A Tale of Two Betting Menus

Horse racing's betting menu has grown by leaps and bounds the last several years. Over the past twelve months, we can see what racing has done in this vein, via a tweet from Crunk.

These numbers look somewhat compelling for those with a bullish view ("wow, look at the Jackpot bets!), but (according to Crunk), 82% of bets for racing come from WPS, Ex, Tri and Supers. So, this is a teeny bit biased.

What's pretty clear, though, is racing has pushed customers from the easier to hit to harder to hit bets. Worse, by pushing them into jackpot bets, these folks are not churning any money, and horse racing becomes a strange sunk cost endeavor.

While racing has stagnated and lost market share since 2006, sports betting on the other hand has not. By the end of this year, legal betting on sports -- without legislative change, or through an increase in distribution - will have increased about 90%.

While racing has pushed players into hard to hit bets, sports bettors avoid them in big numbers:

•  Breaking your customers early and often pushes them away to other games. And sports bettors are very savvy in the first place. Although Vegas books do offer some higher takeout bets, the betting public shuns them. In 2015, only 7% of all sportsbook revenue came from high takeout parlay cards, with 93% from 5% holds. Sports wagering customers are playing, and they are winning enough to keep them coming back.

Horse racing's one edge is "betting a little to win a lot" so I don't for a second think going back to two doubles, four exacta and two tri races a card is wise. However, racing does not seem to show any chops in using gambling economics to allow for their customers to churn.

Example: Two horse exotics (especially in short fields) cause havoc to bettors bankrolls and slowly break them if the takeout is too high. California - with minimum gambling study - virtually blindly increased two horse exotic takeouts to almost 23%. That's almost a quarter out of each pool!

In Australia, where wagering growth is higher than population growth and inflation, it's different. About half of all bets are win pool bets, with each of fixed odds,  the tote and exchanges offering some worthwhile takeouts. Out of the $26B bet in Australia (where about $2B is taken from takeout, $24B returned to bettors), the average bet size is $43. Even small bettors are churning.

Australia allows customers to churn. As does sports betting. In North America customers are pushed into jackpot bets or other hard to hit high takeout mediums. Although racing will tell you horse betting customers do not behave economically rational (look, they like jackpots bets, they are up!), they in fact do. Sooner or later they go broke, and you're left with another void to fill, and another loss of hundreds of millions in handle.