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.

Terminator 6: Death Watch

It is official the takeout increase bill has been signed, California Gov. Arnold Schwarzenegger showed he either doesn't understand basic economics, or he set his common sense aside to appease a group that doesn't understand basic economics.

The takeout hike will most probably go into effect the day after Christmas this year. Although the WPS takeout remains relatively low at 15.43%, daily double and exactor takeout will rise to 22.68%, placing Hollywood Park, Santa Anita, Golden Gate, and Del Mar in a tie for those betting types at around 57th out of 69 tracks according to HANA's up to date takeout data. Triactors and other exotics will go up 3% (which is really 15%) to 23.68%.

HANA reports on the takeout increase here.

Again, I understand the Horsemen who went along with this increase. Why? Because the entire 3% will go into purses. If handle were to remain stagnant, which it won't, monies available for purses would go up 15%. So handle could drop significantly, and the Horsemen will still end up ahead.

Here is an example (using many guesstimates). For every million bet, lets say $300,000 is wagered on WPS, $300,000 on doubles and exactors and $400,000 on all other wagers. Also lets assume that California exports its signal for 5% and 50% of handle is generated from exporting. Also, I believe the Horsemen get 50% of takeout revenues to fund purses.

Using these numbers, prior to the takeout hike, for every million bet, Horsemen receive around $58,000. Assuming signal fees increase on exotics (see Understanding Signal Fees), under the new arrangement, Horsemen will receive around $67,000 per every $1 million.

All source handle would need to drop off 13.5% in order for Horsemen to be worse off.

Any drop in handle up to 13.5% will be absorbed entirely by the racetracks. Which makes me shake my head here at the track owners who have put a huge "Kick Me" sign on their backs by going along with this.

I also doubt very much that the signal fees will go up that much. I can't see Twinspires and other major ADWs or tracks going for such an increase. If signal fees only go up by half the increase on exotics, it will be closer to a 10% decrease that will cause purse accounts to have less collective money.

Handle will drop. The question is how fast, and by how much?

The total effect of takeout increases or decreases normally take time to assess. If a hike occurs, Horseplayers receive less on each bet than they did before. They last less, they go home quicker, they come back less often. Some quit, some find a new hobby or a new game. These players will expose friends and family to horse racing as well. In other words, negative growth is created. Horseplayers collectively won't bet more and reload more just so they could have the same action as before (I believe that there are actually people who were in on this decision that assume Horseplayers do react this way).

I just want to note, that the opposite occurs if a takeout decrease happens.

There are other factors out there. Thanks to HANA and the internet in general, the public is much more aware of track takeout than ever before. There are some really pissed off Horseplayers out there over the action by California, and many of them vow to quit betting California racing. I believe them. I know it would be much harder for someone in California to boycott their own state's product because of familiarity, but for those outside of California, it isn't hard at all.

Personally I stopped playing California the day the bill was signed. Though I will play on Breeder's Cup days. Just keeping it honest. I want horse racing to grow, I love the game, but this move by California racing just really upsets me, and it just tightens the noose around horse racing's neck right now.

And finally, there is one major factor. An estimated 15% of all handle is generated from computer program bettors or sophisticated value players. Not only will increasing the takeout, create less value situations for these players, but increasing the signal fee, even it is half of what the takeout increase will be, will also come into play as to whether an astute rebate player makes a bet or not.

Despite, the flawed argument that bigger purses will lead to bigger field sizes in California (it is flawed because horse racing is experiencing negative growth thanks to not recognizing that the Horseplayer is the customer, and new owners generally get started on a smaller scale, many are Horseplayers first, and the day rates in California are just way too high regardless of the purses), I will predict that within 6 months of the takeout increase, California handle will drop 15-20% regardless of what happens anywhere else.

I originally stated that no good could come out of this in a previous post. Perhaps I jumped the gun a little. Portland Meadows has announced that they are dropping their takeout on Pick 4's from 22% to 14%. Delaware has also decreased their on track takeout on exactors from 19% to 10%.

THE TIME IS RIPE

This is a great time for a track with enough brains and guts to take advantage of the California takeout rate hike by lowering their takeout rates and attracting to begin with, the disgruntled soon to be ex California bettors.

I'd like to think that NYRA, Tampa Bay Downs, and even Woodbine could benefit immensely if they were to do the right thing within the next month or two.


Finally, takeout increases no matter where they originate hurt the game's total growth potential. They kill off the player, albeit slowly and provide zero potential for growth. A player at Hawthorne, for example, receiving $2 less for a $100 exactor he hit at Santa Anita won't feel it immediately, but slowly but surely it takes away his incentive to believe the game is beatable, and besides either coming home with less money than before, or churning one less race because of it, the player eventually becomes more disillusioned though he doesn't really know why.

If that is hard to believe, ask a slots operator what happens to the bottom line if hold is increased by a couple of points.

QUOTE OF THE WEEK:

“(If there isn’t growth in handle), we could end up with two-bit racing and virtual racing. The competition is smart, and it is giving the customer what the customer wants. Racing is still giving the customer what racing wants.”

UPDATE: About the movie Terminator 6. The year is 2029, and there has been no horse racing in California for 12 years. The Terminator's assignment is to go back in time and destroy Arnold Schwarzenegger the day before he signs the takeout hike.