An Important Article on Horse Racing Juice

Dan Needham wrote an article that I hope you all read. It's on the Thoroughbred Commentary website, and it's about takeout.

The whole article is quite good, but there are a few things I particularly liked.

The pricing set by racing in 2014, is not set by science, but "are a byzantine product of statutory taxes and a myriad of fees. They have increased artificially rather than through any kind of data-driven knowledge." We've stressed this before here and elsewhere. It's the house of cards; not the Netflix kind.

And to change those rates, or test them, you have to guide yourself through a regulatory, fiefdom-led minefield.

The reason those two points are so important, is because they defy all logic, and when your pricing mechanism defies logic, you are in serious trouble.

Go to a horsemen group, or track, and say "you should lower your takeout because it's too high".

The answer might be "we can't afford to, because we will lose money."

How do they know? They don't. The price they don't want to lower was not set by the market, it was set by regulators, beginning in about 1930, when they started to come after more gambling money. 

There is a chance - no it is a certainty - they are protecting a price that is meaningless. This probably explains a little bit why the legislature estimates of revenue for the California takeout hike in 2010 were an additional $200 million for purses, which were off by so much, it boggles the mind. When you make pricing moves based on false numbers, you get a bad answer.

It's not like that in any other business, of course. At a GM meeting, they won't say they can't lower a price of a car because they can't. They can't lower the price because they know what it costs, what it will sell, at what price point. Racing knows very little of that.

Dan's piece is important to read because it's what the "takeout hawks" or "those HANA people" espouse: Using data, experimentation, and the like, to come up with the best pricing possible to grow the sport.

In 2014, in the age of big data, in the age of ADW wagering and behavioral economics, racing is relying on numbers not based on logic, or science. It's using pricing numbers that are pretty much based on nothing. I don't care what side of the issue you are on. That's a huge problem.

1 comment:

Anonymous said...

Forget all the analyzing. How about the fact that over the last 20 years of purse subsidies, there have been NO tracks who have added any portion of the money received (seed money) to the pool of any bet. Somebody must've noticed how much money is bet on any bet that has high carryovers in that time....Thirty years into simulcasting, and NO tracks have tried a lower the vig on their product if you come out to the track. It's unimaginable to me that with all these tracks where the purses and the bottom line and is not reflective on handle, that none of them have tried a ZERO TAKEOUT DAY if you are actually at the track, a NO VIG TUESDAY, a ZERO TAKEOUT on the daily double.

The problem isn't only the takeout (the early 2000s model for rebates was a very fair system) and it's terrible how many governments and other organizations have their hands on the horse racing gambling dollar but there is nobody in racing who knows their business or their clients. Frankly, racetracks don't want or think their clients can win. There is no one who has the vision or the creativeness to promote the greatest game in the world so people will enjoy it, understand it and allow it to flourish. They simply want to turn the lights on and have people magically show up every afternoon or night and lose all their money and then come back tomorrow. Pushing a button on an outdated machine should not even be competition for a great sport like horse racing. It's maddening to think that anyone let alone the majority of people think that it's a better form of gambling. Horse racing can be appreciated in so many more ways and aspects from so many different directions and outlooks, but it isn't shown, promoted or taught that way and that's even before we get to handicapping. There are million of stories every day on the race track that go unnoticed by most of us, and then every Saturday afternoon and Saturday night, it's shoved at us all at once. Maybe, someday everybody will stop whining or even analyzing and actually do something.


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