Tuesday, July 18, 2017

Racing's Forever Shifting Goal Posts

When I wrote "Why Lowering Takeout Increases Handle 100 out of 100 Times" recently, I did so because talking about injecting betting capital into a system that needs it (to spur end-user demand) is a conversation worth having. I must confess, I did it for another reason - to see, from those who are pro-status quo and don't like to talk about racing's high juice, where the goal posts would shift to.

What I saw, I must also confess, surprised me a little. I knew some shift would occur, because being 'anti-handle growth' in a game we love is not a warm place to be publicly or intellectually. But I did not expect the posts to move so forcefully into the argument that, yes, handle will go up, but not up enough to make more money.

I see it more and more as times goes on. It's not about increasing short term end-user demand anymore. It's about increasing short term handle, and making more short term profit.

Why did these goal posts shift so much the last few months? I think, in part, because the argument from the status quo can use Canterbury as their main selling point.

Last season Canterbury Park decreased takeout, gross handle grew, and handle per betting interest increased about 10%. But, according to corporate interests this was not enough, and profit suffered. so they increased takeout back to old rates.

This year, overall handle is up, and per betting interest is flat. The conclusion drawn from the status quo is, of course, that raising takeout was a good thing. See, we have all this evidence - they're making more money!

Let's propose for a minute that Canterbury could not get their takeout decrease past the board and commission last season. As most know by now, they had one of the worst seasons for horse racing a track can have - no barns, no field size, the worst weather since 1896, cancelled cards, three horse fields, no bridge jumpers as in years past, etc.

Their 2016 handle would've likely been down about 20%; their per race handle off by as much or more. Revenue would've been down by 20-30%.

Now, let's say they got their takeout decrease passed for this year.

Back comes the field size, back comes the bridgejumpers, back comes the turf races, and now lower takeout with more eyeballs was added! They would've blown handle completely out of the water. It would've been up 25% or 35% this year (all inputs considered YOY).

And guess what -- they would've made more money!

What would've happened at that point is the pro-lower takeout forces would be taking the anti-takeout forces arguments, and vice-versa. Their worldviews would be held in place, and everything would be wonderful for both sides; although one would be happier than the other.

This is the problem with shifting goal posts, and racing in general. It's tethered to widely held belief and that belief is unshakable.

Lowering takeout is about injecting capital to spur end user demand. It's about increasing the lifetime value for a customer, so he or she comes more often or bets more. It's about throwing a hat in the ring to gamblers who are looking at DFS or other skill games. It's about trying to compete. It's about using alternative gaming money - money that makes up about 35% of all US purses - to increase demand while the sport still has that money. It's about changing an ecosystem for the long term.

After all that, after some time, one hopes that then the sport will be better off than it was, and when looking at standardized revenues, it then does have more money.  

I hold little hope that happens of course, because racing (like some other industries) can't see past the bridge of its own nose. It can't see past one meet, or one pool. Racing is about a little midwest track "making more money" in a monsoon, not about economics, business smarts, or common sense. The pull of the status quo in the sport remains strong and I don't see it going anywhere. 

Have a nice Tuesday everyone.


Anonymous said...

Not sure the handle increases are that much. The Pick 5 jackpot is basically free money this year. They get interest for 5 months and closing day it will bring in 1 million plus in handle. Without the pick 5 jackpot is handle really up?

Pull the Pocket said...

Hi A,

Handle is up about $1.5M with five more races.

Up about $1M if we take away the bridgejumper, who inexplicably took last year off. Per entry about even. Field size up to around 8.0.


Most Trafficked, Last 12 Months


Carryovers Provide Big Reach and an Immediate Return

Sinking marketing money directly into the horseplayer by seeding pools is effective, in both theory and practice In Ontario and elsewher...