A long time ago a scientist noticed that when a dog saw a lab coat, he drooled. It turns out that the scientist wore his lab coat when feeding the dog. Pavlov's work was begun and we learned all about conditioning. In racing, it turns out when a track sees a horseman group, and vice-versa, we are conditioned that there is gonna be trouble.
At Woodbine this month, negotiations between the horseman group and Woodbine are ongoing, so I hear, to strike a deal. There are a number of things at issue, namely dates, private property rights, purse distribution and so on. Those are all important issues, and I am sure they can be worked out, however, it will not be easy; it never is.
I wonder though, why not work on some common ground, and help the game at the same time?
Currently the revenue agreements banged out between these two parties are pre-1990 in nature (and this is not just here, this is the way they are done all over racing). If the takeout is 22%, the horseman’s group takes a fixed percentage (let’s say 10%) and Woodbine takes a fixed percentage (say 10%) and the rest goes to various entities. This is how I understand it anyway. So, what happens if we want a wagering sale, for example a 10% takeout pick 4 on Friday’s? We can not. The ink on the deal assures it. The horseman group is entitled to 10%, the deals are not pro-rated, and Woodbine is not a charity. We are boxed in by deals like this and if you don't believe me, look at how hard Ron Geary at Ellis Park had to work to get his 4% pick 4 done.
In other parts of the world, the funding of purses is based on gross profits. For example, betfair gives 15% of gross profits to purses, as do bookmakers. This incentivizes them to grow handle, and churn as much as possible, by finding a price point that makes them the most money. When they make the most cash, there is more cash for purses. If betfair, or a bookmaker wants to have a 4% takeout sale, they have a 4% takeout sale. They do not worry about splitting a pie at the beginning, they worry about it at the end. That is why you see decent takeouts and a more optimal system across the pond. Hong Kong is currently under a similar arrangement.
Why not here? It can be done in this small way, rather easily. All we have to do is make sure there is a provision in deals between horsepeople and tracks, where the pie is split at the end, not at the beginning. This way it can free up this business to do business.
Will this cure harness racing and its handle problems? Of course not, but it at the very least allows some promotion for some bets to the $15-20B betting market out there. And as we all know, if a ton of this money that is bet at 10% takeouts versus 20% takes, and they are bet in HPI, or other internet platforms, you will see this money churned back. If someone gets paid $2000 for a pick 4 instead of $1600, they do not stick the extra $400 in a sock. They just know that their balance is higher and they rebet it. This has been happening all over the internet betting world since the late 1990's.
The time is now perhaps, to change the funding model in the business in a relatively simple way to grow handles and catch up with the rest of the world. We are not reinventing the wheel here, we are simply trying to write a 21st century mechanism, where we can do things that everyone else in gambling has been doing for years. And in the end, finding common ground in these deals is better than the alternative that we seem to see all too often.