Price & Product; Some Hikes Are Different Than Others

Yesterday we had a look at Jennifer Owen's presentation to the Asian Gaming Summit. We mostly focused on field size as a correlated factor to betting handle, as below:

 

Today we'll take a quick look at price. 

In her presentation she spoke about what we speak of here: Raising a price in a business which has falling revenues and increased competition does not make much sense. She used this past year in Australia as an example:

Australia had a law (they have a central office) whereby blended takeout could not go over 16%. If less than 84% was returned to customers, a track or tote would have to give back the excess through low takeout or no takeout bets. Their "Fat Quaddie" bet - a zero percent rake pick 4 - would generate millions in handles.

Lately, with the bet mix much different there is no such law. Exotic bets are made in "pari-mutuel" and they have a higher rake, while fixed odds and win betting has a much lower takeout (about 8%).  As well, racing after more money wanted to tax bookmakers and exchanges more.

Despite the above, handle is firm at around $14B AUS, but it appears to be leveling off. With the increase in prices, there is a chance it will be lower in 2014 than 2013, which would be something new for Australia. But it's not all bad. If you are price sensitive, bet the exchange or fixed odds. If you are a whale, head to the TAB, get a rebate and bet exotics. If you don't care about price, there are plenty of bets for you too.

Their system is working fairly well, because there is something for everyone. 

Overall, their current blended takeout, before rebate, is about 13.5%.

In North America, the average takeout is near 22%, before rebate. There is no fix odds wagering with 5-8% takeouts, nor is there any exchange wagering with 6% takeouts to spur on that market.

So, Australia has field size approaching ten horses per race. They have a blended takeout of 13.5%. They have fixed odds, so odds do not change after the bell. They have a betting exchange where punters can trade their positions and receive lower takeout.

In the US we have eight horses per race, a blended takeout of 21.5%, and no outlets to support racing other than a tote system that is not markedly different than the 1980's.

Things are not perfect in Australia, or Hong Kong - not even close; racing horses around in circles is not a massive growth industry -  but they do certainly have an edge with their tighter controlled, central system. It's more customer focused; with price, distribution and the overall betting product prime components in decision making.