Tuesday, August 19, 2014

Double Gate (Part II)

Yesterday we exposed the flawed logic used by track management, horsemen, and state regulators to justify takeout increases at Los Al, Santa Anita, Golden Gate, Hollywood, Del Mar, and Churchill Downs.

In case you missed it, the logic goes something like this:

"We make more money with higher takeout because last year's handle numbers multiplied by this year's higher takeout rates is bigger than last year's handle numbers multiplied by last year's lower takeout rates."

But in the real world it never works out that way.

Why not?

The logic is flawed because it fails to account for the fall off in handle caused by higher takeout rates.

In California, this same flawed logic has been used by track management, horsemen, and the CHRB to lobby the Legislature and Governor’s Office for changes in state law. (SB1072 is one example of this.)

Yesterday we also pointed out that takeout increases based on this flawed logic have not helped racing as their proponents had suggested – but have had the opposite effect.

Instead of bigger field sizes, more betting handle, and more purse money being paid out as promised: The real result has been the worsening of an already falling handle trend, fewer dates, fewer races, less purse money paid out, cutbacks in hours worked, and lost jobs for workers.

We also pointed out that California’s handle woes in 2011 were not caused by the economy. During the same fiscal time period that California racing handle was falling off a cliff because of SB1072 – the California Lottery was generating record dollars going to Education because of AB142 and its higher prize payout  (lower takeout) provision.

For those of you who might not know, racing is facing a crisis in the form of a downward handle trend. According to The Jockey Club website North American handle peaked in 2003 and has fallen sharply since. 

We at HANA can’t emphasize strongly enough how critically important it is that decisions about changes in takeout rates not be based on logic that is flawed. 

To that end, we prepared a spreadsheet that can be downloaded: here.

The spreadsheet contains a look at Santa Anita Double Pools. There are six tabs going across the bottom.  The right-most tab is labeled DD SUMMARY

The above image shows the first section of the DD Summary tab. Here we are presenting a year over year comparison of handle numbers for double pools in isolation for the first Santa Anita meet that was run this year vs. the Santa Anita meet that was run at this same time last year. As indicated on row 4, this year's meet began on Dec 26, 2013 and ran through Apr 20, 2014.

For this meet, Tom Ludt of Santa Anita fought for, and obtained permission to implement 18% Takeout Doubles on an experimental basis from higher ups at The Stronach Group, the TOC Board, and the CHRB. For that Ludt is to be applauded.

However, Santa Anita was not allowed to offer Rolling Doubles at 18% takeout. I am unclear as to the exact reasons why but instead of rolling doubles they were allowed to offer three doubles only each race day.

Thus, the wide differential in doubles offered: 545 last year vs. just 207 this year.

This accounts for the wide differential in double handle: $20.55 Million last year vs. $13.98 Million this year.

Despite being handcuffed, Ludt's reduced takeout double experiment did show some promise. Average double handle per race rose 79.16 percent.


Before diving into the numbers on the second section of the DD Summary Tab, for benefit of those interested in examining the numbers closely, I should disclose that last year's Hollywood Park meet began on Thurs Apr 25, 2013. However, there was no live racing at Santa Anita on the same calendar Thursday this year. Also, Hollywood Park conducted live racing last year on Thurs May 16, 2013 and Thurs May 30, 2013. There was no live racing at Santa Anita on either of the same calendar Thursdays this year.

In an attempt to achieve as close to a like date (apples to apples) comparison as possible, handle numbers for Thurs Apr 25 2013, Thurs May 16 2013, and Thurs May 30 2013 are purposely not included in the analysis presented in our spreadsheet.

Also, before diving into the numbers, it is important that I point out we are comparing handle numbers from Santa Anita against handle numbers from Hollywood Park and that Santa Anita traditionally out-handles Hollywood Park. For that reason, it is important that we establish a benchmark.

The above image is a screenshot taken of the lower right hand corner of the Side by Side tab on our spreadsheet. It shows that Santa Anita out-handled the Hollywood meet we are comparing to by about 17%. (17% is our benchmark.)

