Millennial Gamblers, Hats, Clubs, "Action" ..... or Value?

Jeff Hwang at the Motley Fool (h/t to @derbyologist) analyzed gamblers in his demographic in a lengthy piece anyone interested in the topic (read-horse racing) should give a go.

We often hear young people won't bet the races, attend racetracks. They don't have the attention span, you see. They also don't want to bet slots. They're a different breed that wants different things. Vegas, racetracks and others have tried parties, lots of interesting action betting, hats, and concerts. Although some of that might work to get them in the house, they are still not gambling.
  • The problem is, virtually all of the discussion regarding millennials has centered on abstract explanations seeking abstract solutions, when the biggest problem is likely far more fundamental than that. Few if anybody discussing the millennial problem have discussed it in the context of the declining economics of gambling itself.
What he speaks of is what we've spoken about here often enough - metaporically, the squeezing of the lemon.

Slot house advantage, over the last twenty years, has moved up appreciably: From below 6% in 1996 to almost 8% today. "In short, the player is losing money faster than ever before", he writes. Slot handle is down about $60 billion since '06.

Blackjack tables are disappearing as they combat card counting and raised the juice, paying 6:5 for blackjack.

His view: Young people are so educated and so aware of the deleterious affect of worse and worse payouts over the last 20 years, they are moving away from casino-type gambling. No value, no bet, we'll go hang at the pool, or as the author alludes, play Daily Fantasy Sports, or sports bet.

He suggests the following, to try and get these young, educated people to bet:
  • In our discussion on blackjack and table games earlier this year, we introduced a concept I call the skill-free rate, which essentially is the lowest house advantage of a comparable game requiring no skill. The implication is two-fold:
    1. That a game requiring skill should have a lower house advantage under optimal play than a comparable game requiring no skill.
    2. The more skill a game requires, the lower the house advantage needs to be to both compensate the player for acquiring the necessary skills, while avoiding over-penalizing lesser-skilled players.
The above is very salient for horse racing. In effect, you need to be able to send home winners, because the demographic which is predicated to play a skill game needs to know they have a chance to win. Rakes should be lower for these games, not higher.

We often hear horse racing is about getting "young people in the building" so they "get the bug". This is completely, unequivocally wrong. To get the bug, today's younger demographic needs a game they perceive can be beaten. If they don't find it, in Vegas, or at the track, they will find it somewhere else.

Right now, that's exactly what they've been doing, and it's perfectly rational gambling behavior.


Anonymous said...

I posted this over at Thorograph. No real comment to it, maybe no one understands it :-)

It's relevant to the discussion of takeout. Give it a look.

Boscar Obarra

BitPlayer said...

Interesting post. If slot handle is down ~20%, but takeout is up ~33%, aren't the casinos making more money?


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