Friday, November 23, 2012

Racing Knows Low Rake Matters. They Just Can't Do Anything About It

I did a quick scan of the twitter line and noticed Lenny Moon's post on takeout and transparency resulted in some interesting chatter. There are some industry insiders that believe takeout doesn't matter much, and use examples like Laurel's one meet takeout experiment years ago, or a promotion at a website, where changes to rake didn't make handle go through the roof. Others who play with lower take, or play daily and fight the rake vehemently disagree. It's fascinating.

On the outside, the industry trots out a company line on takeout, but I firmly believe actions speak louder than words. And data, of course, rules the day. Takeout matters a lot, but the industry doesn't have the foggiest how to do something about it to grow horse racing.

In the 1990's people like Ernie Dahlman and David Cuscuna were betting big dollars, but paying full boat. Then along came the low rake ADW's or phone services. Once they found low take, their betting exploded. More and more people flocked to the low take avenues and their handle went up, as well. Tracks knew about these avenues but the industry hoped they could wish them away. These places were driving so much handle, though, there was nothing they could do about them but keep quiet about it. Some folks tried cutting them off, some tried yelling about them, calling them names. Nothing worked. The power of low takeout was huge. They were here to stay.

Fast forwarding a dozen or so years, these ADW's with low rake supply handles (some with only a handful of clients), greater than the behemoth Twinspires.com does.

Does low takeout matter? You bet it does and that's all the evidence you really need. Ask these players to pay full boat in Twinspires.com or TVG, or HPI and they hit the exits. Handle would probably be $5B next year.

Not long ago there were, and are, moves being made. Even the big boys have relented and are trying to gain these higher volume, low take, clients. On twitter or in industry press they might say one thing, but their actions say another. The market in the 1990's was telling them what to do, but like a lot of things in horse racing, it took many years to respond to it.

This policy is simply shuffling the deck chairs, clearly. It's a fight over existing clients and it's an example of racings short-sightedness, in my opinion. They know low rake matters, they know people's handle's explode when they win, but they can't or won't do anything about it but try and land a few whales for themselves, to scrape out some high volume, low margin handles for the P & L.

There are some tracks trying to do the right thing, but they're up against it. Balmoral Park, Tioga Downs in harness racing are two good examples. The success of Tampa Bay since 2001 is another. But it's very difficult. They are swimming upstream against a tremendous industry current.

The biggest problem that has faced, and is facing horse racing as a viable gambling enterprise, is the juice. Racing knows low takeout is important, but they have not tried to bring the everyday player into that low takeout regime. The new Ernie Dalhman's are not cultivated.  We simply sign them up, charge them 21% takeout and hope they keep betting.

And guess what? They don't keep betting. They get tired of losing and leave, or play $50 a weekend. Why, because takeout matters, yes, but delivering low rake to potential long-term betting customers matters almost as much. The industry grudgingly has accepted the former, but has been a dismal failure on the latter.


24 comments:

Anonymous said...

My handle increased by a factor of 15 when I started getting low takeout, through daily rebate. It's the only reason I am betting horse racing today.

When I read industry insiders tell me it's not happening, I am not sure we speak the same language.

Anonymous said...

I have made similiar comments in the paulick report and he banned me. I used to bet over $100,000 a year on horse racing. Now? I live just 5 miles from Santa Anita AND DIDN'T EVEN GO TO THE BREEDERS' CUP.

Back in the day when the big tracks were drawing 50,000 fans on Saturday, I needed racing more than it needed me. Times have changed, I don't need it anymore, but oh how they wish they could have my action back.

I had written letters to the powers that be at Hollywood Park and Santa Anita for over 30 years warning them on how bad a bet horse racing was and when faced with competiion, it would lose it's luster fast. Hollywood Park people listened a lot more than SA's people, but in the end, change in this industry is not in the dictionary.

If they DO change, and it would take a miracle, I might come back. But I'm not holding my breath.

Markinsac

JLB said...

I am a decidedly low-volume player. But I am thrilled that the Mutuels Online ADW gave me two separate $ 100 wagering credits, one for funding via Dwolla, the second for wagering $ 100. They certainly have impressed me with their service, and rewards.

Jeffrey M. Snider said...

Sarcasm: Lower commissions (part of the take) hasn't worked in financial markets at all.

To the contrary, volume (handle) has EXPLODED over the last thirty years as commissions and come down and spreads (bid/ask) are tighter.

Without question lower rake leads to growth in handle, over time. There needs to be a long-term commitment from leadership.

Leadership, however, is lacking due to its being over-populated by political types and industry types who are essentially no better than a collection of clowns in a circus with no tent.

Doubtingthomas said...

