Thursday, April 17, 2008

Player Motion: Give the Tax Back

In 1996, most know that the pari-mutuel tax on wagering was reduced from 7.5% to 0.5% as part of the slots at racetracks program. The industry took this mostly for themselves.

From the ORC directive:

1996

Under an incentive to provide much needed impetus to the industry, the Ontario Government reduces the provincial pari-mutuel tax on wagering from 7.5% to .5% with the balance to be returned to industry to be used as agreed to in the signed Memorandum of Understanding between the government, the ORC and the newly formed Ontario Horse Racing Industry Association (OHRIA).


With the wagering conference coming up this month, I think it is time to have voices heard to right this wrong, and grow Ontario racing.

I propose this:

This tax going back into the industry must be repealed and a mechanism must be put in place where it is returned in an immediate 7% takeout reduction for all tracks in Ontario.

When we listen to Woodbine or other track and horseman execs they often complain that Pinnacle is "stealing" their customers because they offer a 5% rebate. Well, you guys have a 7% rebate that you can give us now that would crush the offshores you complain about.

The argument that they can't afford it simply does not hold water. They got this 7% added in 1996, so they were operating without it for many years. You can't say you can not afford to give something back that you never had in the first place. Not to mention, over $2B has been added to this business through slots, so we can not cry poor.

The benefits are compelling:

1. Word of Mouth and Buzz - Everyone in every jurisdiction that bets racing will know that Ontario has the lowest rakes in North America. You can spin and promote this easily and effectively. I think a 6% reduction is fine, and the other 1% going to an industry marketing plan to get the word out that Ontario has the lowest prices in North America is a grand idea.

2. Churn - HPIbets is currently the platform in Canada. We all know that churn happens most when your money is rebated daily via an internet site. We might be able to churn 6 or 7 times in a tight ADW like HPIbets.

3. More Fans Would Signup - Every bank gives away toasters for new accounts, because they know when you are an account holder you look to be a long-term customer. If the takeout reduction is done in HPIbets.com, it can grow like a bank or cable company has for generations.

4. 7% rebates would be done only for Ontario Tracks - No Santa Anita rebates, no sending money to promote another track. We promote our local product.

In the end, we might just reverse handle trends in this province and grow our sport.

Please reply below if you are for this tax being finally placed back into the players pockets to help stop this massive bleeding in Ontario. I will forward all comments (even a "yes" and "no" comment is appreciated) to whomever I can. If you do play at one of the offshores or play other low cost games now, if you could comment on if this would get you back to playing, it would be appreciated as well. If you could add your name it would be great, but I understand if you do not.


27 comments:

Cangamble said...

That is a great idea. And yes, it would lead to tremendous growth here in Ontario.
When that initiative happened over 10 years ago, I thought for sure the tracks would lower takeouts.
What I found is that the tracks haven't got a clue about growth.
A 7% rebate would lead to at least double the sized handles we see now, if not more.
I wish you all the luck in the world with that one. Fundamentally, it should happen, no question about it. But realistically, we have the wrong people running the racetracks for that to even be considered.

Anonymous said...

They didnt do the right thing then, there is no reason they cant do it now and promote the game of betting!

Anonymous said...

That is a great idea. It could lead to tremendous growth here in Ontario.

Cangamble said...

Could? I guarantee it would. Besides, HPI asks us to gamble all the time, it is there turn. In fact, they really only have two choices, swirl down the toilet real slow, or reduce takeouts and grow.

Pull the Pocket said...

I notice that Standardbred Canada and the Harness Edge have stories up. Standardbred Canada left an email address for the blog, and I just saw a comment. I will post up them here if anyone sends me an email.

Just got one from Brian:

Here is what he said.

I agree that any reduction of takeout will grow the industry. If it can be seen as a marketing tool all the better. Where we can demonstrate that multiple benefits come from this one activity it can do nothing but promote industry interest.

Ian Meyers said...

