- not in a position to discuss specifics but we have scaled back dramatically in the u.s due to margin compression. major tracks have priced themselves out as far as we are concerned and our returns are just not commensurate with the positions risks we take.
When you squeeze a signal fee too high, a few things can happen: Takeout rates can go up and there is less incentive to lower them (like we saw at Churchill this year), innovation can stop, and player rewards can go down, which affects both small and large players.
When you add smaller fields - like we've seen at Keeneland - higher takeout and signal fees, and less incentive to bet, a negative reaction occurs. Handle goes down. In theory anyway.
Is this comment accurate in real life? Are bigger players pulling out, or scaling back? From my discussions with a few the last 24 hours, the answer is yes.
From one large player who has scaled back big in 2014, and is playing more poker: "Whale versus whale with high host fees has soured me"
From another betting vet, with some knowledge of the teams: "There is no doubt this is true"
From another: "I like horse racing and it is not a conscious decision to play fewer dollars. Short fields and high fees make it impossible to create winning margins"
My handle is off well over 50% in 2014, probably 80% at Keeneland alone with the short field dirt fests. I know many of yours is off as well, because it is getting really difficult to find good bets that any of us have a hope to convert to long term positive ROI. You don't have to be a whale to know you are not getting the best of it.
When racing concentrates on raising prices - whether it be on the top with a rake hike, or on the bottom with a signal fee increase - the result is less handle. The long term result is even worse because bettors who might have an incentive to play horse racing see it as a mugs game; a novelty to play on a big day like Derby Day. No sport can survive like that.
I don't have an answer to racing's ADW issues. What I do know however, is that what racing's braintrust is doing in 2014 with regards to pricing and signal fees is not the answer to increasing revenues to the sport. It's only making things worse.
* A 10% "source market" fee was supposed to allow live racing to thrive in Virginia. Seven years later there are no racedates in Virginia.
** New Hampshire repealed their 2009 10% fee after handle in the state was decimated.