I have attempted to convince every racing jurisdiction that received slot money to pass along some of it to the fans. No luck. We have Parx awarding $22,000 to restricted $7,500 claimers while their fans are charged 31% to bet exotics. The massive slot money resulted in maidens running for $85,000 at Saratoga and fans still paying a $3 general admission charge and $8 for seats at the top of the stretch. I begged NYRA to try "no take Fridays" for the meet and never got one response. I currently wager only with an off shore book that gives me 4% rebate on straight bets and 8% on gimmicks. The racing industry has virtually destroyed itself with stone age thinking and methods. Pitiful.

Anonymous said...

There are some insiders who WANT to restructure the betting pools..... but they have to deal with horsemen. It's a difficult proposition.

If you aren't getting a rebate, you're costing yourself money. Racing will not help you, you have to help yourself.

Anonymous said...

When I listen to the Horseman and tracks they make me sick.I stopped betting 6 months ago.



One other thing,I'll keep bad mouthing this game to people i meet until I see change.


frank L

Anonymous said...

Welcome to the non-betting-on-horse-racing-anymore club. There are many other and much sounder bets to be made on online poker or sportsbetting.

Horse racing just doesnt get it and if you are a stupid horse player like I was for 40 years, enjoy the ATM machine.

In California, they continue to give much to much power to the trainers who have screwed up the game in so many ways. The ABSLOUTE WORST THING THEY DID WAS RAISE THE TAKEOUT WHEN THEIR FAN BASE WAS DWINDLING.

MORONS! THAT WAS THE TIP OF THE ICEBURG FOR ME.

THANKS, JOHN SADLER WHO TALKS ABOUT NOT LIKING EXCHANGE BETTING BECAUSE OF "MORALS". PERHAPS HE SHOULD HAVE USED SOME MORALS WHEN HE GAVE HIS HORSES OVER MEDICATION.

MARKINSAC

Anonymous said...

I totally agree with Doubting Thomas...outrageous that the slots windfall benefited everybody but the player.

Anonymous said...

Did any of you think that the slot tracks are preparing racing to fail? From a business standpoint, racing just drains profits from a highly profitable casino. By charging outrageous takeout rates, they are trying to drive the player into the casino, and hopefully, for them, end racing as we know it.

And the racing guys bit, hook, line and stinker.

Markinsac

Anonymous said...

You are just, simply, WRONG!

Were you correct, they would lower the 'takeout' on the Powerball lottery and betting there would go through the roof.

The Powerball Lottery has minimal overhead, and plenty of room to 'experiment' with your ideas, yet they don't do so for a reason.

And now you want horse racing, which has major overhead, to squeeze into whatever profit margin remains, and somehow "lower the take"??? Sounds brilliant!

What you are so happily and eagerly overlooking, is that the very people who would comment in support of your incorrect perceptions are themselves largely responsible for racing's inability to grow.

As time has proven, "20%" as a suitable level of blended takeout is a workable model, but it is persons as confused as yourself, and you, who, despite feelings to the contrary, are effecting a much HIGHER takeout onto the would-be newcomers to racing.

In brief, You ARE the problem. Everyone knows that you simply can not be a part of any solution until such time as you cease to be part of the problem.

Idiocy like yours is written every day throughout the horse racing blogosphere, and it is always penned by the very people who are the problem.

Did you not pay attention to the survey last year which determined that "fewer than 2% of everybody even knows about takeout???"

You don't see anybody interviewing racing newcomers or would-be newcomers in the track parking lot, or on the street, and them responding: "well, I'd take interest in horse racing but for the fact that the house cut is too great". That simply isn't the problem.

The problem, as it has been for decades, is that the vast edge known to (just those players who tend to write this crap about the takeout being too high - {mostly because, in the past, they were perfectly capable of beating the novices every day, but now they've reached their limitations when it is down to trying to top one another each day}) is simply toooooooo great for the true newcomer to overcome in practice.

You and your supporters remind me of the guy who sits down at a poker game and who can't seem to find the sucker there at the table. In summation: you ARE the problem!!!

Anonymous said...

Can you please explain how "I am the problem" when I don't even bet on horse races any more? In fact, attendance at many top tracks is one-tenth of what it once was. Betting on horse racing has fallen from $15 billion a year to $10 billion.

signed: THE PROBLEM

Anonymous said...

Hello Anon,

I have seen your comments on many other sites and you post the same thing. With respect, your premise is flawed, because you are quoting statistics that represent a caputured market, not a market racing wants.

If you quote surveys on sports bettors, almost 100% think racing's takeout is too high, thus they do not look at it. It's similar with poker players. These are the uncaptured market, or as marketer Seth Godin calls them "the great unwashed". It's the market racing needs to look at: They are gamblers, with disposable income, with a predilection for risk.

What you allude to in your various blog comments is what might happen in a restaurant.

