Monday, December 8, 2008

Let's Get Rebating

On the Trackmaster blog tonight, the author explores a bit about rebating. It is amazing to see the sea-change. Only four or five years ago the word rebate was met with disdain from racing. More than likely because this business loves high takeouts and thought that they could still charge monopoly prices, while not being a monopoly. Hey, who can blame 'em! If you or I were selling hula hoops in 1950, we were the only seller, and the government mandated that the only exercise the citizenry were allowed to do had to involve a hula hoop, we would have stuck it to hula-hoopers everywhere. Cheaper hula hoops? Not a chance. You are lucky we aren't raising prices!

But times have changed. Rebate is not a bad word anymore:

Where does racing go from here? How can the industry grow? How are handicappers shown that they matter? Other than fixing problems like those mentioned, one way is by offering rebates to reward bettors of different wagering levels. Currently, only a privileged few are offered rebates throughout tracks in North America. These are the “whales,” individuals that can push through a minimum of one million dollars a year through the betting windows. It is estimated that currently, about 15% of the entire handle in North America comes from these players through legal rebate shops.

HANA believes with the fingers in the pie economics of racing, we are never going to get 20 legislatures, about twenty acronyms, a few horseman groups, Bob Evans (probably both the restaurant guy and the Churchill head) and a few other scattered groups to ever lower takeout. The only way to do it? Rebates - for everyone. If an ADW wants to offer them, and if a customer wants them, they get them. End of story. If it works for the whale, it works for the minnow. Mr. Racing, it is time you met Mr. Free Market.

When pari-mutuel horse race wagering first began, it had a virtual monopoly on legal gambling in most states. The takeout rate or cost of wagering meant very little since it was the only game in town. Over the years, the environment has changed drastically and racing hasn’t adapted to its altered status. Compared to similar types of betting, horse race wagering has a very high takeout rate, depending on the type of wager, normally from 15-25%. Poker or sports wagering each have a takeout rate of around 5-10%. That is a significant difference in cost to the bettor. The legal rebate shops are secretive about the exact percentage of rebates given to the “whales,” but it is safe to say they are probably at or below the 10% takeout rate. Right now, horse racing has the advantage as the only one of the three forms of betting mentioned, allowed to take legal wagers over the Internet from U.S. residents; this might not always be the case. Racing executives and horsemen need to understand that racing is competing against other forms of gambling. Simple economics dictates that racing has to have a competitive pricing structure for the game to flourish. Since lowering the takeout would be a difficult legislative process, providing rebates based on the amount a player wagers would be the best way to make this change, and while also needing legislative approval, might be an easier path.

It is an excellent piece. What the author fails to mention is that there are currently a couple ADW's who offer cash rewards for minnows and whales. Unfortunately those places (for example BetAmerica and Premier Turf Club) are shut out from getting some signals. Also, with the ancient rules we are governed by, some people in some states and/or Canadian provinces are not allowed to even bet with them. We wonder why. We'll be trying to find out for you, the bettor. Because your money matters, and you will be the one who grows this business. Not a slot machine, not a piece of legislation, not a handout - you. You matter.

Give the article a read. It is a good piece.


Anonymous said...

"Racing executives and horsemen need to understand that racing is competing against other forms of gambling. Simple economics dictates that racing has to have a competitive pricing structure for the game to flourish."

If the racing execs ever adopted this philosophy, the game would grow.

Anonymous said...

I agree with just about everything in the Trackmaster blog piece. However, there is one statement I disagree with.

Quote: "The logistics of providing rebates would have to be worked out and if the ADW Wars are any indication, it will be a difficult process. "

If there was open signal access there would be no logistics to work out. Free Market pricing would prevail. Customers would choose an ADW based on attributes that are important to them.

Anonymous said...

my question: The ADW's that are rebating do not have full signal access. Why? If the business is scared it will lose business as customers move from say a Twin Spires to a Premier Turf Club, then it is an admission that prices in racing are too high. If prices in racing are too high, then why dont they lower them?

Anonymous said...

So I hear on Steve Byk's show that Churchill is having a poll on whom we thin should be the successor there...I don't know why this mattered--I WAS ASKED IF I WAS AT LEAST A BRONZE MEMBER---To what I answerer Yep WTF does it matter-in the appropriate space.--So if one wagers less than 25K their vote is discounted...I was pissed I even voted.