Shhhh! Golden Gate Quietly Decreases Purses

It appears that Golden Gate has quietly decreased purses. By comparing Condition Book 2 and Condition Book 3, horsemen are now running for less. Bottom level claiming purses are around 2-4% less, while allowance races are lower by 8-10%.

For example, I noticed that an allowance non winner of one other than dropped from $34,000 to $31,000.

I can see why this has been kept quiet, there are a few 3 or 4 letter organizations that have their tails between their legs right now. The infamous takeout hike in California, which put the cart ahead of the horse, has been an abysmal failure. Not only has the higher purses not led to bigger field size (Golden Gate is down around a quarter of a horse per race this year), but it has led to an unprecedented Horseplayers Revolt that may or may not be responsible for the 20% decline in handle at Golden Gate so far this meet.

For sure, there is less value for Horseplayers. Higher takeout means lower probable prices, and they break the regular Horseplayer quicker as well, causing them to pay less attention to racing in general over time.

Santa Anita came out with "their" numbers to date. "They" claim they are only down 7.9% so far this year. But for those watching carefully, including "them," the recent numbers look like a horror story.

In the last four weeks, total handle is off over 20%, while total purse money given out is only up 4%. Two major things here, one is that the Mid Atlantic Co-op didn't start taking Santa Anita's signal until the last week of January last year. This meant that for the early part of Santa Anita's meet this year, Santa Anita had around a 10% larger audience than it did a year ago. Comparing the same potential bettors to the same potential bettors could only be done the last four weeks to date. Here is how those numbers look:

The other important thing to keep in mind is that they have cut Wednesday's out. This means they are giving out more purses per race, but running less races. And lately, the Horsemen, jockeys, jockey agents, etc. have only been competing for 4% more money. How long before they are competing for less money than last year. If the 20% decrease in handle keeps up, it won't be very long at all.

Solutions to California's problem cannot be solved by raising prices to the bettor. That wouldn't work if Wal-Mart was in trouble, and it won't work in horse racing either. The costs to own horses horses need to be cut. No reason why it should cost $100-$125 a day in California and only $55-$65 a day at Penn. Sure, maybe a little higher, but not that much higher.

Lower prices means more owners. Yes, purses are important too, but for many, it isn't how much you win but how much exposure to losses you have.

The powers in charge are very aware right now they screwed up. Hollywood Park owner Jack Liebau met with a huge group yesterday including 3 HANA members.

Craig Walker chimes in about California racing. He says that drastic changes are needed.


WOODBINE CUTS PURSES 2%, BUT DOES IT THE RIGHT WAY
Woodbine's bottom line, as speculated here, was down a bit last year despite a handle increase which bucked the industry trend.

“Even though our handle was up last year a lot of that increase was coming from outside Ontario, which means lower commissions for us, and the contribution to the purse account was minimal.”

Woodbine finally allowed the big rebate shops to take their signal last year. This created larger pool sizes and has helped put Woodbine on the map amongst some of the biggest bettors in North America.

Sadly, they have failed domestically, and this is due to higher than average track takeouts, which their live customers have to deal with.

Woodbine is on the improve mentality wise since David Willmot left the boat and they are doing things right, finally.

Things like cutting the major stake races exorbitant purses to not so exorbitant purses is proof of that. Giving out $1.5 million for the Canadian International instead of $2 million will not hurt the quality of the field going forward one bit. And that is now $500,000 more that doesn't have to be taken away from the domestic horsemen.

Another great move is to move the big races to Sunday, when there is less competition as most of the American tracks card their big races on Saturdays. Now that Woodbine is on the map, Sunday's can be Woodbine's day.

Woodbine has good momentum right now. But now with a very good foundation in place, it is mandatory that they lower takeout rates and start to grow domestically.

Did The TOC Pull A Fast One?

It may not have been the intention of the Thoroughbred Owners Of California (the TOC) to have pulled a fast one on the California racetracks, but the consequences sure makes them look like geniuses while California track ownership and management are looking like pretty bad right now.

The track owners and the Horsemen may have actually believed that bettors would be attracted to the move to dirt at Santa Anita, and that bigger purses would attract more horses and create larger fields which would increase handle attracting new money, more than enough to make up for the lost money in reduced churn (a bigger chunk of the existing pie, though their action will reduce the pie even more).

The reality is that it still costs too much to own a horse in California despite the purse hike, and not very many outfits are bringing horses to compete there.

Trainers charge relatively too much and vets don't help things either.

It is speculated on that trainers who charge high prices look for the smallest field they can find so as to keep their win percentages high enough in order to justify their prices (you can't have a 10% win percentage and have too many owners pay $125 in day rate). This culture doesn't change overnight.

The wild card is that there has been player push back, speeding up the effects of raising takeout. No one was anticipating this.

