Racing Knows Low Rake Matters. They Just Can't Do Anything About It

I did a quick scan of the twitter line and noticed Lenny Moon's post on takeout and transparency resulted in some interesting chatter. There are some industry insiders that believe takeout doesn't matter much, and use examples like Laurel's one meet takeout experiment years ago, or a promotion at a website, where changes to rake didn't make handle go through the roof. Others who play with lower take, or play daily and fight the rake vehemently disagree. It's fascinating.

On the outside, the industry trots out a company line on takeout, but I firmly believe actions speak louder than words. And data, of course, rules the day. Takeout matters a lot, but the industry doesn't have the foggiest how to do something about it to grow horse racing.

In the 1990's people like Ernie Dahlman and David Cuscuna were betting big dollars, but paying full boat. Then along came the low rake ADW's or phone services. Once they found low take, their betting exploded. More and more people flocked to the low take avenues and their handle went up, as well. Tracks knew about these avenues but the industry hoped they could wish them away. These places were driving so much handle, though, there was nothing they could do about them but keep quiet about it. Some folks tried cutting them off, some tried yelling about them, calling them names. Nothing worked. The power of low takeout was huge. They were here to stay.

Fast forwarding a dozen or so years, these ADW's with low rake supply handles (some with only a handful of clients), greater than the behemoth Twinspires.com does.

Does low takeout matter? You bet it does and that's all the evidence you really need. Ask these players to pay full boat in Twinspires.com or TVG, or HPI and they hit the exits. Handle would probably be $5B next year.

Not long ago there were, and are, moves being made. Even the big boys have relented and are trying to gain these higher volume, low take, clients. On twitter or in industry press they might say one thing, but their actions say another. The market in the 1990's was telling them what to do, but like a lot of things in horse racing, it took many years to respond to it.

This policy is simply shuffling the deck chairs, clearly. It's a fight over existing clients and it's an example of racings short-sightedness, in my opinion. They know low rake matters, they know people's handle's explode when they win, but they can't or won't do anything about it but try and land a few whales for themselves, to scrape out some high volume, low margin handles for the P & L.

There are some tracks trying to do the right thing, but they're up against it. Balmoral Park, Tioga Downs in harness racing are two good examples. The success of Tampa Bay since 2001 is another. But it's very difficult. They are swimming upstream against a tremendous industry current.

The biggest problem that has faced, and is facing horse racing as a viable gambling enterprise, is the juice. Racing knows low takeout is important, but they have not tried to bring the everyday player into that low takeout regime. The new Ernie Dalhman's are not cultivated.  We simply sign them up, charge them 21% takeout and hope they keep betting.

And guess what? They don't keep betting. They get tired of losing and leave, or play $50 a weekend. Why, because takeout matters, yes, but delivering low rake to potential long-term betting customers matters almost as much. The industry grudgingly has accepted the former, but has been a dismal failure on the latter.