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Interstate Horse Racing Act Chatter Always Fails Customers

I spent some time reading the dissertation about the IHA on Chuck Hayward's site today, written by lawyer Joel Turner.

The piece is not unlike many we've read before. It's about getting more money from the existing wagering pie, for, in this case, horse owners.

It begins by speaking about off track handle, which has gone up, while higher margin on track handle, has fallen. Because of that, more taxes, more fees, more regulation is needed to cure that so-called ill.

The problem is, and this is always the problem, all of those things hurt handle. Take this case in point from the article.
  • The migration of handle to simulcasting and ADWs has left on-track wagering a virtually meaningless part of the pari-mutuel landscape. Even at racing's most well-attended event last year, the Kentucky Derby, the 164,906 patrons at Churchill Downs wagered $23.4 million on track, just 13 percent of the total handle of $180.7 million.
Think about that for a second. If I told you that your widget business in Louisville could bring in $23 million in sales from the local market, but I had a marketplace (say called Amazon.com) where you could increase your gross sales by 700%, would you think it a good or bad thing?

The Kentucky Derby is a great example. You can't shoehorn another person in the track if you tried. You could not increase on track wagering if you tried. $25 million is about a cap. But it does $180 million. Exporting your signal is something that's needed and expected. States like Texas, which is spoken about in the article, have banned this type of wagering. Handle in Texas has fallen to dangerously low, historic levels.

The principle of the IHA and exporting signals have helped top line handle. That's a given. But according to the author, the reduction of handle since 2007 is due to the IHA.

"Is the proliferation of legal and illegal sports betting to blame? Is online gambling, exchange wagering, or bookmaking to blame? Racing clearly does a poor job of analyzing and competing with other forms of gaming for the discretionary dollars. It may be that all of these activities are factors in the decline of pari-mutuel handle on horse racing in North America. Nevertheless, the most likely source of the decline is the legislation that was supposed to prevent it: the IHA.

This makes no logical sense. Giving consumers less choice, higher prices, more fees, new taxes and more inconvenience will not grow handle, it will reduce handle. The IHA needs updating to reflect modern reality no doubt. But selling these changes as handle inducing or pro-top line growth is misguided.

I'd like to see the IHA changed, no doubt. But it would be a lot different than Mr. Turner's view. I want the IHA changed to encourage more growth, and more top line revenue, because when you have top line revenue and growth, your future has some hope. No business will ever grow in the aggregate by decreasing sales. That's just common sense.


Comments

Sal Carcia said…
I certainly understand now why I am being encouraged to bet online even when I am at a track.

But, I tend to agree with you on this one. I guess we will have to see the next installment of this commentary.

The present system has freed up some take to share with bettors through rebates. And now it appears Joel wants to take that off the table and give it horsepeople.

He believes that will cause the game to prosper again. I can't honestly say that makes sense to me either.