With that out of the way, let's dive into the numbers on the second section of the DD Summary Tab:

The above image shows the second section of the DD Summary tab. Here we are presenting a year over year comparison of handle numbers for double pools in isolation for the second Santa Anita meet that was run this year vs. the Hollywood Park meet that was run at this same time last year. As indicated on row 10, this year's (second) Santa Anita meet began on Apr 25, 2014 and concluded on Jun 29, 2014. As indicated on row 9, Hollywood Park ran at this same time last year.

Unlike the first Santa Anita meet that was run this year, Ludt was able to win permission to offer rolling doubles at 18% takeout for this Santa Anita meet - albeit on an experimental basis.

The result?

Double handle rose about 24 percent.

Keep in mind that this was after a lot of players had become disenfranchised because top decision makers had refused to allow Rolling Doubles to be offered at 18% takeout the previous meet.

Also keep in mind that at 24 percent, the growth rate in Double handle was more than 1.4 times the growth rate in overall handle for the meet. (1.41 = 24 / 17 our benchmark number.)

Clearly the 18% Takeout Double Experiment was showing some promise.

Clearly the decision to not allow Rolling Doubles for the first Santa Anita meet was a mistake.

Clearly the differential in net cost to purses was nowhere close to $500k because of the differential in takeout rate as claimed on page 83 of the July, 2014 CHRB Meeting Transcript and quoted in our write up from yesterday.

Frankly, if Santa Anita were my racetrack - and my management team had shown me that they had raised double handle by 24% (or more than 1.4 X my handle growth rate in general) once they had been allowed to offer Rolling Doubles at a reduced takeout rate:

My decision would have been to continue the Experiment!

Jeff Platt
President, HANA

Monday, August 18, 2014

The Flawed Logic behind higher takeout

At the July 18, 2014 CHRB Meeting, Tom Ludt, speaking as a representative of track management for Santa Anita, told the Commissioners of the CHRB that 18% takeout on doubles had resulted in a net loss to purses of almost half a million dollars.

Link to the July 18, 2014 CHRB Meeting Transcript:

Quote from page 83 of the transcript:

"MR. LUDT: We do listen, and I do think that's very important. And my challenge and in -- not just me, but the tracks and a TOC, in setting these things, we just -- not -- like we said, it was an experiment. The handle went up, but if you look at the net to the purses, it actually went down almost 500,000 to the net purses on daily-doubles, singling that out."

I think horseplayers everywhere deserve to understand how Ludt, as a representative of track management for Santa Anita, came up with that $500,000 number as the net loss to purses he claims resulted from 18% takeout on doubles.

HANA has obtained a spreadsheet from the CHRB which you can download here.

Believe it or not, the spreadsheet contains the following columns:

1. A column listing handle on doubles.

2. A column listing handle on doubles multiplied by 22.68%.

3. A column listing handle on doubles multiplied by 18.00%.

Incredibly, the $500,000 number given out by Ludt as the supposed net loss to purses because of 18% takeout on doubles was arrived at by subtracting handle on doubles multiplied by 18.00% from handle on doubles multiplied by 22.68%.

Incredibly, the CHRB swallowed the $500,000 number given out by Ludt hook, line, and sinker - because they approved Del Mar's application to go to 20% double takeout for their current meet.

This was the same flawed logic used by Los Al to justify their takeout increase back in 2010.

This was the same flawed logic used by the CHRB, TOC, and Track Management at Santa Anita-Golden Gate to justify SB1072 and the takeout increase that went into effect at Santa Anita, Golden Gate, Hollywood Park, and Del Mar on January 1, 2011.

This is the same flawed logic used by Churchill Downs this past April to justify their takeout increase.

The logic?

We make more money with higher takeout because our latest handle numbers multiplied by new higher takeout rates is bigger than our latest handle numbers multiplied by older lower takeout rates.

But in the real world it never works out that way.

Why not?

The logic is flawed because it fails to account for the fall off in handle caused by higher takeout rates.

Betting handle and takeout rates share an elastic relationship.

The fact is handle is created by bettors who are price sensitive. This is something that has been studied at length and is very well documented in the economic studies paid for by the thoroughbred racing industry.

We found a link to one such study on the website of the National HBPA: here.

We put a link to a second such study on the HANA website: here.

Sadly, this fact has been continually ignored by decision makers within the thoroughbred racing industry.

