12 November 2008

Horse Racing Must Drop Takeouts Substantially

I've written about fixing horse racing many times before. Most notably, June 2007, I wrote a post called How To Save Horse Racing, and in February 2007 I wrote a piece called Thoughts On Track Takeout.

In the last year, horse racing has gone even more downhill even more when it comes to the growth and the bettor. Most of this has to do with the current ADW-Horsemen conflict, but in the last year we also saw even more tremendous idiocy when Calder and NYRA raised their track takeouts.

The economy isn't helping right now, but horse racing has been dying for years. The reason is simple. It doesn't even try to compete with other forms of gambling, and no long term winners are produced, so as to attract new players.

Drugs, potential cheating, lack of proper disclosure, fatal injuries, etc. are just secondary problems when it comes to growth. In fact, if racing were to increase their fan/bettor base by competing for more players, the other problems would go away because integrity would actually matter as the game would be taken seriously again, by the masses, and the masses would demand it.

All the marketing in the world won't help grow the game. Sure, it might get someone to come to the track once, but there is absolutely nothing that will hook the person to be a regular customer.

Aside from the fact that it takes years to understand most of the handicapping nuances that allows a player to be better than average, the reality is that being better than average won't make one a winner. Far from it. A handicapper is considered good if he or she only loses 10 cents on the dollar (the collective average takeout at Woodbine, for example, is around 21-22%).

Racing execs have shifted their mentality. And the result: In the 60's and 70's racetracks were hesitant to even bring in exotics because they were worried that fans would lose money too fast and be discouraged.
Now racing is set up under the baseball stadium model: Get as much as you can from the customer as quickly as you can because they might not be back for a while. You will probably not see many of them again.

Why Was Racing So Popular In The 60's and 70's?
It was the only game in town in many places. Players also had lower takeouts to overcome. No exotics. No intertrack. You only had around 40-45 races a week to play.

Sharp handicappers had speed figures, before Beyer figures came along and were published them in the form. There were winners, there were those who were getting a regular return of 95-1.10 on their betting. Those who won attracted many players to at least dabble as well. Friends and family were brought to the track, because quite a few people left with money in their pockets so they could come back again the next day.

Many of players that are still left in the game today are products of home environments that included at least a day at the track each week with their parents. And this was made possible because the game used to be possibly beatable in the long term.

There were no major lotteries to compete with, and in Toronto, it wasn't until the Blue Jays came into town in the mid 70's that the race track realized they were no longer a monopoly.

Still, because racing was still a monopoly when it came to legalized gambling, the stands and the pools attracted a lot of mooch money. Gamblers who didn't even want to bother reading a racing form, who regularly lost 20 to 30 cents on every bet. This created another edge for those who devoted time to handicapping in an attempt to beat the game.

So how did race tracks react to not being the only game in town? They raised takeouts and tried to compete with more and more exotics. Triactors and superfectas with a track takeout of 25% plus are bankroll killers. They pumped in simulcasts, and nowadays an outfit like HPITV show 15 tracks a day.

Intertrack/simulcast wagering made sure that only a few people could go home with money in their pockets. The least they could have done is drastically reduce takeouts so players could last a bit longer each day. But the opposite happened, triactors with their high takeouts are now available in every race that has at least 6 horses. Racing has become like blackjack in the fact that you can play 5 really good hands every 20 minutes. Except blackjacks house edge (takeout) is 15 times lower than the takeout at a race track.

And then came slots and lotteries. Slots made sure that mooch money in the pools has disappeared to almost zero. There is hardly a player left who bets without a form. And family day is dead as well. Slots are way more appealing to those who just want to gamble. No thinking is required. Yet, even those who run slots realize that if they increased their takeout to over 10%, slots would be in trouble too. People keep coming back because it mostly takes time to scoop the players gambling money. Someone going to the track knows that $100 may give you 6-9 minutes of real action depending on how much one bets. If you are lucky enough, you might cash, and be able to win another 6-9 minutes of real action.

The way the game is set up today, it is impossible for winners to be created. Nowadays you have good handicappers facing great handicappers, and the great handicapper isn't a winner unless he or she is getting a very good rebate.

