The Skinny on the Churchill Numbers: Bettors Are Clearly Saying No

Back in April when Churchill raised takeout rates on an already teetering betting product, many industry watchers and horseplayers wondered what might happen. After 22 racedays, it looks like we have our answer.

Total handle, including the Oaks and Derby Days, are off $31.9 million.

As noted when the takeout increase was enacted - and the fact that Oaks and Derby Days will skew any numbers - it was the rest of the meet that mattered, via a hike in rates was sure to be detrimental to handle. This was a fairly common opinion in horse racing land at the time, shared by many:
Similarly, after the Derby, Tom LaMarra in the Bloodhorse wrote:

"The six-day Derby week total handle of $253.8 million dropped almost 2% from $258.5 million last year. HANA said it believes there were a number of bettors who didn't wager into the pools, and that the true test will come as the regular spring meet progresses through its June 29 conclusion."

What we are seeing when one weeds out the Oaks and Derby is nothing short of devastation:

Total handle year over year is down $30.6 million or 27%. Per race handle is down 22.5%.

They are precariously close to becoming negative in terms of revenue for the meet, despite the big "EBITDA" gains made on Derby Day that they trumpeted. 

The current narrative that the field size loss (about three quarters of a horse per race) has been the culprit for the handle losses is a red herring. The elasticity (academically studied in 1998) for field size losses is only -0.6. But the data doesn't jive either.

On June 1st Churchill Downs had 68 entries. In 2013, same day, they had 66.

The handle was down $1,023,641 or 21.2%.

Last Monday there were 78 entries versus 77. Handle was off almost one million dollars.

Not to mention, tracks like Belmont have lost a similar amount of horses this year, yet handle remains fairly strong. Last year, in fact, Belmont lost a third of a horse per race, and handle was up 2.42%.

Horseplayers, for whatever reason that floats your boat, are saying no to Churchill Downs, and are doing it in spades. This should not be surprising. They raised a price on a product that was not very appealing, making it even less appealing to the general public, and discerning horseplayers. No multi-million dollar big board, an excellent race caller like Larry Collmus, or all the bells and whistles in a world can fix that.

They've got serious issues in Louisville, Kentucky. Racedates will likely be cut precipitously for next year, and the horsemen - who are reticent to do that at anytime - will likely have to go along with it. That's what happens when you concentrate on corporate "EBITDA" for a big day and forget about the people who pay for purses the other 364 days: Your betting customers.


Sal Carcia said...

What do you mean by dangerously close to negative in revenues?

Do you think Churchill will reverse the takeout increase? Did Santa Anita ever drop their takeout after the boycott?

I can't help but believe that Churchill was use the handle/revenue drop to appeal to the State to bail them out with slots. Maybe, imminent financial disaster of the signature track of a major state industry will force the hand of the Kentucky Legislature.

Pull the Pocket said...


Revenues are close to being down, despite taking more of the betting pie from the rake increase (including the big gains from the Derby).


ron said...

I have to agree with Sal on this one . It would be shocking to see the take reduced. They may throw a bone with a reduced take pick 5 but that's it. Maryland had a temporary increase about 10 yrs ago for capital iimprovements. That temporary increase has become permanent.

kyle said...

I'd say one thing about field size. Median may a better gauge than average - or even a certain critical mass may exist. A nine horse field for instance is the point at which things most often get interesting.

Anonymous said...

22.68% California exacta takeout borders on the insane. But it's not as if boycott in 2011 failed to get their attention. As a direct result of the boycott: HOL-SA-DMR-GG put in 14% takeout pick5 and DMR began seeding pick6 pools on non-carryover Sundays with $50k added money. Two years ago Woodbine went to 14.95% win takeout. More recently, Apr 26 2014 Churchill opening day to be exact, Santa Anita went to rolling doubles at 18% takeout (had been 22.68% as a result of SB1072.) Sadly to date, a boycott appears to be the only thing that gets their attention.

Andy A. said...

They aren't going to lower takeout. The main purpose of the boycott was to prevent others from raising it. We've already sent a strong message around the Country.

Anonymous said...

I find it borderline disingenuous--or otherwise idiotic--to frame the issue as many have above. Profits matter above all else to this publicly-traded company. To remove Derby weekend wagering from any statistics is madness, designed to frame the issue in a way that no business owner ever would. "Revenues are close to being down???" This is a boycott that so far has resulted in revenues "close to being down."

Think of historically impactful economic boycotts against public companies. Do they succeed because revenues take a serious hit? Or because they barely take a hit at all?

At the end of the meet, compare Churchill revenues (let's say they're minus 2% overall vs overall industry revenues). That's an honest headline. And DON'T remove Derby handle from any equation--Churchill's shareholders sure wouldn't.

Then, crucially, understand the longterm thinking that is in play here. CDI clearly believes that the bleeding on "regular" racedays will not continue in subsequent meets. Those who have departed will stay departed, but otherwise, it's Spring 2015, they grow the Derby again, they're flat YOY on the rest of the meet, and the net is that revenues are actually solidified.

Will the boycott grow, or will it stagnate? Because it will need to GROW to hurt CDI in the long run.

CDI's strategy may prove to be successful, or it may prove to fail. But that is the strategy and to frame the issue as "handle decreases after Derby week" is embarrassing. Embarrassing to HANA, and to boycott supporters. The idea is for Churchill to lose money they would have otherwise had. So far, the jury is out, and it apparently is going to stay out. Why on earth would CDI change their new takeout strategy based on the results of THIS meet? They won't. They boycott has barely impacted their revenue, and they certainly believe that longterm it's going to help. The results of the boycott, to date, hardly paint a clear picture for CDI. And a clear picture is what they'll need to see: AS IT RELATES THE BOTTOM LINE.

Anonymous said...

All we can do is try!

Anonymous said...

1) I saw numbers that said they will be down year over year sometime this week. They still have a half a meet and a fall meet to go. They WILL be down big this year

2) Horseplayers (and others) said "why don't they just apply for a change in takeout structure on big days, then leave the rest of the meet alone". If they did that a year ago, perhaps they get more revenue on Derby day and leave the rest of the meet alone, possibly to grow.

Pull the Pocket said...


All posters like myself, and the Horseplayers Association have said during this is: This is short term thinking that plagues horse racing. It's bean counting without thinking of the future and what it does to future revenues.

I remember when Mike at Balmoral Park tried to lower his pick 4 takeout. In month one it grew from $7,000 to $7,500 and industry types said "yes it grew but it is not bringing in more revenue, it should be scrapped." Month three it was up to $8,000, and month six it was $10k. Still the same calls were heard. A year later it was averaging $25k.

The trend from the takeout increase and the increase in purses is terrible. Horseplayers have left the product for others and soon they will be down money, and it might take years to dig out of this hole. That hurts horse racing and the industry has to stop hurting itself for short term, big day, bean counting revenue gains. Those gains, like we see this year at CD, can be gone in a matter of a month or two, with horrible implications for the brand long term.


Anonymous said...

There's an interesting parallel with the current VA scandal going on here; 50 year old arguments, outrage, lots of exposure, and then…nothing changes.
We don't even have anyone's head to roll here.
It would be nice if those middle managers involved make decisions based on "what's good", but that seems like an olden times virtue in todays business world.


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