Friday, April 11, 2014

Pocket Answers Some Churchill Downs Takeout Hike Questions

Boy, wasn't that a kick in the gut, huh? Churchill, in a very bad environment, raised the juice, in what seems like the highest juice game this side of the Turkish lottery. Your reaction has been acerbic, vitriolic, quite plentiful and frankly I can't argue with a lot of it. In fact, I bet there are hundreds of Churchill employees that can't argue with a lot of it.

Interestingly, or maybe not so, for some reason, I'm getting emails, like somehow my opinion means something. What's going on Pocket? Well, I will tackle some of these questions right here, to the best of my ability.

"Husker Fan" in Lincoln, Nebraska asks: Pocket, I am having trouble understanding this move. Why would they raise takeout when it hasn't worked so many times before? And in this market, when they are losing handle and customers are leaving in droves? It doesn't make sense.

I've been struggling with this as well, so you are not alone Husker Fan.

I got to analyzing all the innuendo and theories the past day that I've seen on social media and elsewhere. Did they do it because they don't like racing and want their dates to fail? Was it to make a statement that they need slots? Because they just switched from Lotus to Excel and the sheets are messed up? Because not having customers they can lay off cleaning staff and tellers?

Those may be all good theories, but I think they're all incorrect. I think the real reason  - and I admit this may sound a little out there.........  I think the Churchill Downs executive team are space aliens.

I don't make this hypothesis on a whim. My sources tell me that dogs bark at them constantly,they're rarely seen eating regular food, and of course, they raised the freaking takeout. I think - again, this is only a theory and I may be wrong - they are from outer space.

 Churchill CEO Bob Evans (left) & COO William Carstanjen
Josh from Edmonton Canada asks: Hold it. They paid $12 million for a big video screen and they say they want to raise the rake to make $8 million? Pocket, they want beaten up horseplayers to pay more in takeout, get terrible PR, and even if the volume stays the same (not happening!) the proceeds won't even pay for a television?

Rumor: This puppy ain't no more.
Josh, Pocket agrees. There is so much strange with this whole policy, but I think your point is important: They're still $4 million short to pay for the big screen, even if the laws of economics (and earth) are suspended and this makes them $8 million. You know what that means - more taxes and higher fees. A few I have heard bandied about: A new Bris program (pdf only) will cost $28.50, (or $57 for two). I heard down the grapevine that is changing their players reward structure. If you bet $200,000 in one month you don't get a clock radio anymore. This move alone could save the company $74.

As well, perhaps you'll see fifty cent betting fees on TVG might start a twitter account called the Half a Buck Hog.

Bill from Brooklyn asks: I saw Sid Fernando on twitter say that John Asher [Churchill PR] is a nice guy and Sid feels bad that his bosses put him in this position. Can't we yell at Asher on twitter even if he's a nice guy, Pocket?

Bill, Pocket does not like yelling, and I think you have to feel for John Asher. How would you like to show up for work each day and get bossed around by space creatures?

Angela from Davenport Iowa asks: Pocket, I am only 18 and just started to bet horse racing. Can the Kentucky Commission step in and protect me as a customer?

Protect customers? Oh Angela, so young.

Susan from Richmond Virginia asks: Pocket, should we boycott Yum brands?

No, because if Yum brands raised the price of chicken and people stopped buying it and they make less money, they would lower the price back down to the proper level. We need companies like Yum Brands to show racing that that Adam Smith was not a big weenie and the laws of economics aren't just for Big Crunch sandwiches.

Roger from Muncie Indiana asks: Pocket, CDI is a public company. Can we go to the shareholders meeting and vote by proxy to stop this madness?

Hi Roger. In theory, yes. But I was a corporate secretary for a few public companies when I was a young lad and saw how they worked. The little people pool their shares, there aren't enough of them, the board votes them all down, then the executives close the meeting and leave for cocktails. Chances are the same would happen at a CDI meeting. Well, other than the leaving for cocktails part. In the CDI executives case they will be beamed to the mother ship and tip back some sort of green space juice.

Dave from Decatuer Georgia asks: Out of all the tweets, which was your favorite?

I think this one. It's that classic, "What are they complaining about, it's not like 8 million is a lot of money" grin.
Julie from Venice, Italy says: "Hi Pocket. They raised takeout in Italy to over 40% and now we have no more racing left. You look like you're on your way to reaching us. Hahahahahahahahahaha.

Screw off Julie.

Davey from Green Mountain Vermont: Pocket, they did this exact same thing in California, and revenues last year were $639 million, and in 2010 they were $689 million. Why would they do what California did when they know it didn't work.

Hi Davey. See answer one.  Xfiles, Super 8, that crop circle movie from that M. Knight dude who made only one good movie with that kid and Bruce Willis. You know.

Greg from St. Louis asks: Pocket, what's become of horse racing?

Greg, I wish I knew. It will be studied in MBA textbooks (not in a good way) for hundreds of years. It's not too big to fail, it's built to fail.


That ends today's question and answer. I hope I answered some of your questions.

The bottom line for me, is that no, I will not bet Churchill anymore (I was a regular bettor there), and no, I will not use Brisnet products or, if I was a member, yes, I would close down my Twinspires account. That's just me. However, I know it would not do much. Even when we leave, like the last decade has blatantly and obviously shown the sport, tracks and horsemen keep doing the same anti-customer things.

This episode from Churchill is not revealing, or surprising, nor is it anything new. It's just a reminder to customers, or an education for newer ones that they are simply pawns in the game; a means to an end for a purse.

Customers don't mean much, and we have never meant much. If anyone tells you differently, they are probably from outer space.


Sal Carcia said...

I am assuming the Santa Anita figures are handle numbers and not revenues. Just taking the numbers reported here, Santa Anita's revenues are possibly higher with the lower handle and higher takeout. For example, 22% of $639 million in handle is higher than 20% of $689 million. I point this out because they make these increases to improve their short term revenues. It is definitely short term thinking that will result in long term negative ramifications.

Pull the Pocket said...

Hi Sal,

No, that is total revenue from takeout that's realized. It's in the CHRB annual report.


Sal Carcia said...

Hi Dean,

Maybe, the CHRB is viewing handle as revenue. I believe Santa Anita's annual handle is in the $600 million ballpark. That would make their revenues about $100 million or so.

Am I missing something here?


Pull the Pocket said...


No, that is total revenue number for California racing. It's in the CHRB annual report.


Sal Carcia said...

I see it. Here is another sampling. Between FY2009-10 and FY2011-12 the takeout increased 1% and the handle dropped ~$552 million and the revenues dropped nearly $80 million.

Ron said...

Since they get a bigger cut of live handle and twin spires handle, I'm guessing they're figuring they can fleece the live oaks and derby crowd who don't know nor care about takeout. It'll be interesting to see if they raise they're signal fee to other adw's and tracks.

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