Wednesday, December 7, 2011

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.

11 comments:

Anonymous said...

I wish racing would hire the fellow who sets lines at Bodog for six months (and give him full rein). The pricing mechanisms would be all fixed.

Pull the Pocket said...

I don't think that'd happen anonymous. Bodog and other places that take bets and maximize volume (I believe) are extremely happy racing insiders make pricing policy. They make more money from the customers that leave racing.

PTP

Anonymous said...

How much lower does the handle have to drop before they get the message?

Anonymous said...

They can punt it down the road..

Problem is, they're running out of road...

Phil said...

Because some RTIP grad couldn't find data, we kick the can?

WTF?!?!?

Why was he even on the panel, with all the gambling people who have run successful businesses out there?

WTF??!?!?!

Phil

Pull the Pocket said...

Phil,

It's not uncommon for an industry person to moderate (or sometimes join in) a panel. Since the RTIP runs the conference and one of their students is employed in the industry and interested in takeout, I am not surprised. He may have even suggested the panel.

A few panels I have been on had outsiders (or alternate bet takers) and I think they are most interesting and informative. So I get your point.

Even at marketing conferences I gravitate to alternative views for the most part, because the next big thing usually lies outside a given industry or business. Just my opinion on that, though.

PTP

Anonymous said...

These people are either morons or conspirators.

If you need 'study' to realize that paying higher odds on winners is going to create a bigger handle, you're not qualified to address the issue to begin with.

Check out the odds offered on Betfair on NY racing sometimes to see what a rip the parimutuel pool is.

Anonymous said...

Can you people not understand plain english and common sense:

Those extremely likely to be grumbling about takeout rates in horse racing ARE THE PROBLEM!!!

IT IS YOU YOURSELVES, and not 'takeout rates' who are the "insiders" from which the general public runs/stays away where it concerns their potentially taking interest in horse racing.

A study introduced last August pointed out that less than 2% of those surveyed even KNOW about takeout. From that, it is clear to understand that takeout is not the problem.

What racing bigwigs are doing is akin to trying to invite new people to play the lottery in a situation where the OTHER GUY has a better chance of winning than they do!!!

Nobody wants to play a lottery like THAT!


If some organization is going to raffle off a car, people only play because their dollar has THE SAME CHANCE of success as does the other guy's dollar.

It is precisely because of the same collection of idiots who are screaming about the non-issue that is "takeout", that the general public continues to want nothing to do with horse racing.

How much more clear and simple does this have to be before you look in the mirror and accept the reality which you yourselves have created???

Anonymous said...

Takeout both funds purses and pays the track's expenses, from staff to paper for the copiers to air conditioning and heat. Bookmakers don't bear the cost of putting on the show. They can afford to charge lower rates for their services.

Anonymous said...

"Takeout both funds purses and pays the track's expenses, from staff to paper for the copiers to air conditioning and heat. Bookmakers don't bear the cost of putting on the show. They can afford to charge lower rates for their services."

--- What does that have to do with "optimal pricing", anon?
Whether a casino has 10,000 machines w/ a $$$ billion in overhead or 5 machines with a thousand in overhead they both charge 5%. If a bookie has 10,000 employees, or 1 employee, they both will give you pk -110.

Ted in Toledo said...

I haven't made a bet taking pari-mutuel odds on over a year, except when there's a plunger show bet, then I'll take the rest of the field to show, but even that's getting old. The players have just about caught up and there's very little profit anymore unless it's done at a small track like Mountaineer.

I now do all my horse betting at ehorsex, a betting exchange that bets on major US tracks. It's been around for years. Even money shots pay 3-2 or higher sometimes. I've cashed on 2-1 shots at 5-1 many times. And what is their takeout? They take 2.3% of winning bets. It's hard to go broke and I've cashed regurarily.

The racetracks are concerned about their bottom line. I just wish horseplayers were too. The one's who a left are the stupidest. They show up, pay for parking, pay for admission, programm etc. That adds up to $16 a day BEFORE YOU MAKE YOUR FIRST BET.

Racetracks have to get meaner and leaner in order to survive. They take up a lot of ground that could be used for other pruposes in the off season. Racing meets need to get shorter too.

And the pari-mutuel takeout is absolutely @#$$. Don't let men making well over $100,000 a year tell you that the takeout is necessary to run the sport. Instead of asking the horseplayer to fund everything, why don't you contribute by taking a pay cut?

Or force them to wager 25% of their earnings on horses. Let them get to see just WHAT A BAD BET HORSE RACING IS . . .