Forget my position as a guy that runs an ADW. As a player, I think it is a terrific idea to give back as much of the tax as possible.

A great idea!

Anonymous said...

From Maurie Danko. God love ya Maurie, I used your database to bet more money than I care to elaborate on. You are a great fan and participant of racing!

>>>>>>>>>>>>

The idea sounds like a good one AND it should be phrased primarily from the point of view of "improving our Ontario wagering product" (which clearly it does) and not so much from the "horse players deserve more" (sounds like every other industry subgroup trying to claw-back more).

I vote YES to your good idea. Maurie

Jeff Platt said...

The thoroughbred industry is facing a set of challenges that (so far) it has chosen to ignore. Track execs fail to understand that players have options when it comes to choosing where to spend gambling dollars. In today's environment tracks face competition... something they never had to deal with in the old days.

Games with lower rakes abound. Sadly, track execs continue to operate using a decades old non customer oriented business model. They seem to view (and treat) players as a necessary evil.

As a result, not only are alienating existing players, but they have missed out on the chance to win over an entire generation of new racing fans who have chosen to spend their gambling dollars in casinos (who oddly enough HAVE adopted a customer oriented business models.)

In the meantime the track's best customers - the ones betting the most money - are playing offshore where they can get rebates. Track execs need to wake up to two facts:

1. The offshore situation is of the tracks' (all tracks collectively) own doing.

2. These players are not coming back to the track anytime soon -

unless...

They are given a monetary incentive (as in reduced takeout) to do so.


Jeff Platt

Professional Horseplayer and Developer of JCapper Software

Roy said...

I am absolutely convinced that one of the biggest problems with the decline in wagering is that almost nobody leaves the premises up money. The racetrack needs to understand that winners are good. People leaving the racetrack with money in their pockets is in the best long term interest of racing, they come back more often and churn more money through the pools.

Simulcasting has given the player more choice, choice is good but it has also exponentially decreased the number of bettors that leave the premises up money at the end of the evening. This is a major problem.

It is so obvious that takeout rates need to be lowered. There is an optimal number as to what the takeout % should be that would maximize the long term profits for the racetrack. I'm not sure what that percentage is but am certain that it is no where near what the takeout is today.

Reducing the takeout percentage by 7% is a start. It is obviously good for the bettor and will generate more revenue for the ractrack in the longterm. I am also certain that we would still be above the optimal takeout % for the racetrack.

I agree that it is important as to how this is positioned. I think telling the tracks that this 7% belongs to the bettor will fall on deaf ears. The track needs to understand that lower rakes maximize their long term profits and that people occasionally leaving the premises up money is a good thing and not money being left on the table.

Anonymous said...

To whom it may concern
I think it is wonderful we are trying to grow our customer base . I have
been in or around this business over over 40 yrs and I remember the words
right out of my fathers mouth."train your horses in the morning race them at
night"if we don't prevent trainers from not having there horses ready we are
sunk .time after time I hear the catch drivers being interviewed and saying
"it was his first start last week so the trainer told me just race him easy
"and "he was a lot better this week " bob macintosh ,carl jamieson ,george
teague and most great trainers have there horses ready when entered to
race.i could on and on about the shortcomings and unethical actions of
certain trainers ,owners and drivers but nobody in the governing body of
this industry wants to hear it. Testament to this ,=100-1 I will not get
even a reply .
Dave mailman
Owner ,trainer ,agent

Anonymous said...

I understand your position and your proposed solutions towards a desirable outcome in your particular area of concern.Congratulations on your personal efforts and your persistent efforts to stimulate awareness.

There is without doubt a variety of variables negatively impacting the horse racing industry which need to be addressed.Industry leaders unfortunately dont appear to have a clear vision nor the need to regulate and to address regional differences so that the entire industry is on the same page.

I am aware of the efforts of racetracks to stimulate interest,attendance and awareness as handles continue to decline.In as much as racetracks are looking to increase the handle perhaps they are overlooking the obvious barriers encountered by the consumer.