Marketers can't go there. They can't advertise that the only people who win at the track are those who bet offshore, or those who get substantial rebates. Racing has no long term winning poster boys, whereas poker has many. Is it a wonder that online poker, and other forms of gambling have grown, while racing, despite being available all over the place, has gone down the toilet when it comes to growth?


Takeouts need to be in the 10-12% range or forget about it.

Note: This piece is also co-posted at Bloodhorse Blogs More interesting comments can be found there.

HANA has part two: Why I Left Racing. See also Racing Should Cut Prices Right Now at Pull the Pocket.


El Angelo said...

I agree that tracks should lower takeouts, but disagree that the proliferation of exotic wagers is a problem; without them, NOBODY would be interested in racing.

Anonymous said...

Hi CG,

This post is a really good one pal. Nice work.

Anonymous said...

Anon, thanks. I figure I needed to post something good since it has been a week since my last post.

El Angelo, I'm not arguing. I mainly play tris, supers, P3's and W4's. All high takeout bets.
My point is that I don't see the rationale to have triactor takeouts at 28.3% at Woodbine, for example, while exactor takeouts are 20.3%
All it tells me is that I'm right. Race tracks want to break us as quickly as possible in an attempt to wipe us out daily.

Anonymous said...

Marketing is important. Horse racing needs to fix the future, not the present.

Lowering takeout will likely appease the current bettors (and future bettors) but without the addition of more bettors, it just means more losses for the racetrack. I'm not saying takeout isn't important - I think it's very important that the bettor receive some value for their dollar, but there is more to it than just that.

Without marketing to attract more people to the sport, the number of people that are a part of the stay-at-home-and-bet-on-the-phone demographic is going to decrease. The industry is too reliant on current bettors and employees to get their friends and family interested, rather than trying to reach out and grab more of the publics interest. The declining numbers all over North America are evidence of that.

Take a look at some racetracks with lower takeouts than Woodbine and see how many of those didn't have a decrease in handle, attendance and profits. People are simply losing interest. Racing also shouldn't be so (apparently) dependent on the bettor. It's amazing that show jumping and other horse events like that are thriving and doing well even with little payback to the competitors from prize money and absolutely no betting or slots assisting them.

Racetracks are better off making what money they can squeeze out of people now since it's going to be near death in a couple of decades if they don't do anything about it while they can.

Anonymous said...

I've written before that most people are not cognizant of track takeout. They just know if they go to the track they will most probably lose very quickly and tap out most of the time.
My point on marketing is that there is no reason for anyone new to become a bettor, so marketing is futile.
The racing industry needs to created poster boy bettors....ones that are successful, without bull or rebates. Poker has these poster boys.

What does the track want and need? More bettors.

The main reason as to why people bet?

To at least have a chance to win. And in the long term, to have a chance to win in the long run.

Race track marketers can't go after people on that basis. Poker marketers can.

All bettors want is a chance to win. There is no chance right now the way the game is set up unless you get substantial rebates.

Anonymous said...

I don't really understand why people think more Marketing will be the savior of the sport.

Lets take Woodbine as an example. During the prime of the Woodbine meet, the races are on t.v. no less than 16- 20 hours a week, nationally(albeit on cable) Add to that the 2 hours plus special broadcasts of Harness action. There are billboards and advertising throughtout the city. Not to menetion T.V. advertising on top of their live broadcasts. Woodbine seems to have relationships with most, if not all, major sports teams in the city and generally have some sort of presence at a lot of community/cultural festivals that take place throughout the city. Also it is almost impossible, throughout the summer months to pass through Union Station at rush hour withtout people from Woodbine handing out food/betting coupons ( most of which end up on the ground BTW.

add to all this the fact that Woodbine wasn't built last year. It has been in the same place now for OVER 50 years. I think you would be hard pressed to find anyone in this city that doesn't know about Woodbine, so I just don't see what more they could do Marketing wise.

the fact that the exposure seems to be there and the fact that betting on Horse Racing is now easier and more convinient than ever, tells me this game is fatally wounded. I don't ever see a day when the track is the place to be in this city ever again.

racetracks should concentrate on giving their exsisting fan base the best experience possible and keep them. Instead of chasing after this ever elusive "new fan" they have been after for 20 years.

Anonymous said...

How are they going to get new and more bettors without marketing? If no one knows that horse racing exists, how will they become interested? The way I see it, there is a current group of bettors, which are typically people over the age of 30. If the racetracks don't market horse racing, they won't add more numbers onto that.