Fact: Los Al's on track handle was down 27% during the first six months immediately following their takeout increase in 2010.

Fact: Handle at Santa Anita, Golden Gate, Del Mar, and Hollywood Park fell almost $250 million (a quarter of a billion dollars) during the first year of their takeout increase.

Fact: Santa Anita cut one third of its staff as a direct result of the flawed logic used to justify SB1072.

Fact: On page 4 of the 2011 CHRB Annual Report then CHRB Chairman Keith Brackpool cited "the economy" as the reason for California's handle woes.

But SB1072 wasn't the only gambling bill to be passed by the California Legislature in 2010. AB142 authorized the CA Lottery to leverage higher prize payout percentage (lower takeout) to drive an increase in total dollars going to education.

Q. If the economy was so bad, how then did the CA Lottery achieve a completely different result through AB142 and lower takeout than CA Racing did with SB1072 and higher takeout?

Fact: Handle at Churchill Downs was down $49 million vs. the prior year's spring meet in the wake of their takeout increase this past April. Further, Maggi Moss reported on Twitter that Churchill will have a 20% purse cut for their upcoming September meet.

Fact: Handle at the current Del Mar meet is down approximately $30 million vs. the prior year - IN PART - because of player reaction to seeing Santa Anita Track Management use this same flawed logic to blame 18% double takeout as causing a net loss to purses of $500k.

My questions to the CHRB:

Have you not learned anything from all from this?

Can you not see how your continued belief in the flawed logic behind SB1072 is causing you to harm the very industry you are sworn to protect?

Jeff Platt

President, HANA

Monday, August 11, 2014

Beyer: Horseplayers Are Making a Difference on Takeout

Noted horse racing columnist Andy Beyer has penned some thoughts regarding the low takeout pick-5 in southern California and the HANA-supported boycott of Santa Anita a few years back. 

Writing for the Washington Post and the Daily Racing Form, Beyer said, "The pick five's success since it was introduced in the state in 2012 is due to two player-friendly features: a 50-cent wagering unit and a 14 percent takeout rate. It is arguably the most attractive bet in horse racing, and it has been adopted in other jurisdictions, notably New York. But the evolution of the pick five in California holds significance for the entire racing industry because it is closely tied to a crucial issue: takeout." 

The article also contains quotes from HANA's Jeff Platt.  To read the article in full, please click here.

Joining HANA is completely free!  To sign up, please click here.

Wednesday, August 6, 2014

Handicapping Information Galore

The archive page of HANA's Horseplayer Monthly contains all of our issues dating back to our initial edition in September of 2013, but we will cross-post the entire archive in this post so you have it handy on the blog as well.  There are many handicapping articles, articles, and statistics for you to peruse. 

June Issue Features:
Barry Meadow talks Morning Lines, Lenny Moon finds a track he can crush, CJ of TimeFormUS looks at track bias. Pletcher's Derby record, what gives? Four ways to have more fun on big days. Mike Dorrwants WPS minimums hiked. 

FeaturesBelmont EpilogueDinkin is going to miss Keeneland poly, Garnet's harness column focuses on the Hawk, Belmont meet stats and much more. 

April Issue Features:
Track Ratings:
Methodology, Top five at a glance, Big movers, Interviews: Kentucky Downs Johnsen & Sam Houston’s Stahlbaum, Tracks Listed, 1 through 64, Statistics.

Keeneland Previews: Rich Nilsen, 7 Reasons to Play Keeneland, TimeformUS Trainer Numbers, Melissa Nolan’s Freshman Sire Outlook for the Horseplayer. 
Woodbine Preview, Stats, Bruno channels Abbott & Costello, Barry Meadow talks takeout, taxes & fees. Lenny Moon says it’s all about the Player. Garnet Barnsdale looks at false chalk in harness racing. JJ Hysell’s Derby Top 5, CJ from TimeFormUS explains run ups. Big figure gaps, sucker bets?

March Issue Features:
Barry Meadow kicks it off looking at odds lines, followed by an excellent article by Bruno de Julio, and our Cover Story, “A Review of Esquire’s Horseplayers” by Jerod Dinkin. Twinspires’ Jeremy Clemons answers eight questions and Larry Collmus gives one dandy interview.  Mark Patterson of Mountaineer shares tips and tricks, Doug McPherson lends his thoughts on Quarter Horse bias. In the harness section, Garnet Barnsdale looks at a “Trident” of handicapping.

