The Heat Is On; Pocono Downs Lowers Takeout From Absurd Levels

Pocono Downs, the used to have the highest specific takeout for any North American track, harness or thoroughbred. If you can believe it, they were charging 35% to Horseplayers on both triactor and superfecta wagers. That is going to change come August 2nd, when they lower the takeout on both wagers to 25%, which is still on the high side, but it is still a good start.

This means that Pocono will have a lower takeout on tris and supers than Woodbine which has a takeout rate of 27% for triactors, and 26.3% for supers.

Incidentally, the highest takeout in North America now belongs to Penn National which has a triactor takeout of 31%. On supers Penn charges 30% which is what Philly Park charges for both triactors and supers.

The lowest takeout in North America for triactors and supers is 19% and belongs to Keeneland and Churchill Downs.

The lowest takeout for any bet in North America is 12% (Retama for Pick 3's and doubles and Sam Houston for the Pick 3).

The lowest takeout on WPS belongs to harness track Tioga Downs (15%), they also have the lowest takeout on exactors in North America (17%).

To me, this move by Pocono happened because of mounting awareness over track takeout thanks very much to The Horseplayers Association Of North America. They were almost forced into this "experiment" as they like to call it, because they will be hosting The Breeders Crown this year, and at 35% their takeout rates would definitely be flashed all over the place, probably hurting their potential business immensely.


Richard Eng recently got interviewed by Trot Radio regarding his ideas about lowering takeout. Listen to it here. He dispels the myth that takeout doesn't matter because most Horseplayers don't know or care about it. The reality is that if a player cashes more, the player bets back more, lasts longer, and the more the person leaves the track with, the more likely they are to come back.

Lowering takeout is not a short term savior but a long term one. But increasing takeout, focusing on marketing high takeout bets, or doing nothing will only continue to kill the game as new Horseplayers do not come close to replacing those who quit or die.


Handle continues to decline, but there is a definite trend occurring

Hollywood Park just announced a 10% drop in handle for their recently ended meet, Lone Star was off a whopping 21%, so bad that Lone Star President, Drew Shubeck state that he is considering lowering track takeout next year. Why racetrack execs are waiting so long is still mind boggling.

Meanwhile, some good news, Indiana Downs was up 3% over last year. Indiana Downs has relatively lower track takeouts (especially on triactors and supers; 21.5%), but most importantly distributes their signal to all ADWs, and at a reasonable level.

They were graded an A for signal distribution by HANA. Hollywood was rated a D, while Lone Star earned an E (being a Tracknet track where they don't distribute to all ADWs, limit rebates, and charge a fee that is above average).

There seems to be a shift, as more and more Horseplayers look for rebates, if they live in a jurisdiction where they can get them, towards tracks that offer the best net takeout (track takeout minus rebate). This is true amongst the biggest players as well. Value is becoming a key word amongst the regular players more than ever.

Fort Erie is destined to suffer handle wise as they have yet to do anything about their ridiculously high takeouts. They basically stick it to their on track customer by charging 26.2% for almost every exotic (28.2% for triactors). Think about it, how is a business expected to grow their live customer base when they take out 26.2% on exactors and doubles. When it comes to the daily double, Fort Erie has the highest takeout in all of North America, and they have the second highest takeout when it comes to exactors.

Worth repeating:

FORT ERIE'S TAKEOUT ON EXACTORS AND DOUBLES IS 26.2% 

 

One thing where Fort Erie recently received a bad rap they didn't deserve is in a recent column by Bill Finley Reasons To Be Cheerful. His 8th reason commends Woodbine, but unfairly blasts Fort Erie and three other tracks:

8. The sport has finally turned a corner in how it regards people who abuse their animals. Many tracks have put in rules that lead to the ban of anyone caught sending a horse to slaughter. And Woodbine sent a strong message when it banned owner Bruno Schickedanz and his trainer after they violated track rules and worked out 13-year-old Wake at Noon, a former Canadian Horse of the Year. It was a callous effort to squeeze every last nickel out of a horse that had been very good to them, and it cost the horse his life.

It should be noted that not everyone is taking this matter as seriously as they should. Since the ban went into place, Schickedanz has started horses at Fort Erie, Mountaineer, Presque Isle and Thistledown. Shame on those tracks.


Until the Ontario Racing Commission rules on Schickedanz, it is proper business to allow him to race. I would argue that Woodbine should also allow him to race as well. If the ORC finds Schickedanz did nothing wrong, or something that warrants only a slap on the wrist, tracks that refuse his entry could be in for possible legal actions. Again, I think what Bruno Schickedanz did was deplorable and disgusting, but was it illegal the way the rules are written now?


The Prince Of Wales draws today in Fort Erie. Since I didn't get an invitation to the event, I won't be covering it:) But if you want some good info on the Prince of Wales check out Triple Dead Heat. I wonder if he got an invite. Keith is much nicer than I am.