Let's play with numbers... let's say there are 100 bettors. Assume half of them die in the next 20 years - a lot of the hardcore bettors are older, from my observations - so then you're left with 50. Let's assume the children of all current bettors now... half of them don't like what gambling did to their parent/don't like horse racing/have better things to do with their time than bet on horses so they don't want to follow their parents footsteps/get involved and the other half (25) are interested in gambling.

Now later on in life, assume half the current bettors pass on/go broke/lose interest, so you have 25 of them and now you're reliant on their children and the few people that the tracks were lucky enough to rope in without any effort. You've got maybe 55 people from the current 100. Those numbers are drastically lower than before.

Without marketing to draw more interest to the sport itself, there is going to be either no growth or a decline in the number of bettors. You say you need to draw interest to the winning aspect... people need to enjoy what they're betting on to begin with. Would you bet on some weird third world sport knowing not much about it just because it has a decent payout? Likely not. If someone goes to the racetrack and really likes the action, I'm sure they're more likely to become a regular bettor than someone that doesn't know a horse's head from it's ass.

Racetracks have other forms of income as well... I'm sure they don't solely rely on the income from betting. Those other forms of income also come from general interest from the public. Again, without marketing you won't improve the general interest and therefore in the long term the number of people going (or staying at home) and spending money on the races/things at the races is going to stop growing and likely decline dramatically.

Anonymous said...

If marketing isn't important, especially for a sport and a building that has been around for 50+ years, why do sports like football, baseball, hockey, basketball, soccer, etc. all advertise/market their sport and major games/events and such? They shouldn't need to if they're established enough, then.

Anonymous said...

Maybe I can explain this better. Because there is no desire for people to bet on horses because there are no winners to try to emulate, marketing is a wasted effort. It is like selling ice to Eskimos.

People go to watch team sports for different reasons. It has nothing to do with betting (sure there are bettors who watch at home, but sports would still make a good buck without gambling). It has to do with admission prices, souvenir and concession sales and TV ad revenues.

The product horse racing has to offer is gambling, that is how they generate almost all of their money.
Racetracks need to make gambling appealing. And without winners, there is very little appeal.

El Angelo said...

The problem for tracks with reducing takeout is that it's tough to see how they'll make a profit. Everyone says that tracks get more bets when they reduced takeout, but nobody says if it's enough. For example, if $100k is bet on a race with 25% takeout, the track's cut is $25k. If they dropped the takeout to 20% (a 5-point drop), they'd have to increase the amount bet by 25% to break even. I don't think that's likely.

Anonymous said...

El Angelo, you would be wrong with your conclusion.
People bet back what they have in most cases, and devote X amount to betting in a year for example.
We've seen what betting with low commissions does via Betfair. And I know for sure that people who get rebates bet much more than those who don't.
I've got first hand examples, that if takeouts were dropped from 22% to 12%, that betting could go up anywhere by 3 to 5 times.

Problem is that tracks won't take the chance and try to prove me wrong.

Anonymous said...

At the Current Takeout rate Horseracing Is a Suckers Bet.

Play Poker,When they lower the Takeout to 10% then go back to Horseracing.

Anonymous said...

I agree with you El Angelo... which is why marketing is important. You can't keep the industry alive with just the current people interested in it - you have to interest more people to join this industry. Racetracks can't predict that bettors will start betting more - maybe if they win more they'll just keep their winnings and run rather than keep chasing to try and win that rare big payout.

Without growth in the amount of people that actually enjoy horse racing and want to bet on it, the numbers are only going to remain the same or decline, especially as the older generations pass on. The distant future is very important to this sport - not just the present.

Takeout drops would help, but they still need to advertise to people that horse racing exists so that there are more bettors being added into the pool. Since the average person doesn't know about takeout, I can't see that effecting their play too much.

I'm sure that some tracks with reasonable takeout are still facing losses and likely more considerable losses since their takeout is so low and the handle is dropping. I can't see how Woodbine would want to give up the money it's making just to appease gamblers that are still betting anyways. If anything they should drop it and perform a strong marketing campaign to attract new customers.

Anonymous said...

