Friday, July 3, 2015

Slots Incentives, Handle Disincentives

The first week of slots play is in the books at Plainridge, just south of Boston, MA.

"Plainridge Park Casino, the state’s first casino, raked in $6.1 million in gambling revenue in its first week of operation, enough for the casino’s owners to declare themselves “pleased” with the results and for one industry specialist to call it “a great start.”

Of that $6.1 million last week, about 9% or $567,000 goes to horse racing (mostly to the track and purses). The racino is pegged to do over $200 million this year. The net to horse racing: Somewhere around $20 million.

Conversely, let's look at handle. Let's say Plainridge does $100,000 in handle per card. At a low signal fee, let's set revenue at 5% of that handle, which would mean the track and purses would drive  $5,000 per card in revenue.

If they race three cards a week, that's $15,000 in revenue.

$15,000 from racing, $567,000 from slots.

Let's say you and I have a plan to grow the bet, with giveaways, marketing, social media, takeout reductions and seeded pools and we bring that to the track.

"This would raise your handles by 20%" we say. "It will only cost you about $2,000 per day to achieve this."

Well, handle goes to $120,000 (a great success) and revenue goes to $6,000. And it cost them money.

When you are getting $567,000 from slots, handle is inconsequential. Do no work, make $567,000+ $15,000 a week from betting, do a lot of work to grow the bet and attendance, invest money and time, get your hands dirty and get $567,000 + $18,000 a week from betting.

Wow, a 0.51% increase in revenue from investing in your racing product and working your tail off.


Ron said...

This is why racing, with a few exceptions is doomed by the time I hit s.s. age. Why would the state's and casinos give away 20mil to a dying industry? Answer, they won't continue to do that.

Tinky said...

Ron nails it. The premise of your post would only be compelling of one could confidently expect the slot revenues to continue for a significant period of time at anywhere near that level, and they won't. Guar-ant-teed.

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