JJ Hysell gives us her kick butt Derby Top Five, the WirePlayers boys and girls share their top ten.Mark Midland tells us why he thinks bigger tournaments are working at Derby Wars. We get some “FTS” and “STS” insight with Art Parker.

The Back Page shares some trainer stats from database handicapper Jeff Platt, that to our knowledge, are not published anywhere.

February Issue Features: 
Horseplayer Jerod Dinkin, a seven-time Horse Player World Series and three-time National Handicapping Championship qualifier, offers several tips tournament play, both before you enter and when you are in competition.
What is "lawyer handicapping" and why should you avoid it?  Barry Meadow explains.  Clocker, horseplayer, and jack-of-all trades Bruno De Julio explains why he likes to see horses "multi-task" and what that means. 

December Issue Feature:  
A trainer is 15% off the claim, wins 32% sprint to route, is pretty good with a certain jockey. How are we supposed to use these numbers? Barry Meadow explains how to, and not to, use published statistics when we handicap.

Breeders' Cup Issue Feature: 
Patrick McGoey won the Breeders' Cup Betting Challenge and over $500,000 two years in a row. We spoke with him as he goes for three.

October Issue Feature:
An interview with professional horseplayer Mike Maloney.  Learn how a pro goes about his betting day, and see if it can help you become a better horseplayer.

September Issue Feature: 
Are horses getting slower or faster? What's up with run up times? How are the TimeformUS figures constructed? Learn the answers in our Q and A with TimeformUS's Craig Milkowski. 

Click here to read that and much more!

Thursday, July 31, 2014

Why Big Day Revenue Gains Work & What It Says About Horse Racing

In April, CDI raised takeout at their flagship track, Churchill Downs. It was suspected at the time by many industry analysts that this was a way to grab more money from two big days - The Derby and the Oaks - to make the bottom line look better to shareholders.

Those analysts were probably correct. In the recently concluded World Cup, if ticket prices were doubled if Brazil made the final, revenue would be increased. Derby and Oaks day would see a gain over a regular day at the track, too.  It's common sense, really.

Why would it work for those days?

When casual fans go to the racetrack, they expect to lose. On big days like the Derby or Oaks, it's a once a year occurrence. Those days, Joe from Queens, or Susan from Lexington say "I am bringing $500 to the track to take a shot at the Derby". They don't bring only $400 because the rake was raised. They aren't bet sizing or looking at longer term ROI. They are just bringing what they planned, fully expecting to lose it all.

While those folks are good for Churchill (or other tracks on big days with lots of casuals), what they are saying about horse racing drives a stake into its heart as a gambling game.

Joe and Susan are saying this is a game (handicapping) that can not be beaten. They don't care if the takeout is 18% or 22% because they don't plan to come back. They don't plan to buy a DRF book to learn the art of handicapping, read the Horseplayer Monthly for tips (August's issue is out today, by the way), or go out of their way to come on a Tuesday for the regular races. They drink mint juleps, lose all their money and go home.

Churchill, and other tracks who wish to, can happily raise takeouts on big days and probably escape unfazed. However, when they choose to do the same thing in the other 364 days, they are hurting the game of handicapping in untold ways. They are saying to Joe and Susan and everyone else, "you're right. This is a sucker game. But thanks for your cash. We'll see you next year."

I was vacationing this week with an old friend who used to play the races as a youngster. He's a fund manager now, busy with 12 hour work days and two kids, so he doesn't have a lot of time for horse racing. He asked me if horse racing was still hard to make money at. I told him yes, and relayed that takeout was even being raised, not lowered, to make it even more difficult. He said "the math isn't there to begin with, and they tilt the wheel even more against you?"

No business can grow like that; especially a gambling business. The horse racing industry needs to understand that to have a thriving gambling game, at least some winners must be sent home to come back tomorrow. They must have a chance to win, or at least perceive they have that chance; to tell others about the opportunity of the game. Until that happens, racing will be relegated to trumpeting increased "EBITDA" one day a year with blaring headlines, while in the fine print everyone knows how bad the other 364 are.