Anon 9:44. Almost everyone in Toronto knows Woodbine exists. They get tremendous coverage on TV. They are on the Score, Sun TV, HPITV, etc.
There are betting parlours too. People know racing exists.
Takeout drops do not mean that the tracks will lose more money, the exact opposite will happen. Players will just play longer, and some will think the game is beatable, because perhaps a few players will be beating the game.
This will create new players.

People don't have to know takeout even exists to know that they go broke faster when betting horse racing than they do betting any thing else, except for lotteries.

That is what high track takeout does. A person sitting at a black jack table will lose on average what a horse racing gambler loses in a specific period of time. But the black jack player will feel he has a chance to win because he lasts 15 times longer at a black jack table.

Talking about takeout as a selling point in marketing isn't going to do it either.

There has to be a reason for a person to get interested in playing horses, and 9 times out of 10, the reason is gambling.

But the reality is that horse racing has lost out to other forms of gambling where there are real winners, like poker, online poker, and sports betting, or games where the player at least can last longer with his or her bankroll, like slots or blackjack.

I wouldn't introduce my friends to betting horses. The way the track takeout is these days, the gambler has no shot. It is like giving a friend a lifetime supply of heroin. Would you do that to a friend?

Back when there was mooch money in the pools, the game could be beatable if enough effort was made. I brought friends to the track back then.

Anonymous said...

From what you state, then, what's the point of horse racing even trying? Maybe everyone should pack their bags and call it a day. Since you seem to think nothing else is going to save the sport and dropping takeout isn't going to make enough of an impact to save the world of horse racing on it's own, so maybe everyone should just call it quits before the industry hits rock bottom.

You clearly don't see the importance of proper marketing, which Woodbine does not do. Basically, from your standpoint, why do half the companies that advertise on TV do what they do? We all know that Pizza Pizza sells pizzas, we all know that Dove is a bar of soap, we all know that there's hockey night in canada, we all know that frozen vegetables exist in the frozen aisle... so why do they continue to advertise their products? Reaching more people = reaching more potential customers. You underestimate the power of the right marketing plan.

Like I've said before, also, the industry needs to focus on the up and comers that are going to be the future of the game... not you current bettors. You guys are already hooked in. You may be unhappy, but you spending an extra few hundred a week on races once takeout drops isn't going to save the industry in 20-40 years when a new batch of people need to be brought into the world of racing to take your place.

Anonymous said...

They shouldn't bother trying. Look at what trying has accomplished? The game is dying, and it was dying before the economy hit the brick wall. Even though you can bet from everywhere, and everyone knows it. Everyone also finds out soon enough that you can't beat the horses no matter what so they don't even try to get the knowledge it takes to become good at losing regularly.
Those hooked are leaving, or partially leaving and dying. Not being replaced.
As for marketing. People need soap. People need entertainment. You can get cheap entertainment watching the Leafs and even betting the Leafs, and your bankroll lasts a lot longer betting sports, and because the rake is so low, you have a chance to win.
Good luck getting newbies involved in the game. HPI is available everywhere and everyone knows about it. Young people investigate things on the internet.
A couple of internet searches and they get to my site or a site like mine, and they get educated. In other words, good luck to anyone new coming along with any real cash.

And on what basis are you going to market horse racing? Excitement with no chance of winning long term? Of course they'll leave out the latter part, but the new player will get it real quick.

Anonymous said...

What about the excitement of watching the races themselves? Purely for the form of entertainment? I know that myself (used to anyways) and my parents for example enjoy going to the races... taking $100 or whatever that they are willing to drop in order to simply have a good time watching the races, having a couple of drinks and something to eat.

These types of customers may not drop a grand or so betting every week but at least it's income for the racetracks and its a positive step in the right direction to build a stronger client base.

What's so bad about marketing that? The races can be enjoyable to watch, it isn't always specifically about those with major gambling problems. If you offered some family things and actually marketed and let the public know that these events are going on, I'm sure you'll get kids bugging their parents to go on the pony rides and then the parents, while their kids have fun, may place a few small bets while they're there.

The kids also get exposure to the horse racing and may find it very exciting and down the road they at least have that in the back of their mind. They may want to either get involved or want to come back again to have fun watching them and thus leading to a potential bettor.

