Racing Needs to Work With Its Betting Partners. They're Not the Enemy.

In the summer of 2012, Australian racing (in this case Racing Victoria) had the bright idea to raise fees on exchanges (I wrote about it here on the blog when it happened). They began charging an obtuse and horribly short-sighted "turnover tax", which made backing and laying on an exchange a thing of the past, for the most part. Those who still tried to trade the horse betting markets this way were subjected to a "premium fee", which pretty much wiped them out.

This replaced the "gross profit" model that had been working; Betfair had been paying 10% of bettors profits to racing. 

Bettors responded by doing what they do when they have no shot to make money - they curtailed their handle on horse racing. 
Without giving figures, my turnover with them dropped by 90% on the punting side, and I used the Fair for laying only which was NOT subject to the tax. RV got nothing, and the Fair lost out on the commission I was paying on the punting side, which was substantial even though I was on a low rate.
Since that time, the racing commissions did some learning. In effect, Racing Victoria was not making more money, they were making less money, because fewer people were betting.

They did what's not often seen by horse racing. In 2013 - only one year later - they decided to take less money and let betfair revert to the old system. The customer got reduced fees, and handle went up in Victoria.

Since 2013, they did even more learning. At the Warnambool Carnival, with betfair having full access to the meet, pari-mutuel, non-exchange handle was up 17% and 15% year over year on the two days they were running. On the third day, Betfair had a power outage and could not offer their races. Total handle among the other operators was down 6%.

In response to this value-added proposition, Racing Victoria changed the fee structure again, and punters are receiving even more money back to bet. The fee charged by betfair on a bet dropped from 6.5% to 6%.

It should astound and amaze us - ok, maybe it should not - that here across the pond the exact opposite tactic is happily in practice.

A few examples:

i) Signal fees keep going up, taking money from resellers, who pass that on to customers. As handle falls, the response is not to correct things, but to raise them even more.

ii) ADW taxes on resellers, which were first implemented in Virginia (I think racing is defunct there now) were broadened to other states. This tax is passed on to customers.

iii) Takeout hikes.

iv) Resellers like Derby Wars are something to be sued and crushed, not worked with.

The above is all done with hundreds and hundreds of millions of slot subsidies, and in a jurisdiction that takes the most per bet for purses than any major one in the world.

In North America, if you asked Magna or the HBPA or the TOC or Chris Kay to raise signal fees on resellers to 100% of revenue, giving them and punters nothing back, they'll gladly take the money. If you ask someone to sue a website where there's evidence that it - like betfair at the carnival above - is driving eyeballs and helping your handle, they'll say sure, "they're stealing". Takeout hikes to "raise purses", sign me up, it's a great idea. Take that evil reseller Twinspires behind the woodshed, like they tried with betfair in 2013? Grand, can o' corn.

It's bad enough these policies are encouraged and happening, but when they don't work there is no one to say "whoa, we made a mistake, let's revert back" like they did in Victoria.

No one is saying racing has to give away their product; give everything to a reseller, or bettor. That's ridiculous. What I am saying is that racing here in North America has to work with their resellers, and through them take care of their customers, encouraging them to grow the bet, and in turn, to grow the sport. Resellers are your partners, not your enemy.


Anonymous said...

I'd rather have somebody like Derby Wars pushing things even harder. Their 17% vig isn't going to attract bettors generally, though it's better than what tracks take out for exotics. That's still unworthy in light of Draft Kings charging 11-13%. 13% is bad enough.

Anonymous said...

The other thing the big entities do is while they raise the rates on their partner tracks, they take advantage of the little guys. So while they push to make 8%, 9%, 10% on their signals, they keep tracks like Turf Paradise and Mountaineer down to 4%, so if you bet on XpressBet or Twin Spires, they are keeping a crazy 18% on the small tracks and not sharing any of this with the horsemen (or the customers).

Meanwhile, nobody is investing real dollars to improve the sport. The Twin Spires betting interface is at least 12 years old (the old Youbet and AmericaTab) and the others are no better. Is it any wonder things are going downhill?

If would be much better if tracks were paid according to handle, 9% for premier tracks, 7.5% for mid-tier tracks, 6% for small tracks and then everyone could focus on growing the sport instead of infighting.


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