In my situation I have an Expressview dish and I place my telephone account wager through Assiniboia Downs if I am interested in their particular racing menu on that particular day.I am restricted in the number of harness tracks I can play as they have a thoroughbred simulcast bias.A limited menu certainly does not sustain my ongoing interest.My desire is to wager on a number of tracks including "B" tracks in Ontario which are not consistently carried here to any extent.I am denied membership to HPI although I wish to wager online on racetracks that I choose.

Residents in Manitoba ,Quebec and Northern Ontario are excluded from membership.I continue to call every six months but membership is denied.This ridiculous situation should never have occured but obviously industry leaders allowed it to happen and are not insisting on national standards for universal participation.I agree its about time consumers had a voice in many issues-------after who makes the wheels go around.

In the meantime ,racetracks are vying for our wagering dollar while another entity is denying the opportunity to participate.I am denied the opportunity to participate online in Canada while the opportunity for immediate membership exists offshore.--- Go figure !!!

Mike

Anonymous said...

DanG, Florida: Among the dozens of compelling reasons to reduce the takeout for the heavily taxed horse player there is one that seemingly gets overlooked when discussed by management and horsemen.

New serious players…

“Whale” has turned into an evil word for many, but a quick glimpse at the NY / Kentucky pools will show that a handful of individuals represent a disproportionate percentage of the funds bet.

Even miniscule reductions of 2 points can make a HUGE impact on a large player’s bottom line. A second Ernie Daulman entering the NY market is not a bad thing and should be encouraged by reducing and marketing reduced takes.

The intelligence of the modern player is frankly overlooked by those in positions of decision. The days when the gambling market is cornered by racing are long since over. An aggressive campaign to help bring more cash on-shore will generate more revenue then our industry will ever realize.

In closing…I realize the overheads are in different worlds, but just stand next to a poker table sometime and skim 30% from each pot the way Philly park does on some exotics. The next sound you will hear are cars starting as the players will be looking for greener pastures. This not only can happen in our great game…it is happening right now.

As someone who loves this game and depends on it for a living, a plea; Stop thinking about this minute and start thinking about the next decade. Lower the rake and study the power of “churn”…to increase revenue for all.

Anonymous said...

G'Day

Great timing. This winter I looked at all the tracks I was interested in and their take out rates. Except for Win I won't be betting Woodbine. Any thing over 20 % take out I plan to eliminate as a betting option. I estimate I will spend 80% less this year. (26.5% on tri's and super is robbery). While you are at it, try and see if you can get the Breeders Cup people to publicize what their take out is????

Speak Loud

Bill Buchan

Anonymous said...

well stated ptp. It will be achallenge but I wish you success with it because without it this industry we all love will continue to spiral into the ground without a doubt. Your suggestion is one that can be marketed well also, because everyone loves the idea of "tax' ending up in their pockets. All one has to do is think of the countless commercials we see on TV and flyers in newspapers advertised "no tax" sales.

Whether the powers that be choose to go this route, or find another pot to draw such money from ( e.g., a slight reduction in purses), the key will be the powers that be recognizing the need. I wish you all the luck in the world in that endeavour.

Anonymous said...

I am totally in agreement with you regarding the need for reduced takeout. It is similar to the Laffer curve in taxation - a reduction in taxes or takeout will lead to an increase in revenue for the track. Betting seems to have gone into a downward spiral and I believe that this is largely the result of the inability of bettors to win consistently against such high takeout rates.

Ontario tracks are now dependent on slot machines (not sure what the takeout is on Ontario slots) rather than on betting on the horses. It wouldn't cost a lot to
experiment with lower takeout rates - and to highly promote this - even if it were done as an experiment. This could make it possible for some serious horse bettors
to win - and would reduce the incentive for bettors to look at offshore sites.

The only thing I don't agree with is limiting the takeout reduction to Ontario tracks. Why not have it for all tracks and let the bettors decide where they want to bet.
It could make it the North American betting mecca with people coming to Ontario to bet for the reduced takeout.