You can't just stop trying to build a customer base like Woodbine is doing. Not everyone knows Woodbine exists or when races are held or when events going on (hell, even backside employees don't know when Woodbine is having special things going on in the front side until the day before or after - Sandy's autograph signing last weekend for example, I never would've known about it if I didn't check their website and it only posted it a couple of days out).

It isn't all about the gamblers, the minor customers that come in once in a while for entertainment are where Woodbine should focus its energies... get families to come out and have some fun watching horses while they have a hot dog outside or whatever... those people could potentially become someone with a gambling problem and they may just choose horse racing - you never know. It's not like people are branded as gambling addicts when they are born and automatically know "oh I should go bet on horses," it's something that requires that seed to be planted into their memories so at least the potential is there for them to come back one day.

Anonymous said...

It is mostly about gambling. There are way too many cheaper ways to spend a family afternoon now.
Back in the old days when families were brought to the track there were two things that were a lot different than today.

1. It was possible to make money at the track (takeouts were less and mooch money filled the pools), so there was word of mouth that anyone can be a winner if they are good enough and lucky enough in the long term.

2. There was very little competition for anyone wishing to gamble, or just for something exciting to do on a Saturday afternoon.

Anonymous said...

I wish you would quit saying it is impossible to win at horse racing. Last year, I gave you access to my betting records to show you a profit could be made even witout a rebate. Over the past five years, I have earned $1.3 million post rebate.

I totally support and applaud your crusade towards lower takeout, however you have got to stop writing things like "Everyone also finds out soon enough that you can't beat the horses." This just isn't true and it erodes your credibility.

Anonymous said...

No doubt there are a few that have positive ROI's without rebates, however, most wouldn't even play without them, and when you look at a five year picture, it could be dicey that the positive ROI would still be there.
If there were players making money without rebates, we would know about it, but of course, we would also have to ask, why aren't you getting rebates, are you stupid or something:)

Anonymous said...

Anyone who plays seriously without a rebate is frankly stupid. Rebates have accounted for about two thirds of my profit.

Anonymous said...

If poker had a 20% to 30% takeout do you think It would be so successful?

Enough said.

Anonymous said...

If you become a big enough bettor, you can get a rebate of around 15%, which knocks the takeout down to about 10% and this makes horse racing a winnable game.

Anonymous said...

You aren't comprehending the whole purpose of marketing to the families Cangamble. You need to plant the seed of how exciting horse racing is in the minds of children so when they get older they at least have the possibility to want to go and bet on the horses.

You can't just cut off all hope that anyone could become interested when a simple plan could help at least plant those seeds to help possibly contribute to more bettors down the road.

Again, stop just thinking just about the NOW... the future of the industry is what is looking very dismal. Since less and less people are interested in horse racing it results in less and less people becoming those die hard gambling addicts that live and breathe simply to bet on race horses. Exposing racing more to children will at least provide some possibility for steady numbers in the future or potential growth if it catches on.

If I was never exposed as a child to horse racing, I doubt it would've been an interest of mine when I got older. I'm sure everyone that bets was exposed at one point in their life at a young age to horse racing... you don't just decide when you're in your mid-30's "I'm going to become a hardcore horse racing bettor" they have to have had some exposure to it at some point.

I'm sure those that simply enjoy horse racing as a form of entertainment contribute a fair amount to the handle, also. Since right now the whole entertainment factor is played down so much at the races you can't say that appealing to that sector couldn't help improve profits which could help woodbine in making the decision to drop takeouts.

Anonymous said...

Anon, what I'm saying is that the marketing effort is like selling snow to Eskimos. In theory, sure you should try to appeal to families, but like I said in my post previously, families got involved in the 60's and 70's and even the 80's because people left the track with money (not that many exotics, only 9 races a day to bet, etc.) and there were a few winners everyone knew about.
Marketing without a lower takeout is a futile effort.
And a lower takeout means more revenue according to every study, so Woodbine shouldn't even be needing more people to come to before they lower takeout.
Good luck marketing to families, you might as well be an SUV salesman when gas is $8 a gallon.

Anonymous said...

They went because they enjoyed it - if they didn't enjoy it, they wouldn't go. The general public have NO idea what takeout is and don't give a rats ass about it. Only you hardcore gamblers know and you only know because you bet constantly every day.