Thursday, July 17, 2014

20 Percent (Reduced) Takeout Doubles at Del Mar

This week kicks off some great summer racing. Opening day for Del Mar is today Thursday July 17, 2014. Opening day for Saratoga is tomorrow Friday July 18, 2014.

Link to a Press Release on the Del Mar website: Here.

The press release contains the following quote:
"In a new arrangement for this meeting, Del Mar will drop its takeout rate on its "rolling" Daily Doubles to 20% after previously offering them at 22.68%."
While it may be true that at 20% the takeout for doubles at Del Mar in 2014 will be lower than the 22.68% takeout Del Mar had for doubles last year:  It is also true that the 20% takeout for doubles at Del Mar this year is HIGHER than the 18% takeout rolling doubles offered at the recently concluded meets at Santa Anita (April 26, 2014 through June 29, 2014) and Los Alamitos Race Course (July 3, 2014 through July 13, 2014.)

There is an untold story here. I think it is important that you the player understand how 20% takeout doubles (instead of 18%) came to be at Del Mar.

Sources are telling me it was the TOC (Thoroughbred Owners of California) who, at a meeting on Friday July 11, 2014, voted to discontinue 18% rolling doubles at California tracks.

I ran handle numbers for comparable dates between Hollywood Park 2013 and Santa Anita 2014: Here.

As you can see, handle for Santa Anita 2014 vs. Hollywood Park 2013 was up 16.81%.

I also ran comparable date handle numbers for Double pools in isolation:

As you can see, handle for 18% doubles at Santa Anita 2014 vs. 22.68% doubles at Hollywood Park 2013 was up 24.05%.

To put this in context:  The growth rate for 18% takeout doubles at Santa Anita was more than 1.43 times the growth rate for handle in general.

We at HANA think the wagering public deserves answers to the following questions:
If 18% takeout doubles were up 24.05 percent vs. 22.68% doubles from the previous year, why vote to discontinue the program?

Wasn’t the program doing what it was designed to do: Make the California wagering menu more attractive to players so that California tracks can grow handle?

--Jeff Platt
--President, HANA

Wednesday, July 16, 2014

Money Earmarked For Drug Research Sent to Lost Churchill Downs Purses

Gregory Hall in the Louisville Courier Journal wrote today that $125,000 of the $1 million from The Kentucky Thoroughbred Development Fund was allocated to Churchill Downs for purses in 2014.

"The $1 million was taken from a separate racing commission fund that pays for equine drug research," he wrote.

This, according to the article, was needed to be added to purses, because Churchill Downs had a purse shortfall for its spring meet after a massive handle reduction.

In April, Churchill Downs raised the takeout, and said that the increased revenue from the takeout hike would increase purses by $8 million.

This is what takeout hikes tend to do. Not only does the hike not raise purses by an amount like 8 million dollars, it ends up having a track, or horsemen group divert funds from equine drug research when purses fall.

Takeout hikes are never the answer to racing's revenue problem, and never will be the answer to racing's revenue problems. They only make things worse.

Saturday, July 12, 2014

Horseplayers Understand How Dinny Phipps Feels

In the article "Jockey Club Supports Federal Oversight...." you can sense the frustration by Dinny Phipps. He, and others from the Jockey Club, clearly do not think federal oversight is the best solution to their issues, but getting horsemen groups and states, as well as other alphabets, to agree to some sort of reform is elusive. He looks like a man who is saying "I can't fix this problem, so let the feds take over."

Really, can anyone blame him?

As horseplayers I think we know how he feels.

Today there was a thread on about a proposed (and rumored) hike in takeout rates at Del Mar racetrack, which will be carried over to all of California racing. It's titled "Is the TOC preparing to stick it to horseplayers again?"

The TOC, for those who do not know, is the Thoroughbred Owners of California. They have veto power over what racetracks charge us to bet the product. Why should an ownership group be able to tell tracks what to charge their betting customers, you may ask? It's because it's a part of the Interstate Horse Racing Act.

