RTIP Takeout Thoughts - It's a Punt

The panel on takeout rates today, with an industry insider, and our pal economist Caroline Betts failed to deliver too much to bridge the industry's long-suffering handle losses, in terms of pricing. One of the presenters mainly focused on data accumulation, rather than an actionable plan to test lower takeout levels, and this is what dominated the industry press.

• Steve May, the business manager for the Racing Commissioners International, said that a project he undertook to examine takeout rates while studying for his master’s degree at the University of Arizona’s Race Track Industry Program failed to generate any firm conclusions on how takeout rates affect betting because he was unable to acquire enough data on handle at racetracks and handle by bettors.

• "The conclusion is blank," May said. "I don’t have enough data. It would be unethical to say there is a conclusion. There’s a lot of work that need to be done on this, and to cite studies from 1976 is not good business."

So, there was no data and without data what'll happen is we'll do nothing. It'll be yet another punt, by an industry with a hard-core culture and history of punting the football down the road.

As Dave Vicary, a retired tech executive noted on Twitter:

"It's a classic argument used to avoid decision making, responsibility, and change."

I agree that's what the industry takeaway from the above will be.

I would've personally liked to have seen a narrative that focused on some sort of goal, with the stated assumption that rake is too high; mainly because there is data - real world data - to back that up.

For example, we all know bookmakers in Britain - who have been doing so for two or three centuries - charge about 5% for shorter shots in the win pool. They don't do that because they're a charity, they do it to make the most money from their customers - it's their "optimal rate". By simple reasoning, that means the 20.75% win take at Turf Paradise is probably way too high.

So:

How do we test the historically derived profit maximizing 5% takeout rate in one pool (that has been borne out of centuries of data) when we have tracks charging 20.75% here (a rate which is completely capricious)?

If you try and work a plan to implement that - say by getting all tracks on board to try a 12% win pool rake, or a 10% one sans rebate - then you can accumulate data and adjust. This is what casino's do; they tweak and test all levels on slot machines constantly.  Your neighborhood bookie does too. Notice how your he/she charged ten cent lines in 1911, just like they do in 2011, without the use of excel for Mac?

How do we work towards that? What are the next steps? Do we have an action plan? Can we discuss it? These are the ideas Caroline has been working towards for some time.

Unfortunately what we tended to get here is yet another industry-led narrative that will probably involve setting up more committees to answer a question that every gambling expert, or businessman or woman out there knows the answer to already - our takeout is too high.