But, hey, if racing is in such trouble as you state - why have this blog? Obviously lowering takeout alone isn't going to save the sport and apparently marketing is futile (which is not true) so why even bother trying to get anyone to change the way things work? Might as well just pack up your bags, call it a day, stop wasting your time and start playing poker.

Anonymous said...

They enjoyed it because most families didn't get clobbered. They could go with 40 or 50 bucks and last the whole day, and usually come out with 20 bucks or so, and on many days come out a winner.
I've already made the point over and over that people don't know about takeout, but they know when their bankroll dries up.
Lowering takeout will save the sport. That is one of the reasons I have this blog. I also get good rebates on the majority of my bets.
I like horse racing and I'm in the industry myself. So it is also to my best interest that horse racing grows.

I'm just telling you that marketing is futile unless you lower the price of the product first. It is a fact.

Anonymous said...

That is exactly what I was talking about, though. See... back in the day people came out to have a good time and keep going all day long. People can still do that, but Woodbine has forgotten about those people and I think a lot of other racetracks have as well.

Woodbine needs to stop marketing to the same crowd of people (SunTV, SportsNet, The Score) and start appealing to a wider range of clients to get those people that want to have a good time back. A lot of people, again, look at the racetrack and think hardcore gamblers and not a family safe environment like we had with the tracks back in the day. People don't know that it's okay to come out with the family to spend a day at the races. Like I've said, just about every person I know that has children and I mentioned about going to the races always asked if it was safe for kids to go, as so many of them think its a bad place to be.

Again, if Woodbine marketed promotions it has (such as family day or autograph signings) more than just a day ahead of time, you'd likely get more people out for that and the odds of them staying to place some bets would be pretty positive.

As you've already stated, no one is aware of track takeout except the hardcore gamblers. People don't associate losing money necessarily with going to the racetrack and even if they do - some people DO pay for entertainment, bring $100 they're willing to drop for the sake of a good time with their family and friends. Of course everyone wants to win, but some people just enjoy the fun. I know a lot of people that do... not everyone enjoys horse racing for the same reasons that you do.

You have to appeal to a wide variety of people and you're saying that Woodbine should primarily focus on the gamblers and make them happy by dropping takeout - nevermind about entertaining the people that are there for the entertainment of horse racing, which is what most sports are all about anyways! People drop $200+ on a single ticket to go to a sporting event... here they can get in for free, pay $2.50 for a program and spend whatever else they want to have a day of fun. Doesn't seem like such a horrible thing to me. Typically these people are not die-hard gamblers that are there expecting to make money, these are people that are simply wanting to enjoy themselves on a Sunday afternoon or whatever the case may be.

Racing needs to build clients for the future, otherwise it's just going to keep dying as the generations go on. Imagine if sports newscasts provided a little glimpse at the stake action coming up for the weekend at the track, how many people would go there rooting for a horse or something like that... would that be a bad thing?

I'm tired of repeating myself, since you clearly don't see the importance that marketing has on any product or industry. Good luck saving the racing industry with just takeout reductions. Seems to be doing a world of good for all the other racetracks that have lower takeout than Woodbine.

Anonymous said...

Anon, tracks with the lowest takeouts are still too high to get the buzz going that winners are possible.
I think you live in a fantasy world. Woodbine should have dropped takeouts considerably the moment they got slots. If the place was packed, they wouldn't drop takeouts gladly.
If they had a petting zoo and and a waterslide, they won't get long term customers.
I don't think you have a clue about what is involved in attracting new families to the track. Not a clue.

Anonymous said...

i'm not sure if it is funny or sad that there are still people involved or around this industry, that still think, there is this huge pool of millions of people in this city unaware of Woodbine and/or Racing in general. All they need is to be marketed to. You also completely deny the fact, that minus media coverage(ie. sports shows and newspapers) the races get as much T.V coverage via live broadcast and advertising as any sport in the city. the product IS out there. It is also easier than ever to wager...still nothing.

truth is Woodbine is no secret. These elusive "new fans", "young fans" or "families" are simply not coming out by choice, not ignorance.

the sooner the industry realizes this and begins marketing to it's target audience. GAMBLERS!!! there is really no hope in my opinion.

the day will never come when families simply want to go to the track for the "majesty of the sport of kings" and even if they did. Casual fans like that can not support this sport.

IT's ABOUT THE BETTORS, STUPID!! should be the racetracks motto going forward.