For example, at Del Mar, the state, Frank Stronach, the CHRB and horseplayers can be all packed with studies, economist testimony and econometric data to show that lower takeout rates of, say, 12% can work for everyone. Despite that, the horsemen group of record can say no. Then the policy would end.

They don't have to show a business case. They don't have to bring in experts to testify so that a decision can be made. They don't need data from economists.

They can just say "no" and it's over. We think that's just silly.

It's similar to a hay supplier going into Bob Baffert's barn and having the power to set Bob's day rate. That sounds nuts, and it probably is, but that's the power of the IHA.

Takeout rates should be set in a professional way, with professional people who know gambling economics in charge of the precedings. Giving a horsemen group the power to set takeout rates in a  capricious fashion - without any checks and balances - should've never happened in the first place.

It's a wrong that needs to be righted. The future of wagering for horse racing is too important for knee-jerk, non-scientific, arbitrary decisions.The IHA needs updating, and it needs updating before it does even more damage.

Friday, July 4, 2014

Pricci: For July 4th Horseplayers, It’s Morning in America

First of all, Happy Fourth of July to all of our readers in the United States.  Thank you for your continued support and enjoy your holiday with your friends and family (and place a wager or two or several if you feel so inclined).

Second, John Pricci wrote a piece entitled, "For July 4th Horseplayers, It’s Morning in America" for Horse Racing Insider, explaining the clout that all of us as horseplayers have in this era of social media and electronic communication.

An excerpt of John's piece appears below -

"The most encouraging and dramatic sign of progress in the first half of 2014 is a relatively new development; the emergence of the horseplayer as a political force that can affect change, almost at almost warp speed compared to the glacial pace at which progress is usually made in this sport.

Can’t speak for other betting-boycott supporters but I take no comfort from the fact that Churchill Downs Inc. took it on the fiscal chin to the tune of nearly $48-million in handle. That comes to $1.3 million every racing day not named Oaks or Derby. Without those days, business was down approximately 25 percent.

For all the slings and arrows shot its way, none of this would have been possible if it were not for dissenting voices on the Internet and social media. From websites speaking truth to power, to grass roots participation from fans in racing chat rooms, industry organizations took note.

The perfect storm for change turned out to be a disqualification in the final race of the day this winter at Gulfstream Park, allowing a carryover jackpot to continue. The DQ, in and of itself a controversial call, was met with great consternation and suspicion.

The response on the Internet was immediate and forceful, resulting in subsequent dialogue between fans and racetrack executives. The result was policy changes meant to improve the race adjudication process.

The back-and-forth bore fruit in that the response was in the main positive for bettors although, to date, not all promises have been kept. Horseplayers have long memories.

While no pleasure was taken from CDI’s travails, what was gratifying to see is what can happen when a disparate group of gamblers get together in a common cause. Bettors got mad as hell and decided not to take it anymore.  Each passing day, the influence of a grass roots organization such as the Horseplayers Association of North America continues to gain influence and beginning to get invited to sit down at the table.

And, so, as the nation celebrates its freedoms this weekend, there is reason for a very small segment of the American people to feel optimistic optimism about future. We know it won’t happen overnight but it finally looks like we won’t get fooled again."

To read John's piece in full, click here.

Thursday, July 3, 2014

Bringing Down the Twinspires

This blog post originally appeared on Lenny Moon's Equinometry blog.  Lenny is on Twitter @equinometry and is a monthly contributor to HANA's Horseplayer Monthly e-magazine.

Corporate Genius 1: “We need more cash in the till to please the shareholders and increase our bonuses.”
Corporate Genius 2: “I have the perfect idea, let’s look like the good guys and take on those racing dates in September to drop our daily handle below $1.2 million so we can increase takeout rates.”
Corporate Genius 1: “That’s brilliant.  We’ll get good press for helping the local racing circuit now and then we’ll fleece our mindless customers next spring.”
Corporate Genius 2: “They won’t even notice because all the talk will be about the Derby and before they know it the meet will be over and revenue will be up a couple million.”
News of the takeout increase spreads like wildfire because unbeknownst to the two corporate geniuses a lot their mindless customers use the internet and social media.
It only takes a few days to orchestrate an official boycott of the takeout increase but the two geniuses ignore the warning and take a wait and see approach.
The end of June rolls around and to their surprise wagering handle is down $49 million and the increase in takeout rates can’t overcome the decline and results in a slight drop in takeout revenue.
Excuses quickly roll out but none can account for the dramatic drop in wagering handle.
Since the corporate geniuses won’t tell the true story and the racing media only tells part of it I’ll give you the whole story.