Right now Ontario has a pretty good advantage in Pick 6 betting - no government coming in and taking 25% of any "so called" profits.

Anyways I read your article in Trot Magazine and am totally in favor of a reduced takeout as a way to increase betting - and to increase the amount that will
go to the tracks.

David Reid
Kingston, ONT


P.S. As an aside I am not sure how important the powers that be consider parimutuel wagering. We here in Kingston were totally shut out of our Horseplayer
Accounts for a full 15 months due to some squabble between OHHA and Baymount who may or may not be building a track in Belleville. Maybe Kingston isn't a huge market but totally shutting us down for 15 months doesn't seem like a really smart decision for an industry that is concerned about the reduction of their
pari mutuel handle.

Anonymous said...

When I play the medowlands and there is a 10 percent commission taking out by woodbine. On a 10 thousand pay out woodbine gets my 10 percent which is a lot of money, how can they do that?

Larry

Allan said...

You better be taking this to Montreal Dean!! I never knew this about the 7%. Wow, I'm even more angry. I hope you are heading there as it seems you are one of the very few that talk about this. I have this nightmarish vision of a bunch of industry bigwigs sitting around talking about bringing in live music or a clown to paint kids faces, in an effort to bring up the wager...... shutter.

Anonymous said...

Email from a professional player, who seems to echo the malaise that players feel about this whole thing.

>>>>>>>>>>>>>>>.
Thanks for thinking of me. Some days I have the time and energy to put up the good fight. Other days I get exhausted at the thought of trying to change the policies of the people who run Woodbine. This is the 2nd day I have felt the latter.

I obviously wish you the best of luck in your presentation. Feel free to bring me up as an example of someone who has bet $1,376,802 with a legal rebater over the last 7 months.

Until WEG lowers their takeout substantially and/or offers a reasonable rebate, they will never win back customers like me who bet 7 days a week.

Anonymous said...

I ONLY play venues with lower exotic takeouts. I refuse to play any track pool when the take approaches 21% or more. Last year i never had played Ellis park until they dropped the take on the late PicK Four to 4%. They got my attention and my dollars. I played the races individually as well so it attracted me to their product.

Anonymous said...

You will get more repeat customers with a lowered takeout, it's a mathematical fact.

Anonymous said...

I play thru parimutuel rebate shops AND offshore, and would much rather have an across the board lowering of takeout. I get the same or better rate while the betting market allows the bad players to stick around longer and wager.

The main thing [you] need to emphasize is that it's not an overnight thing. Laurel tried it for a three week meet and were "disappointed", but it takes longer than that for the takeout reduction to make a significant difference to the average bettor's bankroll.

Seattle

Cangamble said...

Woodbine didn't allow their valued HPI customers the ability to bet on Laurel during the experiment last year. Also another major ADW didn't carry Laurel as well.
We have no idea how much of the extra money won at Laurel thanks to reduced takeouts was bet on other tracks. One thing is for sure, horseplayers most likely didn't hoard their extra winnings.
But it was too short of an experiment to see if Laurel would eventually get heavier regular action. I don't think reducing for a short period or only a special type of bet is the route to go, it has to be an ADW offer (rebate) or a few tracks getting together.'
It is a gimme that WEG needs to reduce takeout. They have the 6th highest overall takeout in North America and they have slots to boot.

Anonymous said...

While I am less than expert regarding the racing products in Canada, having been around the game in the States' for almost fifty years provides me with the following insights:

1. High takeout subsidizes an inferior product. How else can you explain the continuation of flat racing in Northern California where 5-horse fields have become the norm?

2. High takeout finances rebates and enables non-parimutuel offshore operators to grow and profit. Do the math. ANY rebate gives a player a better chance at turning a positive ROI even when it's simply a return of his capital from excessive rakes.

