Tuesday, December 2, 2008


By Cangamble

Horse racing handles were dropping prior to the official announcement that the world has entered into recession. Handles in North America recently can't even keep up to tiny inflation increases. Even though horse race betting is available in more and more homes than ever before, the racing execs have forgot that their product is a game of chance, and they have not even attempted to compete with other games of chance.

Click Image to enlarge it:

The above graph looks better than things are. If you just factored in normal inflation rates since 1992, the total mutuel handle would be higher than $18.4 billion. Not to mention that in 1992, one had to go to the track (or OTB) to make a bet.

By all accounts, I expect 2008 numbers to be down anywhere from 5-8%. Here is an industry that should be experiencing nothing but tremendous growth. Horseplayers know that nothing compares to horse racing when it comes to gambling, when it comes to excitement and self admiration when it comes to selecting the right outcome.
I don't want to sound like a broken record, but the reason for the stagnation and decline in numbers boils down to one major thing: the cost of the takeout versus other games of chance.

While we are at it, lets look at another chart compiled by The Jockey Club:

As you can see, handle stagnated in the early 1990's but grew considerably from 1994-the late 1990's. This was due to teletheatre and mainly internet ADW growth. Many patrons didn't need to go to the track anymore to place a bet, thus on track attendance also declined, and continues to do so today.

Do these stats mean that people are gambling less? Absolutely not.
Take Canada for instance. $13.6 billion in gambling money was lost last year by Canadians last year. In 1992, only $2.7 billion was lost.
Canadians can and do bet on anything. Internet sports, poker, Pro-line, slots, all sorts of lotteries, oh and horse racing. We didn't have as many options in 1992, but we did have to go the track or the teletheatre to make a bet on a horse race.
In 1992 handle in Canada was $770 million, last year it was only $560 million. Not only is that shocking (I know slots took away a lot of it), but if racing grew at the same rate as total gambling grew in Canada, the handle number last year would have been over $3.5 billion.

In 2004, The Cummings Report was published. It seems that racing execs used the valuable information and recommendations in the 72 page report as toilet paper.

The problem is that they probably read it, but they didn't react. In 2004, they were still making money. Tracks were not closing.

The Report basically spelled out that racing needed to compete for gambling dollars, and pretty much predicted the downfall we are seeing today.

I'm sure the same is true with the North American auto sector, and their refusal to aggressively compete with Japan, by making more economical cars and cars that use other sources of energy.

I have news for the racing industry, not enough people care to even considering bailing it out.
But the biggest problem with horse racing today is that the industry might be too far gone. It is completely dysfunctional.

Some racing execs may now know that they HAVE TO REDUCE TAKEOUTS TO COMPETE AND GROW, but the horsemen groups won't take a risk on a complete new way of thinking. I just don't see it at this time.

Meanwhile, bettors are leaving, owners are leaving, handle is dropping, sales numbers are dropping, and tracks are closing, yet gambling overall is flourishing. Under the current pricing model (high track takeouts) there is no light at the end of the tunnel. There will be no growth, only decline from here.

There may be some temporary fixes soon, but don't get fooled. Horses will start running more and more for what they are worth, so tracks can put on a lot more low claimers, therefore paying out a lot less in purse money. And if the withholding tax law in the states gets overturned, gamblers will have more churn money, though they will end up losing the same as they would by the end of a calendar year, handle will spike a bit for a meaningless while.

If you play the horses and you mostly agree with what I have said above:
It is free. We are on our way to 500 members. The more members we have, the more pull we will have with the industry.


Anonymous said...

As I have mentioned before, I enjoy waking up to your blurbs, It is healthy for me to get my blood freely flowing....You just dont get it guys! the stagnation in the total handle IS NOT due to take out. The vast majority of horse players are not concerned with it. Get over it. the cost of breeding, breaking, vet, training, grain, hay etc. are continuing to climb and you guys (400 strong, had more in my high school graduating class) want a reduction in take out that would mean a reduction in the purse structure no matter how you spin it. Your position is that a reduction in take out would somehow attract more players. You are sadly mistaken. It may attract more proffessionals but that is a detriment to the industry. The stagnation can only be reversed with marketing, not joining the high school band. If in fact your organization was formed to help the industry than please do something besides playing this worn out record. Not going to happen fella's.....

Anonymous said...

"You just dont get it guys! the stagnation in the total handle IS NOT due to take out. The vast majority of horse players are not concerned with it."

That is the problem and that is how the business thinks.

It is not about the "horseplayers" who care or not. It is about the $500 billion dollar gambling market filled with people who do care about it that we do not have as customers. They are the ones who are playing other games.