Trainer Vito Armata is appealing 'a 45-day suspension and $1,500 fine that were issued following a stewards' ruling on a positive test for the Class 3 drug acepromazine, commonly used as a tranquilizer.'

The appeal process really pisses off many Horseplayers who believe that tracks are one step behind drug trainers to begin with, and even if they are caught they either get a slap on the wrist or are allowed to train thanks to a lengthy appeal process. Horseplayers want to see rules with a bite that create actual deterrence.

In this case, the violation happened in April, and the appeal date is yet to be determined.


Finally, a heart warming story about a new friendship between jockey Eurico Rosa Da Silva and a (formerly) troubled teenage fan.

The Jester And The Sage

It isn't hard to figure out why horse racing is lagging in growth. Those in control are generally ostriches who have to deal with and appease Jesters all the time.

Race track execs want to believe that horse racing's woes can be solved using a combo of different things, but refuse to acknowledge that it might just be the way they price the game to the customer/Horseplayer (track takeout).

Ideas from cheap beer in the infield to jockey bobble head dolls to dollar hot dogs have all been tried, yet horse racing handle continues to drop while the amounts bet on other forms of gambling have risen.

Today's Jesters in horse racing are the old school racing exec, and many horsemen and breeder's groups, and some politicians in certain jurisdictions.

They are Jesters because their demands for a bigger piece of the pie leads to a shrinking pie. They share a complete lack of understanding, and in some cases, caring, when it comes to idea of price sensitivity amongst the customers. In fact, some don't want to come to grips at who the customer is. Some horsemen believe they are the customer or at least a customer.

Horsemen can be customers, but not the racetrack's customer, they are the customer of the breeders, the vets, the feed man, etc. But in the case of racetrack growth, the only customer is the Horseplayer. Their losses (and the losses of casino players, where applicable) pay for the track's operations and the purses that the horsemen receive.

Increase the amount of Horseplayers, and the amount of times the Horseplayer wagers, and purse monies for the tracks and horsemen will increase. This also means that breeders will get more for their horses, as demand goes up with the prize money.

In a perfect world, one would expect that the idea of optimal pricing would at least be tested, but the horse racing world is probably the most dysfunctional one in the Western World.

There are too many organizations that stand in the way of growth.

Enter Fred Pope, a marketing and advertising executive in Lexington. He just wrote a piece for The BloodHorse Blog: The Rise of Bet Takers in North America.

In the blog piece, Pope bases all his assumptions on the false pretense that if the track that puts on the show gets a higher percentage from the bet taker, there will be money for the track and the purse accounts.

Pope shows a total ignorance of the economics of the game and as a matter of fact, a complete ignorance when it comes to simple economics. He also fails to recognize the consequences of his plan on horse racing period.

I also want to add that his comparing horse racing in the USA to that of France is pretty absurd (I think he just wanted to throw a wrench at the idea of exchange betting because Betfair is no longer allowed in France, but wait a minute, it is already not allowed in the USA). France, according to The Jockey Club's data, has the same ballpark handle as the USA does, but they run about 13% of the races the USA does.

But what Pope doesn't mention is that in France, only 2.5% of handle goes to purses, while an average of 8.5% goes to purses in the USA (this of course includes subsidies from slots). It tells me that in France, that the bet takers (bookies) and/or government take a much higher percentage of wagers than in the USA.

Does Pope really want a system where only 2.5% of the total handle goes towards purses? I don't think even he is a Jester of that magnitude.

Pope wants those who put on the show to get a bigger percentage. On face value, it seems noble enough, but the repercussions would be disastrous.

The blog piece seems to be geared towards ADWs which have been the benefactors of the shift of money being bet on live racing to money that is now bet online. He is right that handle should have soared because now people in most jurisdictions can bet anytime on any track. However, bettors have been lured to other forms of gambling where they can last, and also have a chance to win long term. Horse racing has failed to compete for these players while takeout has marginally gone up in the past decades (thanks to a shift by bettors towards high takeout bets that have large returns that are now available each race).

The only real growth horse racing is experiencing these days is via ADWs that provide rebates. Players last longer, get more into horse racing, miss fewer days, and in the long run, they are more likely to get family members and friends interested. Also, they spend less of their disposable income on other forms of gambling, as rebates give them the opportunity to possibly beat the game (if they are good and lucky enough).

By increasing the fees tracks charge ADWs that offer rebates, the customer suffers the most, as the rebates shrink. This causes the player to play less, and take longer breaks between action, and perhaps, find new betting hobbies other than horse racing.

In fact, all ADWs will have less of a budget to advertise as well. It is ADW advertising that helps pay for racing publications as well as advertising found on the internet and sometimes TV. Does horse racing need less advertising, especially now? Or less horse racing publications? I don't think so.

What is interesting though, is Pope seemed to do a bit of goal post moving in the comment section (perhaps he learned for the umpteenth time that ADWs generally pay more for racing signals than racetracks charge each other):

.....the problem now isn't the ADW's, it is the receiving tracks where 60% of all off-track is still wagered. They get 16-17% and only pay the host 3-4%.