3. High takeout positions racing at a disadvantage compared to other gambling venues. There is less to payout. There is a higher opportunity cost for playing and a higher operating cost for staying.

4. The next ten years in the racing game promise a tumultous time for those who do not overhaul their product in order to retain and grow their customer base. This includes both takeout and breakage reform and making the customer an active partner along with the tracks and owners' groups.

Richard Bauer, USA
www.trackthieves.com

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

It's like the powers that be think you are going to run off to Australia with the 7% rebate on your wagers the next day.
HELLO!
Nobody bets at a place with rebates to walk away the next day with the money, they bet a place with rebates and keep betting until the money is gone. Not only that, knowing that they are getting something back, in most cases they bet more, or with a feeling of protection. It's quite simple.
I think WEG believes there is a rather large demographic out there willing to bet 1 million to show on a horse via HPIbets to make the 7% and cripple them or something? Why do they think like that?
Why do they blame offshore wagering sites? You honestly think the money that these offshore wagering sites would come into the pools if they weren't getting a rebate? Not a chance.
Who wants to bet with somebody that doesn't even care if you bet or not?
Why sell something when you don't care if anybody buys it?

best regards,

Lou

Anonymous said...

Note, received this via email. Forgot to post first name and residence, so I deleted post 23 and am placing it here.

>>>>>>>>>>>>>>>>>
I was using pinnacle offshore until the debacle. Because of the rebate I found a way to make place bets profitable. I wound up with a 3.2% loss, but a rebate of 7%. It actually was a rebate of 6.2% as they did not give a rebate on 2.20 horses.

Now the kicker is, I went from betting about 30 to 50k to 1.3 million that year.It made the churn factor possible. If takeout is lowered it may have the same affect. I now have changed my play where place betting is profitable, but it is so small that I have stopped. I would definitely go back if takeout is lowered significantly.

Thanks

Vic
Los Angeles

Anonymous said...

The math against making money at horseracing is all but stupid, but what I call the "dream" has been all but been removed from the betting end horseracing. Maybe there never was such a thing. But the dream of being a professional handicapper is pretty much not attainable in todays environment (yes there are exceptions few and far between, but their visibility is zero). I can turn on ESPN just about 24 hours a day, and find some example of the "poker dream". College dropouts, put in their time, some hard work and a few hard lessons, and now they sleep till noon, play poker on TV and make a million a year. While it may be no easier to play poker at a high level than it is to pick a winning horse, the rake in poker is 5% at a maximum. Same with sports betting. A professional bettor that picks 55% winners at 11/10 odds is paying 5% in vigorish. The biggest example is the day trading "dream" Etrade/Ameritrade/Schwab made BILLIONS taking commisions that I'm sure averaged well below 1%.

I have no doubt that if they cut the takouts to 5% across the board, eventually the pools would be atleast 5 times bigger (probably 25 times bigger). Obviously this can't happen all at once or the tracks would go out of business (still think about half of them need to at this point). So in my fairy tale world, all the stakeholders would wake up one day and realize this, propose to drop the takeout 1% each year for the next 10 years. Then take a page from the Hong Kong book of racing, where information is given away not charged for, and most importantly where cheating is policed and punished to the utmost extreme. Then take advantage of the fact we live in a global world where internet video gets better everyday , and market said low takeout racing to all parts of the world. And finally develop a robust and secure betting platform that can be accessed in a myriad of ways and most importantly bets can be batch submitted via computer. (ie encourage syndicates which is not out of the hong kong playbook)

I've never bet horses "Seriously", but if I knew that I could count on there being a 5% takeout in the future where my chances of getting cheated were very low, I can guarantee whatever circuit proposed this plan, I would start studying tomorrow. While I'm sure it will never happen and even if it did it would start off slow and probably be repealed a year into it. But if done properly sooner or later, a tipping point would be hit, where the large pools, accompanied with the tales of success would bring media attention, which in turn would bring the new horseracing "daytrader". Oh what a pipe dream.