You own a restaurant and it serves beef only. There are thousands of customers that want chicken, but you do not serve chicken, therefore they are not in your restaurant.

Your accountant says "you should serve chicken and increase your sales". You say "I have asked my customers and they dont want chicken, they want beef, so YOU ARE WRONG"

Of course they want beef, that's why they're eating there.

I hope that helps you understand why you don't get more agreement on your various comments on blogs.

Anonymous said...

Does someone want to explain poster #3 above about margins meaning little to overhead? Please.

Anonymous said...

To the anon whose misguided effort fell well short of what even he was trying to suggest:

First of all, no "statistics" are quoted at all in what is purely common sense, and nothing more.

Racing, such as it is, cannot be particular as to which subset it wants of the market it doesn't already have. The entire realm is two parts: the market you have, and everything left over.

The only one "quoting" surveys here (aside from my tiny reference to how few people in all categories even know about takeout) is you.

You are merely one of the problems trying in vain to somehow (seem to, at least) reason your way out of being said problem. This selective reasoning is fool hardy.

Clearly this has nothing to do with restaurants, or any of the other circus side acts which racing pretends will bring back the crowds in droves.

Any fool who can reason his way through elementary math can understand that, in ways unique to horse racing, those in the know, through their own doing, greatly increase the effective takeout burden on all of the rest (while so often, and at the same time, crowing to 3rd parties that it is "the takeout" that is somehow too high, when in fact the takeout hasn't changed markedly in many decades!!).

Repeating the simple terms you couldn't seem to grasp the first time around: The rates of attrition, caused in greatest part by your own ranks (the unwarranted complainers) have evolved to become so great that you have chased-away the novices, and dis-enchanted the newcomers to such an extent that you are now cannibalizing your own ranks. You have squeezed yourselves to such great extent, without many more suckers to clean-out, that your only remaining loophole is to hope that somebody buys your idiocy about the takeout.

Politicians and track owners are well aware that takeout rates haven't changed significantly in many decades. We here are not concerned with factors other than what is DIFFERENT in 2012, about horse racing, than was the case in the 1980's and the 1970's. Takeout, in that context, is effectively a constant - and not a variable, and as such, takeout can not be the culprit.

The sharper industry folks can see this clearly - now why can't you??

The variable is what you have been doing to the would-be newcomers, having been escalated and magnified many times over by simulcast wagering. YOU did this... and there are more of you, and fewer of them (newcomers) with each passing day.


You can feed them chicken, or beef, or tweet them in the paddock all you want... but that is mere fluff, when the underlying effect of your own actions is killing the game you pretend to attempt to revive.

At least show the good common sense to stop pretending.

And the sole reason I don't "get more agreement" is because the only waters I'm in are otherwise comprised entirely of those who are the culprits. The correct analogy would be that of a good cop circulating amongst the inmates and the guilty.

Lastly, when you can produce a restaurant serving either chicken or beef marinated in parimutuel wagering it is only then when you should return with what I hope will be a much better constructed, and more relevant analogy.

Anonymous said...

Sir,

I will repeat it again: You do not get support because your comments use circular logic.

As for not using stats, well of course you did:

"Did you not pay attention to the survey last year which determined that "fewer than 2% of everybody even knows about takeout???""

That's a stat with you saying no one cares about takeout.

Then you write:

"greatly increase the effective takeout burden on all of the rest"

So, takeout doesnt matter because only 2% of the people say its an issue, but we're increasing the takeout on all the rest which hurts horse racing.

Interesting argument!

As for the rest of your post about the 1970's, the logic again is flawed. In the 1970's racing had a monopoly. They could charge 40% and still have some people in the door.

They monopoly priced at 20% takeout in 1970. Wiki monopoly pricing if you'd like.

Then the gambling world changed and they still monopoly priced. That's why they're doing worse than other gambling games.

I hope that helps you understand gambling economics, just a little bit.

Cheers!



Cangamble said...

People do not have to know what takeout is for it to negatively impact their desire to bet horses more than they do.
For example, slot players are less sophisticated than horseplayers, I doubt very many know or care what the casino hold is. Why not make it 20% like horse racing? The answer is simple, it is at an optimal rate that has been tested by casinos over time. It is at a rate (between 5-8%) that gives many players the false illusion the game is beatable, while giving most players enough bang for entertainment buck as well.
The reason why poker is popular is because the rake is low enough that there are some visible winners. To get the poker crowd, the game needs to be perceived as beatable. At an average takeout of 20% there are no visible winners and the result is that nobody in their right mind believes it is beatable, whether they know about the 20% average or not.

Anonymous said...

You say me using statistics aren't "relevant" yet you say only 2% of horseplayers even know what takeout is? OK, and I'd bet that those 2% account for 50% of the handle. OK, so tracks have one-tenth of their former attendance, NOT RELEVANT! Betting on horse racing is down 50%, NOT RELEVANT!