Excuse #1: Decrease in Field Size

Field size is often attributed to changes in wagering handle.
In some cases it does contribute but in others it seems to have no impact.
For example in the weeks leading up to the Churchill Downs meet I researched howchanges in takeout rates affected wagering handle in California.
In addition to takeout rate changes I looked at the average field size to see if there was any correlation between changes in it and wagering handle.
During the period of stable takeout rates (1997 to 2005) field size decreased by 7.41% while wagering handle increased by 20.39%.
During the period of increasing takeout rates (2006 to 2013) field size decreased 1.30% while wagering handle decreased by 28.30%.
The decrease in field size during the first period was 0.60 horses per race while the decrease in the second period was only 0.10 horses per race.
This would clearly suggest the change in field size didn’t negatively impact wagering handle.
With 17 years of data this study provides sufficient proof that field size doesn’t always impact wagering handle.
Giving Churchill Downs the benefit of the doubt, however I also looked at another study that did show field size can impact wagering handle.
The Thalheimer study, which you can find here, showed the correlation between field size and wagering handle to be 0.58.
Using this correlation and applying it to the change in field size at Churchill Downs from 2013 to 2014 would suggest wagering handle should have fallen by just under $3 million.
That’s a far cry from the $49 million drop that occurred.

Excuse #2: Decrease in Number of Races

My study of California didn’t look at number of races but Thalheimer’s did.
The correlation between number of races and wagering handle was 0.64.
Using this correlation and applying it to the change in number of races at Churchill Downs from 2013 to 2014 would suggest wagering handle should have fallen by just over $7 million.
Again this isn’t anywhere close to the actual drop of $49 million.
The chart below shows the actual drop and what the Thalheimer study estimates the drop should have been based on decreases in average field size and number of races.

Even if you combine both the expected drop in wagering handle caused by a decrease in average field size and number of races the total is around $10 million.
That accounts for only 20% of the $49 million drop, which begs the question: what caused the additional $39 million drop?
The answer is one the corporate geniuses will never admit: the increase in takeout rates.

This is Just the Beginning

The Thalheimer study also determined the correlation between changes in takeout rates and wagering handle to be – 2.30.
The negative correlation means that an increase in takeout rates will result in a decrease in wagering handle and vice versa.
While the affects of changes in average field size and number of races will be felt immediately the full impact of takeout changes typically takes 12 to 18 months.
Applying the – 2.30 correlation to the changes in takeout rates and blending them based on the mix of WPS and all other wagering types suggests the decrease in wagering handle should be about 31%.
The $49 million drop this meet is only a 12% decrease meaning the wagering handle should drop more rapidly over the final two meets this year and the spring meet next year.
The decrease for the remainder of this year will likely be much more than 12% because that number includes Oaks and Derby days, which skew the data.
When factoring out those two days wagering handle was down over 25%.


The decrease in wagering handle was a combination of a decrease in average field size, a decrease in number of races and an increase in takeout rates.
It’s pretty clear the overwhelming factor in the equation was the increase in takeout rates.
It’s also pretty clear that the players boycott accelerated the decrease in wagering handle.
The forecast for the remainder of the year is pretty bleak as well as there will be no big days to skew the numbers.
The last and most important point is this should be a wake up call to all tracks.
If you increase takeout rates expect your wagering handle to plummet.
Likewise if you decrease your takeout rates expect your wagering handle to skyrocket.
If you don’t believe me take a look at Kentucky Downs.
The data regarding the 2013 and 2014 Churchill Downs meets can be found here.  Please note that I did not include Future Wagers in my numbers so they may differ slightly from other reported numbers.

Wednesday, June 25, 2014

Violette's Comments Don't Sit Well With Horseplayers

Yesterday in an interview at Thoroughbred Racing Commentary, New York horseman Rick Violette said that customers should help pay for new drug testing. Out of 100% of revenue, the tracks receive about 11%, purses receive about 11%, and the customer gets paid out 78%. The proposal - if we can call it that - means that if the tracks and horsemen give 1% each for drug testing, horseplayers should too. That means takeout would be increased by another point.