While the tracks know the ADW's are going to steal their bettors, they will not give up the 17%. If they will just change the IHA (Interstate Horse Racing Act) and split the takeout when they are the "host", then they will move up from 3-4% to 9-10% and charge that amount or more to the ADW's, OTB's, and Casinos.

Believe me, most of the net importing tracks become net Exporters when they start getting half (9-10%) of the takeout as the host. They just need to run the numbers and get on board with changing the IHA to their benefit....

Pope again hasn't really thought of the actual repercussions to this idea either. For instance, if this happens, Churchill Downs Inc., which owns a few tracks, will only focus on their products at their tracks, where they get the entire takeout (shared with the horsemen of their tracks). Do you think they will be in a hurry to take a bet on another venue that they have to pay half for? Maybe the major tracks that Horseplayers demand to bet on, but what about the smaller tracks? They have no chance at being on a racetrack's betting menu.

So what happens if the smaller tracks receive 0% of track to track handle from other tracks instead of 3 or 4%? They might just have that final nail in their coffin.  They should and will fight Pope's plan if it gets any legs.  They have no choice but to offer their signals to other tracks much cheaper.  What happen then?  The tracks charging 8-10% to other tracks, won't be able to sell their signals.

The reality the current distribution has been determined by free market fundamentals.  And changing it will cause a downturn. 

But what happens if smaller tracks start closing? It isn't pretty. Less owners, less trainers, less backstretch employees, racetrack workers, etc. This will lead to less demand for horses because there will be less owners. Breeding prices will dive because there will not be enough outs to try to get even, if a horse turns into a dud, as most horses do.

And there will be less people exposed to horse racing. Most people need some time watching races live before they become regular gamblers. Lots of people are exposed to horse racing for the first time by owners in small partnerships, as they go to the track to hopefully watch their friends horse win so they can get their picture taken.

Of course, there are those who say there is too much racing right now, and Pope's idea could play right in their hands.

Edit:  I also have to add that if the smaller tracks disappear, and fewer horses are bred, and many smaller operations disappear, the governments may be less apt to give racetracks a percentage of the alternative forms of gambling.  If this game reverts to the Sport Of Kings again, there will be little public support for throwing any slot money at it.  If this game reverts to one only for the elite and their stables, expect no slot money in the future.


I will not agree that there is too much horse racing right now. Nobody knows, because it is the jesters who have come out with this without exploring the idea of lower pricing first. Long before most business closes, they generally try to sell their product at lower prices in hopes that maybe the business can do better with bigger volume. This brings us to The Sage.

 Richard Eng recently wrote an article too: Lower Takeouts Would Benefit Sport



First off, I need to correct Eng a little. Sports betting has a takeout of 4.6% for single bets, 10% for two team parlays and 12.5% for three team parlays. The average horse pays somewhere between the odds of a two team and three team parlay. He also left out poker and its low vig.

Eng is on the right path with the article, though he seems content with just lowering the takeout on WPS.

The cycle of growth always begins with the customer. If you want to sell more products, lower the price, don't raise it.

Couldn't say this better myself.

But where Eng gets it wrong, sort of, is that no matter how much a track promotes win, place and show, many Horseplayers will still be automatically attracted the idea of a high return gamble. But even for that, takeout matters greatly and the more a player gets back, the longer they will last.

He is totally correct that tracks do promote the high return bets, and these have the highest takeouts usually, thus killing bankrolls the quickest.

Yes, allowing for fractional betting of things like superfectas help attract the player to the bet, but what happens is that more of one's bankroll goes towards those wagers, which has an even more disastrous effect on the Player's ability to last.

Another great point Eng makes is that keeping players in the game longer leads to higher handle and it is implied, that Horseplayers will lose more money in the end, as he states there will be more money for the owners and breeders.

This is true, but it for reasons not cited in the article, but some that I've mentioned above in this blog post: Players lasting longer= Horse racing becoming more of a priority on the Horseplayers gambling/entertainment totem pole and with that comes perhaps more money being lost on horses versus other places of entertainment or forms of gambling, and perhaps it will lead to friends and family of the Horseplayer who lasts longer to get exposed to the track and betting.

And finally, again not mentioned, with lower takeout comes the opportunity that there will be visible long term winners. Sure, a racetrack and horsemen depend on people collectively losing money, but visible winners will attract many people who will want to emulate the winners. And as any Horseplayer knows, horse racing for most is an addiction, regardless of success. But potential regular Horseplayers need to last longer, and the general public needs to have a reason (a beatable game) to give the game a long enough try.

Taking a bigger piece from a shrinking pie will not lead to growth, but in most cases, leads to a smaller and smaller pies down the road.

For a more Eddie Haskellish take on Pope vs. Eng:  Gamblers & Breeders/Insiders

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