Wednesday, September 5, 2012

Good Reporting On Handle Figures

Unlike some recent releases, which try and sell items which may or may not have an effect on racing handles, Tom LaMarra over at the Bloodhorse lets the numbers speak for themselves.
  • Aided by an increase in race days, pari-mutuel handle and purses in August registered the largest gains in recent memory, according to the Thoroughbred Racing Economic Indicators released Sept. 5.
He speaks of the meet differences, changes in dates, and does a fair apples to apples monthly comparison. 

Back in June, when handle skied there was a giddiness in the air. In July, when handle fell, that giddiness was replaced with gloom. The fact was, June 2011 to June 2012 was different, as was July, as was August to their respective months.

All we know, is that total handle in 2012 is up about 2%. Racedays in 2012 are up about 2%.

According to the only comprehensive study to date, there are a few determinants of handle, in order of importance: 
  • Takeout rate- Lower the takeout, higher the handle. Common sense really. If you bet a $2 exacta you get back $10. If you lower the takeout rate you get paid $11. The next race you bet $3WPS and a $2 exacta, instead of $2WPS and a $2 ex box, which results in another dollar of handle.
  • # of races- Although there are diminishing returns on either end, this is fairly straightforward too. If you add a race to a card, or a brand new race date, your handle will be higher.  This is likely what happened in August 2012 versus August 2011.
  • Field Size - Again, ignoring inflection points, or diminishing returns, this too is common sense. If you give a customer 10 choices to form an opinion on instead of 5, you'll get more money. It's why Kraft has 50 kinds of cheese; because they'll sell more cheese with more choice. 
The inferred "elasticities" of the above are: 2.3 for takeout rate changes, 0.64 for number of races, and 0.58 for field size. The often trumpeted "more purses equals more handle" registers a 0.06. 

So, when we see all the scuttlebutt about jockey autograph sessions, gym bag giveways, pink days, or what have you, remember that they are for on-track promotions. When you see a card with $1M given for a stakes race instead of $900,000 the previous year, that's to give money to horse investors (usually from slot money), not to fans. Those things are not the main handle drivers, overall.

The aggregate handle drivers are pretty simple - give a customer a good price, give them some choice in the number of races being shown, and give them bettable field size to form an opinion. If so, they'll tend to bet the sport more than they did last year.

1 comment:

Cangamble said...

Fridays and Saturdays are the biggest handle days for the industry because of the amount of tracks that race both those days compared to the rest of the week. Many times comparing a month this year to last year one of the main reasons handle and race days are either up or down significantly is because of this.

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