This, as one might anticipate, went over like a ton of bricks.

Among others.

Mr. Violette might find this anger unwarranted. However, since he speaks about football and concussions in the interview, what would he think would happen if someone in power in the NFL said "fans get a better product if our players have fewer concussions, so we're going to raise ticket prices $10 at every stadium to help pay for concussion testing."

Fans would be justifiably upset. The NFL is an $8 billion dollar league. They should find some money to pay for their athletes and the good of the game of football themselves from that $8 billion.

Horse racing, through slots, revenues from betting, grants, admission, ADW taxes, fees for horses and licensing, and a number of other avenues, raises about $2 billion in revenue. Like the NFL, they already have revenue to pay for this themselves. They should use it for drug testing. There's clearly plenty of money for it.

Monday, June 23, 2014

The Field Size Narrrative Doesn't Capture Your Behavior

When handle is down this racing year - especially at CDI owned racetracks like Arlington and Churchill Downs - industry insiders like to chalk it up to 'field size losses'. Perhaps this is a way to buttress your boycott of such properties, we don't really know. But we do know it does not have the merit some would want it to.

A point of fact. Here is the Arlington Park numbers from this year when field size was a standard deviation above where it was last year:

Yes, despite what you may read in the press, you are reading the number correctly.

2013 field size sample: 7.54 horses per race, 2014 field size sample: 8.27 horses per race, for an increase of 0.73 horses per race.

Handle is still down over 9%.

Churchill Downs, outside special event days, has lost 0.62 horses per race this meet - that's less than the number Arlington has gained in the above sample. Handle is down 26.90% overall, or over 20% per race.

For field size to be "the" issue, the above numbers would not be possible.

Or, in common sense terms, if field size was "the" issue, you'd have to believe this:

"I am betting Churchill Downs more because they raised takeout and I make less money when I win"

rather than.....

"I am betting Churchill Downs less because they raised takeout and I make less money when I win"

One of those statements makes logical sense and one of them doesn't. It's pretty clear what's been happening, and we expect, over time, others will catch on to it, too.

Friday, June 13, 2014

Northlands Park Pick 5 Carryover Tonight

If you're looking for a track to play tonight, Northlands Park has a $6,607 carryover in their Pick 5, which carries an industry-low takeout of just 10%.
We had some information about Northlands Park's commitment to improving their wagering product on page eight of the April edition of the Horseplayer Monthly, and we are planning on having a more extensive interview with Executive Director and General Manager Chris Roberts in the next issue.

Free past performances are available here (PDF).

Thursday, June 12, 2014

Some People Prepare for the Stephen Foster Different Than Others

We were tweeted this cartoon from a horse racing fan:

You can follow Deb Martin here. And you can see more of her work, as well as purchase some if you wish, right here. 

Thanks Deb, we laughed.

Monday, June 9, 2014

Bettors Low on the Pole: Courts Even Think We Don't Matter

Today via the DRF:

"A U.S. District Court judge has ordered that an indictment against a Pennsylvania trainer be dismissed...... The indictment stated that the trainers had allegedly given illegal substances to horses or intended to give illegal substances to horses as part of what the indictment claimed was a scheme to fix horse races. In his ruling, Caldwell said the indictment against Webb did not contain any evidence that the trainer had actually bet on any of horses that had been given illegal substances or urged anyone else to bet on any of the horses."

We don't know the logistics of the case and we certainly will not comment on whether this gentleman is guilty or innocent of anything, but why do judges rulings think we don't matter?

We may have bet some of these races. Money may have been taken from us.

If a Fortune 500 CEO cooks the books would the judge say because he does not own stock in the company and did not profit from it we'll let him or her cook the books?

What about other horse owners? What about other trainers - a trainer who wins races illegally (allegedly), gets press, win percentage headlines, is noticed and gets new clients (possibly some of yours).

When a race is "fixed" there are victims. The trainer who is supposedly doing the fixing does not need to bet on his horse to make financial gain, or hurt others.

That's our opinion. What's yours?