Fixing Odds is a Fix, But it's an Impossible One in US Racing

I watched a youtube interview with long time horseplayer Dave Gutfreund today. Dave decided to hang it up with horse race betting and concentrate on poker. He believes (among other things) late odds drops through money jamming the pools at one minute to post (via computer batch wagering and off-track money) are too much for him to handle.

He's right and this is a huge issue for gamblers, because it's very difficult to decipher what odds a horse will go off at when we make a wager. If we believe a horse is worth a 30% chance and we see 3-1 we wager, but the horse could end up at 7-5 so it's a bet we never would've made.

In Australia this was an issue, as well, but there was a fix. A fixed odds fix. In the early 2000's, fixed odds wagering represented about $40M in handle. By 2016, this number had vaulted to over $3.5B.

The market spoke and the industry listened. They offered what the customer wanted, in a tech world which demands it.

This avenue allows the industry to hold onto people like Dave, while still keeping a vibrant pari-mutuel system (with higher takeout) that grabs more margin from casual players. It also allows them to make more money on big days from once a year fans. If they want to be more than once a year fans, or once a year players, of course, there's a fixed odds system to attract them, with lower takeout.

This ecosystem also means the tote can be nimble. For example, not long ago they've looked at pricing higher on weekends and less during the week:
  •  "We don’t run a business based on what we want customers to bet on, we make sure we give customers what they want. We would like a pricing flexibility environment. Our strategy is to combine an offering to customers that has fixed-odds and pari-mutuel.”
Here in North America this type of modern dynamic pricing environment is virtually impossible to achieve. Some of it is regulatory, yes, but most, in my view, is from being tied to the status-quo anchor. Change would result in lower margins, certainly in the short term, and in this industry anything that results in a lower margin is simply a non-starter.

With sports betting being looked at by the Supreme Court, more and more betting customers will be introduced to fixed odds. And they will flock to it. But they'll probably be betting the Steelers or the Black Hawks; there will be no way to do the same thing in the sixth at Belmont.

1 comment:

Anonymous said...

I can't say I blame Dave for jumping ship, the late odds changes have undermined the game over the past twenty years. You can't set and enforce anything close to viable minimum acceptable odds even when betting right at post time, which means even a 100% line handed off to you by god has you ultimately betting on literally tons of underlays. This kills off most any chance of gaining an acceptable positive return. In the 90's and earlier it was a different story, you did the work and you got paid, granted not rich but you did get paid, once in awhile a late drop would occur but it was more the exception than the rule The odds with just a couple MTP weren't meaningless. Today I run real-world tests and see upwards of 80% of my conditional wagers made right at post time payoff less than the cutoff. That's just laughable. The sport is stuck in die-off mode if this situation doesn't change. I mean maybe if contraction eventually gets it down to only a handful of tracks with massive pools their might be some stability. That's still years away. I may not see it in my lifetime. It would change the sport dramatically as most of the employees jobs as well as the mid-to-lower-grade horses would be gone.


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