At a 20% takeout, just the $10 bettor would be stuck $200 after 100 bets. The sportsplayer would be stuck $45 after 100 bets and the blackjack player would be stuck $20 after 100 bets. NOT RELEVANT! If there was a matchrace at a horsetrack, and equal amounts were bet on the two entries, the track would pay back 60 cents on the dollar on either horse when the true odds would be dollar for dollar. 40 cents would be eaten up by takeout. NOT RELEVANT!

How do you beat or attempt to beat a game with odds like this?

If you think horse racing is such a sound, I challenge you to post your picks here on this forum each and every day. At the end of a month, we'll see how well you did . . . c'mon, put your money where your mouth is!

signed: Not relevant poster who posts on other sites and is the problem

Anonymous said...

My god, no wonder your sport is dying all around you. "Takeout" in Turkey, is effectively 50%, and the handle is UP there!

Now drum it through your collective heads that "(the fixed level of)takeout" is NOT, has never been, and will never BE the cause for horse racing dying all around you.

It is your own collective impact on everybody else which has been eroding and will eventually kill horse racing in North America!

These brain-dead proposals you continue to make, like half-endorsing the lower-takeout bets (the half where somebody should try it - and never the half where you yourself then play those tracks), just encourage individual tracks to cost their vital simulcast sites considerable revenue.

It is easy for somebody at Podunk Downs to say: "we're gonna change our pick-4 takeout from 24% to 15% this season" when they handled $1200 on-track. They cost themselves $108 there. Meanwhile, at the satellite spots, from which the bulk of the hoped-for pool is wagered, the mere break-even line is an increase of 75% in pool size. Meanwhile, you've left money on the shelf for 4 races, while dozens more wagering opportunities for your customers have passed.


It sounds as if the main dog in this fight is still having trouble comprehending:

Get it through your head: the takeout itself is a constant. It is your collective impact on the effective takeout on everybody else, which is killing horse racing, all while you pretend you want to turn things around.

And you don't even seem to understand the "survey" we keep citing. "Fewer than 2% of everybody even knows about takeout".

Put in different terms you might know: "We ARE the ninety-nine percent!!!"

If you need far-flung analogies to understand the most simplistic common sense, then consider a fish tank:

Take a 20 gallon tank, then read somewhere that the number of fish you got require 18 gallons of water to stay alive. You fill the tank with a few gallons of water, then you put the fish in, then you put the gravel at the bottom, with the wreckage from an old ship, or a pineapple (if that's your theme), and then you fill the rest with water, somehow measuring the 18 gallons plus.

You people are, to the mutuel pools across this continent, the equivalent of putting giant, space-sucking rocks in the fish tank, threatening the existence of the whole environment because of your own collective impact on the pools.

You are like politics all over again... where one percent of society is attempting to force change onto everybody else, while at the same time remaining unwilling to pay your own freight.

Lastly, unlike in politics, so-called "support", from the one percent is valueless.

R said...

Great blog PTP - highly entertaining. I am watching a man talk gambling, who doesn't gamble. Then when smart people who do gamble don't agree with him, he blows a gasket.

Better than watching the "Voice" and I love the Voice.

Anonymous said...

Smarty, post your race picks for a month and demonstrate that the "constant" takeout rate can be beat. c'mon, quit beating around the bush!

You have the opportunity to shut me up once and for all. I suggest you make at least one pick a day and post it here well before post time. If you beat the game after a month, Ill never post about horse racing again.

Deal?

signed, THE PROBLEM . . .

PS. I really liked your point, "youve said the SAME things in other forums" therefore that automatically makes them irrevelant.

Cute.

Anonymous said...

Another thing those in the industry don't look at is the constant fees the horse player faces. At Santa Anita, it costs $4 to park, $5 admission, and $7 for a racing form, more if you also want a program. If I go to the races only twice a week, that's over $1,600 a year and that's before I make my first bet. If you go 4 days a week, $3,200 gone!

Now I don't expect those in the industry to pay these fees, after all, you put on the show. But by not paying everytime you go to work, you don't understand what the horse player is facing.

At the track, I'm stuck $15 before my first bet. The local casino sends a bus and gives me $15 in free slot play when I go there.

See the difference?

Signed: THE PROBLEM

Anonymous said...

Where's our friend? I miss his chicken-to-beef and fish in the gas tank comparisons. I was really trying to understand it.

-THE PROBLEM....

Anonymous said...

I think he's saying we're SPILLING THE BEANS! Horse players don't need to know what the takeout is kind of like eaters don't need to know what's in their food. Shame on the governmment requiring the ingredients on the label.

How is educating the bettors bad news? Isn't the truth the best option? If you're ashamed of your product, change it.

signed: THE PROBLEM