Despite handle being off, the Horsemen are ahead of the game and here is why the TOC is in no hurry to rescind the recent takeout hike:

In a nutshell, the takeout increase has caused blended rates in California to go from around 18.5% to 20.5%. However, the entire increase now goes to the Horsemen.
Out of State signal fees could range from 3% to brick and mortar locations to much more when it comes to what ADWs pay. It was admitted that California racetracks could not get the full increase from out of state bet takers, but only a little more than half. Still, if the average signal fee was 6% last year, it means that they are now getting 7%, but when you look at it closer, it means that purses now get 4% on average instead of 3% of every dollar bet on their product from out of state. using this example, which means an increase of 33% over last year (again, I'm not sure of the exact numbers, but this is probably very close).

Domestically, from in-state bets, they now receive anywhere between 25-33% more over last year on average. Tracks, meanwhile receive the exact same percentage on every wager, if everything that has been made public is true.

In layman's terms, this means that for every thousand dollars bet last year, the track and horsemen may have received $50 each on average (again, this is an educated guess). However, now horsemen receive about $65 on every $1000 wagered, while tracks still get $50.

If handle is down 15% because of a combination of the Players Boycott and less churning created by higher takeouts, it means that in relative terms, tracks are now receiving $42.50 on every thousand bet, while Horsemen are still receiving $55.25 per every thousand bet (in adjusted dollars). So even with a 15% drop in handle, something devastating for the track, Horsemen purse accounts will be up by 10%.

Now, if you go a step further, the California racetracks could have been actually up this year if not for the boycott and reduced churn. Gulfstream Park and Fair Grounds early success this year may mean that handle might be on the way to recovery. So California track owners are not only down whatever they are down this year, but down what other tracks are up as well.

Unless handle drops at least 25% gross over last year, the TOC is unlikely to be motivated to rescind the takeout hike, unless the tracks are hurt so much that they are forced to cut back dates even more (they are currently running only four days versus five at Santa Anita right now), or even worse, threaten to close down. The tracks may have to run only 3 days a week (to cut expenses down), less races (more per day), and a hope for fuller fields to attract more betting per race.

Both Del Mar and Hollywood Park have a foot in the grave (well at least a big toe) to begin with.

How can this mess be fixed immediately?

The TOC has to be persuaded to look into the crystal ball. It is inevitable that things will be a lot worse for horsemen, and whatever tracks remain standing in California a year or two out. There is zero evidence to show that higher takeout leads to more money bottom line for Horsemen and tracks.

The tracks have now changed percentages on net takeout, and the TOC would be ill-advised to not consider this when negotiating. The cut on net profits need to be readdressed. If the TOC and tracks are reasonable, the Horsemen should now aim to receive between 55-60% of net takeout received on the California product.

This change would be good going forward. As there would now be motivation to make the most net takeout money, which means that the track is free to seek optimal takeout rates.

If blended rates don't come back down to at least where they were in California, California racing is at risk of losing Horseplayers who will never return. Most Horseplayers who are boycotting are not interested in anything but a return to the old rates before they will consider betting another race there.

C'mon guys and Bo, I want the game to grow. Get together and make it happen.


WOODBINE HAS A SIMILAR IMPEDIMENT

Woodbine's blended takeout rate is approximately just over 21%. 1.3% goes towards taxes. That leaves $200 on every $1000 bet to be split between horsemen and tracks. However, Horsemen get an additional 2% on all bets (4% on triactors), which means that on every $1000 bet on track, Woodbine gets $89 while Horsemen get around $111 on average.

If Woodbine drops takeout, the Horsemen get even more of a percentage on net takeout. The HBPA and Woodbine should get together and try to help grow the game, by changing this deal and make it a percentage of net takeout, not a percentage of what is bet. A 55-45% split in favor of the Horsemen on wagers made through Woodbine would not change things one bit, except it gives Woodbine the ability to experiment with lower takeouts.

Of course, if Woodbine could find another way to fund the 2-4% the Horsemen gets, they would be free to experiment with lower takeouts as well.


FORT ERIE SAVED FOR AT LEAST ONE MORE YEAR

Not very many people knew that Fort Erie was even in trouble until early this week, when it came to racing in 2011. They supposedly were good to go for 3 years, but they were not able to make payments for the increased payment to Nordic ($650,000 this year and next, compared to $100,000 last year) and the new HST on time. And they obviously didn't make enough last year to overcome the concern that they could actually come up short this year, and they realized that there is a question of who pays for the shortfall if it happens?

Details are not out, but it looks like a deal was carved out that does not place the indemnify the EDTC (the current managers of the track).

Still, if they think there is a hope in hell to grow a business with a 26.2% track takeout on exactors and doubles, whoever is guaranteeing the losses is guaranteed to be out money.

CLICK TO LISTEN TO A RADIO INTERVIEW OF PROFESSIONAL GAMBLER AND HANA VP MIKE MALONEY
It starts at the 17 minute mark. You might learn a thing or two.



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