Merry Christmas Vegas Horseplayers

Vegas racebook patrons (what's left of them) will likely be unable to wager on New York racetracks in the upcoming days or weeks. 
  •  NYRA, which showed a profit for the first time in 13 years, reportedly is asking to almost double the fee for its signal, which would mean between 10 to 12 percent that Nevada would have to pay.
The knee-jerk reaction from many in the sport is "good, they should pay more," but that's way too simplistic. Nevada racebooks and others are part of a distribution network that takes a racetrack like Belmont and allows a customer base to bet. It's no different than a car dealership, or a million other distribution points that allow a business to sell their product. NYRA can go and purchase a casino in Vegas if they'd like and take all the money from the signal, but that's not feasible, so others sell their product for them.

Casino's, like ADW's and others, are not charities. Floor space for a racebook could be used for another gambling game, so the profit that a racebook makes has to exceed the opportunity cost of doing something else.  NYRA - as is the case with this new management team, led by a former toy company executive - wants more from the casino's, and about everyone else, without investing through a forward linkage.

This has been going on for awhile now, and has been occurring in dozens of other industry's, especially as the web has taken hold. Examples from the book industry are prevalent, when it comes to middlemen, marketing, and reselling. That business is in flux, like we see with and ebooks. Authors receive only about 7% of all sales on Amazon when they have a traditional book (the middleman - the publisher - takes a great deal of it, as does Amazon), whereby with self-published ebooks, authors receive about 65% of the revenues (lower with back end marketing support, or help from Amazon).

It's nice to feel all Oprah-warm-and-fuzzy-like and say "NYRA deserves 80% or 90% of the revenue in the win place show pools because it's their product" but that is not realistic. Margins - probably well over half - have to be set aside to keep the reselling distribution network, its marketing, its customer cultivation,lower takeout to price sensitive patrons, and other growth oriented characteristics to ensure the health of the entire market.  I feel this salient point is being lost on Monarch, CDI and NYRA, and it should be paid attention to, or they will wake up with many more customers lost in the ensuing years.

1 comment:

BitPlayer said...

The real question is: What happens if a race book closes? Does the customer stop betting, or does the customer start betting through a different distribution channel that allows the track to keep a greater percentage of the rake? If enough of the customers shift to a more profitable distribution channel, then the track will end up ahead, even if some customers are lost.


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