Racing's Pricing Evolution

Good morning everyone in racing land!

Bill Finley, fresh off his Sweden trip, dishes on Grand River's lower takeout plan in Ontario (pdf). Bill makes some excellent points, not the least of which is that in simulcast land, smaller tracks with small pools have a tough time making lower rakes work.

Pricing has evolved in racing over the last fifteen years. We've gone through several iterations.

For those who don't follow it like gambling geeks do, here's a summary.

First, was the 'no reduction in price, anywhere anytime; we are still a monopoly and no one cares about price' phase. This was when you'd hear things like 'pricing does not matter because I walked the grandstand and people don't even know what takeout is'. Near this time, slots were introduced to several jurisdictions, where all money went to purses and profits, with nothing to the customer. The customer did not matter in this phase, because they'd bet cockroach races at 30% rakes, according to mass thinking.

In the mid to late 1990's, the Ernie Dahlman episode occurred where he moved his tack to Vegas to play - where he got lower pricing. That first salvo into lower pricing was the first big opportunity for racing to learn about their prices being far too high (for some at least). The customer was talking.

Low takeout, independently owned shops, began to prop up, marketing and selling racing's product for them.

After these shops began to get a foothold in the market, racing moved to phase II, which was the 'we must stop them' phase. It was a war on people like Dahlman, Vegas, and other rebate shops. This was talked about in the Cummings Report way back when, which we reference on the blog quite often. Rather than analyze what people like Dahlman were doing, creating a new paradigm for racing itself in the halls of power, and looking at dynamic pricing model as an industry driver, racing went to war with them.

This lasted several years, but after some time, when these shops were bringing in billions of wagering per year, racing started to embrace some form of the same thing, which was phase III. It was not a new pricing model - the market had been doing it for many years - but to racing it was new. Places like Magna, CDI and others created their own shops to dynamically price.

Now we are in Phase IV. We have dynamic pricing where you and I can seek out lower prices and get them via ADW, but we also have tracks lowering takeout for everyone (mainly as a promotional angle). Low takeout pick 5's, 0% pick 4's with a Twinspires promotion, tons of points for a highlighted bet at HPI, guaranteed pools, and so on. As well, we have small tracks like Hastings, Grand River and Tioga Downs, trying across the board type reductions.

Racing, as a group is probably now where it needed to be at sometime in the 1990's. I'm not smart enough to surmise if the current landscape is anywhere near optimal. What I am smart enough to say, though, is that handle today is probably 20% higher than it would've been if racing had not evolved at all in terms of the pricing offered.

Ideally when slots were introduced in the late 1990's (like, for example in Ontario) there would've been a pricing plan attached. Instead of fighting over racedates or how racing would dole out billions of dollars in slot money, there would've been a betting czar with a grand plan on pricing and customer retention. There would have been a takeout 'cap' like Australia has done. If so, that would've made the Grand River takeout reduction news this week moot, because in 1998 or 1999, Grand River would've been on "Ontario pricing" with lower takeouts, or a massive rebate program. That would've been cutting edge for the time, as it turns out.

Regardless, we are where we are in racing. Things are moving along. Is it optimal? That's very unlikely. Should these things take fifteen years to get done? No. But it's moving along.

Such is the way things work in racing.

Notes:

Tonight the Molson Pace goes at Western Fair. Their low takeout pick 4 is guaranteed, and it should be a whale of a horse race. Free program pages are available at the Western Fair website, and their simo show with Greg should be top shelf. Give them a look tonight.

Have a great Friday everyone.