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California Racing's Slow but Sure Customer Drip

As horseplayer Andy Asaro's led boycott of California racing reaches day three of three, I recently had a look back at a few numbers from the Golden State.

In 2010, as most know, California raised takeout for a reason we often hear from horse racing's braintrust - to raise more money. As Will Cummings put it in his analysis of the racing industry's pricing history, "for [racing] it's a way of life."

Via the BH, seven years ago:
  •  "Currently, over $4 billion is wagered each year in the state on horse races and almost $800 million is withheld as the takeout to fund such things as horsemen's purses, racetrack operations, state oversight of the industry"
  • ".....a 2% increase in the takeout would result in approximately $70 million in horse racing revenue being redirected toward the industry, rather than provided to bettors as winnings."
  • Supporters say the increase will stimulate purses, leading to increased field size and more wagering.
Others weren't so sure the government and horse racing folks who prepared the report - who multiplied the amount wagered by the increase in prices to get at their conclusions - would be correct.

"Horseplayer groups believe increasing the takeout will reduce the amount wagered and therefore will not benefit the industry," the story states.

Looking at the 2015-2016 CHRB annual report, there's some strong evidence that the folks who study gambling, and live each day betting the sport, were more right than wrong.

The "over $4 billion in handle" is now $2.9 billion.

The revenue to the sport in the entire state which was "almost $800 million" is now $604 million.


These are incredibly bad numbers. 

As noted in this look at historical takeout rates, and their influence on racing, hikes (or decreases) can take some time. Seven years seems like enough time.

Mike Maloney, a very sharp player, once said: "All we’re doing when we raise takeout is driving people away. The regulars are coming less often or they’re coming just as often but getting ground down. People within the game still don’t understand how destructive takeout is."

The most disturbing part of this, in my view, is that the effects of destroying a customer's capital seen in California has occurred over and over again, in jurisdiction after jurisdiction, for more than a half century. Yet they keep doing the same thing, hoping for a different result.

I have no idea what California could, or should do. But if they're trying to raise purses, increase handle, and turn the ship around, I am completely convinced that increasing prices is not a solution. In fact, as most of the empirical results and wagering economic theory shows - including those in their very state since 2010 - it's a problem.


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