old theory is true, handle should be soaring today. It is not.

Lets look at some cold hard facts:

Between 2000-2010 the population of 45-64 year olds grew 31.5% in the USA

Total North American handle dropped 25% from 2000-2010.

Is it the economy or increased competition? Vegas should be a good barometer as competition from all other locations and a bad economy should mean that Vegas would have experienced a drop off as well. Wrong.

Vegas total handle increased by 11.7%.

In real money terms though, Vegas is off, as inflation rose 26% from 2000-2010. But again, with more and more casinos popping up across American, they still fared quite well.

So lets look at horse racing one more time from the angle of 45 year olds or greater. Handle in 2000 was 15 Billion, multiply that by the Vegas increase which takes into account inflation minus competition and the bad economy (11%), and multiply that by the increase in population for those demographics (31.5%). Horse racing handle should be hovering around $21.9 Billion instead of $11.5 Billion.

The game is dying. Increased takeout caused by actual hikes to a shift in higher takeout wagers available is a main cause. Another cause is the increase in signal fees that ADWs have been seeing of late, cutting into rebates available to every day players, which creates less churn. Also, protectionism from signal hogs, to States not allowing internet wagering, to States that have implemented home market fees, have all added to less churn and have turned many existing Horseplayers to give up on horse racing.

But the main reason is a diminishing amount of today's 45 year old, as they were not weaned on horse racing. And because of that, it is hard to convince them to play a game that nobody beats long term, and that has a very big learning curve. Why learn a game that is perceived to be unbeatable?, when there are games like poker that are perceived to be beatable by a few, the same is true of sports wagering, and to a lesser extent, blackjack which has a very low house edge.

Drugs aren't the problem either. They've been associated with horse racing even prior to the inception of parimutuel wagering. Sure, a movement to integrity will help, but only if there is a growing customer base.

It isn't over for horse racing, but there needs to be visible winners created.

Takeout needs to reduced to the 15-16% percent range by all tracks, and if this is successful, further drops need to be made. Until that happens, rebates for all needs to be embraced by the industry.

Low takeout Pick 5's don't work. It doesn't create churn, it doesn't attract new bettors. The same is true about Jackpot bets. If a Jackpot bet can't get new people right from the start, all it does is take a lot of churn money out of the bettor's hands.

Exchange wagering needs to be a reality. Getting families to go to the track as regulars is a dead deal. Horse racing needs to get with the times. The only way to cultivate the 20-35 year old crowd is to give them a high churn fix, one that some can actually win at, which will create a buzz.

In the meantime, a nation wide lottery type bet (a Pick 9) similar to the V75, that is available to be bet at lottery kiosks and every track and ADW, will certainly help get more horse racing exposure from 45 year old plusers.

The time has come to let the market decide the price of the bet, not the Horsemen or self serving Racetrack owners, if racing is to grow.


Steve Zorn said...

Absolutely right on the need for lower takeout. NYRA tried to do this at one point, but was stymied by state regulators. That's unlikely to change in NY now that NYRA has become a serf in the Governor's empire.

kyle said...

There is so much to say on this subject. On the dying part, I refuse to believe you can't sell this to the young, middle aged and the old. It IS the best gambling game there is when presented and priced right. There is just too much crappy, over-priced racing. But it's nothing VALUE can't fix. I define value as a function of takeout and field size. If I was czar and ruled in a world where innovation was actually possible the first thing I would do is link takeout to field size. One and half percent per betting interest in straight pools seems about right with a max takeout of 15%. I would do everything I could to steer dollars back into the straight pools and the verticals. We should be paring pools not adding more ridiculous bets like Arlington's high five jackpot play. Raise your hand if you think taking $100 bucks out of the pockets of 10,000 players and consolidating it in the bank account of a single winner with vig to the IRS increases aggregate handle across the industry?

Ron said...

The actual adjusted takeout was a little higher in the 60s and 70s than stated because alot of players played place and show back then. The breakage was a real killer on those bets. As a kid I remember lots of people betting across the board and little old ladys betting to show alot. Today only the bridge jumpers are in the show pool. I estimate the adjusted takeout about 1 to 2 points higher than the article stated.

Cangamble said...

Ron, breakage on show is around 1-2%, place it is around .5-1%, and for win it is less than under .5% on average. Win pools were still much higher than place and show pools back in the 60s and 70s, so perhaps actual collective takeout was maybe .5% higher than the stated takeout amount.

Equinometry said...

Great article with fact based opinions. Its easy to say the sport is in good shape or bad with no proof but your examples back up many of the things I have talked about over the past few months.

Lower takeout should be the number one priority for all tracks. Fewer betting choices and eliminating jackpot wagers should follow. Too many choices leads to smaller pools and harder to hit bets lead to less churn and fewer winners.

Hopefully if people that care like you and me keep shoving the facts down the industries throat they will take notice and do something about it.


tommy said...

anyone who bets at the track is a dummy, unless he is a getting a good rebate. as to low take out pk5s, i love the fact that i am getting raked only 5% average . and zilch on c/o days.as to jackpot bets, give the people what they want.

ron said...

Breakage on show bets can be obscene. In the 70s every U.s. track had dime breakage. Horses that should have paid 2.79 were paying 2.60 as you know.The amount of place and show wagers made up more than 10 times of the pools that they do today.

Cangamble said...

I understand how breakage works. I'm talking collective average breakage. I wrote a post on Breakage a couple of years ago: http://cangamble.blogspot.ca/2009/02/horseplayers-dont-get-any-breakages.html

Unknown said...

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