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.
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