The DRF yesterday compiled figures in terms of handle, field size and purses for slots and non-slots racetracks. The results, although alarming, should not be a surprise to anyone who follows the sport, or who has followed how these slots agreements were written.
"Racetracks that received subsidies from slot machines in 2010 generated
on average only two-fifths of the betting that non-subsidized tracks
generated even though they distributed nearly equivalent levels of
average daily purses"
In harness racing these results are commonplace. It is normal to see a track give out $100k in purses, with less than $40k of nightly handle. It is also not uncommon to see upwards of 90% of all purses come from the slot machines.
What went wrong? I believe it can all be traced back to the singular policy-focus on the supply side, with a hopes that this would increase demand.
As far back as 1995, while lobbying for the machines, the narrative focused on purses leading racing to the promised land. The thought went: If we offer better racing through higher purses, people will bet more, and off we go. This might make sense on the surface, but when we dig deeper it was a plan built for failure. Studies like the University of Louisville showed as far back as 1998 that when we double purses handle only increases six percent.
Not to mention, takeouts were always too high and were still at 22%. Now they brought a 5% takeout slot machine on the premises and expected to have on-track demand rise?
In addition, adding slots at tracks seems to have taken the dumb money out of the pools, making betting even a less desirable proposition to core customers, or to potential ones.
The demand side has never even been looked at. A lot of people, way back in 1996, were warning about this. And even governments were trying to lead racing (believe it or not.) In Ontario, the politicians offered racing back a 7% parimutuel tax, asking it to be used to stimulate demand, through lower takeout.
What happened? Very little. The money was taken by different alphabets and never returned.
The sad part about the above, is that we keep doing the same thing over and over again, expecting a different result. Virtually every slots deal written since Ontario, almost 15 years ago, is exactly the same: Put all the cash into purses, and demand will go up. It was this way in Pennsylvania, it's this way in New York. On the demand side, the entire slots castle was built on a premise of pure folly, and we have repeated it.
Even today in other areas, the demand side is ignored with the hopes this failed mantra catches on. In California purses were raised in the short term, at the expense of the customer. It will likely fail, just like the dozen or so previous times it's been tried.
Adding to the economic morass we see in the sport, allocation of purses has thrown even the supply side out of whack, exacerbating handle losses. Slots rich Indiana and Pennsylvania for example, have killed field size at Keeneland and Churchill. Slots at Chester has killed field size at the Meadowlands. Our flagship tracks, the ones that people patronize, are being hampered by places that people do not bet. It's like opening a top of the line lemonade stand in the Arctic, and expecting to grow demand for lemons.
Over the years, on this blog, at wagering conferences and elsewhere, there have been suggestions offered to grow demand. Things like player rewards, takeout reductions, set asides of slot monies for slush funds to attack and cultivate a new base, etc. There is some recent movement from the tracks and horsemen to finally address these things. For example, Jeff Gural has asked for "2% or 3% of slots money to be set aside" for player and customer cultivation. In Ontario, funding a slush fund from slots to enact numerous (mostly customer-centric) ideals, was shot down; but the plan was at least spoken about, and constructed.
But really, there is little progress. There is simply no one there to lead.
In the meantime, customers continue to look up, see a $30,000 purse with $2000 in a win pool, and wonder what might have been. It seems tracks and horsemen groups are starting to see the same thing - when you focus on the supply side, you get supply, but when you ignore the demand side, there is no one there to buy.