Insular thinking, just like we have had for 100 years by the people who run this business.

Ask betfair if horseplayers do not "care about takeout". They match billions on UK racing and recently signed their 2 millionth(!) customer.

Take off the blinkers and look at the gambling world we live in, not the insulated world of racing. Once people do that, this column makes a whole lot of sense.

When this business stops thinking failure is good, is a day that can not come soon enough.

Pull the Pocket said...

Wow, anon must work for a track :)

Of course takeout matters and will grow the game if lowered. Isaac Newton says so, and he has a better track record on these things than racing. We are somewhat math-challenged.

One day it will happen, as it is inevitable. Hell racings own numbers say takeout should be around 12% in win to maximize revenues. If they think that, then it probably should be 10%. :)

It just amazes me how the world is changing all around us, we stay the same, and expect to grow, like we are some sort of monopoly again and the last two decades and the invention of the internet did not even happen. I am waiting for an episode of Quantum Leap to tell us this all has been a big dream. Scott Bakula for Racing Commissioner!


Anonymous said...

Anon 1, I'll agree that the majority of players are not cognizant about takeout, but when push comes to shove they wind up gravitating to lower takeout games because they may not understand how the money is being distributed, but they know where they last and where they perceive they have a chance to come home a winner.

You are way off base if you "think" that lower takeouts mean lower purses. It is you who doesn't understand takeout. I'm thinking you are either a horseman or an exec.

Did you read the Cummings Report? I suggest you do.

As for marketing. You need winners to attract players. That is what worked in Poker. At today's takeout rates, there aren't many winners who don't get rebates who can be poster boys for the industry.

Anonymous said...

I have no argument with anything you’ve said here, but I think at this point, it’s more important to knock some sense into the horseplayers who can’t see the value in giving HANA a shot at working for them, despite the fact that no expense or personal data is required.

What have they got to lose?

Could JP’s logic be any more persuasive? Could you and DT provide any more statistics and examples illustrating the problems that exist and why?

Why aren’t they convinced?

Do they need more specifics and details of how uniting their voices can effect change? Do they think players have no chance going up against wealthy and powerful horse owners and breeders? Would they prefer a more confrontational approach toward effecting change? Is it reasonable after five months to question the current path and mission? Do most players actually care about the lack of industry response to customer concerns?

What will attract their attention?

Advertising in the DRF or other industry media? A tour of demonstrations outside active tracks? Addition of prominent, but not-primarily-horseplayer/authors to the HANA advisory board? Pop-Up advertising on forums, blogs, and other related websites? Targeted direct mailings? A concerted and coordinated effort by turfwriters to advocate HANA membership (new/additional justification may be required)? Maybe more like Mr. Zast should weigh in on HANA's perceived progress more often.

When will there be a better time to recruit dissatisfied horseplayers?

Some think the economic crisis altered the dynamic of the Presidential electionl campaign to Obama’s advantage. Is there some aspect of the existing circumstances that can be exploited to raise awareness among prospective members? Is HANA’s primary message one most horseplayers can identify with currently, i.e., can handle be expected to grow in when disposable income is scarce?

Given the situation, perhaps HANA should start making the case that purses are currently too high, and opportunities too many. The graded stakes committee just increased the number of graded stakes for 2009 and upgraded existing ones including six Grade I stakes adding a minimum of $600,000 at that level plus the downgraded Suburban. Where is it supposed to come from? Fields will shrink and their quality will be diluted, thereby lowering the handle such events can attract. IMO there needs to be fewer graded, ungraded and non-stakes events scheduled to attract larger fields at each level.

There also needs to be additional incentives for competing in larger fields. Purses should be distributed in full to each in the money finisher only when the field is full AND -- in graded stakes -- only if that horse was previously a winner at that grade level or above OR finished ahead of such a starter.

Lower stud fees are being announced as well as lower sales prices. Why should purses be any different? We are told that about 1% of horseplayers are high-volume bettors responsible for 10-15% of handle, and an even more disproportionate share of winnings. Isn't it likely that some low percentage of high vet-bill barns are also disproportionately adept at accumulating purse money?

Maybe more people would be attracted to an objective of leveling the playing for horseplayers and horsemen alike in these uncertain times.

Anonymous said...

Anonymous 1 said...

"It may (lower takeout)attract more proffessionals but that is a detriment to the industry."

I sure hope this person Isn't high up In the Horseracing Industry.
Can you Imagine if the Poker Industry said Professional Poker Players were a detriment to the industry.


HANA said...

Very nice questions and comments. Indulto, in future blog posts those questions will be addressed. You raise some very good points.