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Tuesday, July 21, 2009

Two Meets Report Handle. Could They Be Any Different?

Indiana Downs reported their handle figures for the recently concluded meet today.

The Indiana Downs product generated nearly $61 million in total handle, an increase of 19.5% from 2008. Average starters per race for both the Thoroughbred and Quarter Horse programs also increased from 8.6 in 2008 to 8.8 in 2009. "We keep finding ways to bring new outlets on board. We had Canada on board this year. Hopefully we can find a few more markets."

Conversely, so did Hollywood Park.

Using the track's figures, Hollywood had a drop in total all-sources handle of about 18 percent from last year's 60-day meet.


That is quite a juxtaposition. However in several ways it is explicable, if we look at what drives handle.

Field size was up in Indiana. Field size at Hollywood was poor. Larger field size equates larger handles.

The signal at Indiana Downs has never been tinkered with. They offer it out, at a low price, so virtually everyone who wants to play it can and have been able to for some time. Hollywood on the other hand has had signal disruptions as recent as last meet. In addition, because Indiana offer their signal out at a very good price, places that rebate to small and large players can use that edge to lower the effective takeout to players. Hollywood charges a high signal fee. Lower signal fee = Lower takeout for players = Higher handle. This is why HANA was publicly and vociferously opposed to the THG "1/3, 1/3, 1/3 model" they were pushing last year regarding signal fees - it would have been a takeout increase, and takeout increases hurt handle.

Short fields on poly versus large fields on dirt will tend to be at a disadvantage as well with horseplayers who have myriad choices. Indiana won that battle.

We make raising handles in racing some sort of nebulous and unattainable ideal. The empirical data shows otherwise - if you offer your product out to anyone who wants it without holding them for ransom, make it bettable and competitive, make field sizes large, and offer your signal at a low cost so ADW's are allowed to lower the takeout on their players, your handle will show improvement. This is proven time and time again to be a successful alchemy.

H/T to "Inside the Pylons" at Paceadvantage.com.

9 comments:

Anonymous said...

Bingo!

The_Knight_Sky said...

When was the last time a Southland racing venue showed an increase in all-sources handle?

Was it the time they went out of their way to create a Super High Five pool to make up for the shortcomings of the racing surfaces?

It seems as though the TOC keeps pulling the plug at the most opportune times - during the meet - to prevent a meaningful gauge of how the racing product is being received by the public around the nation.

Coincidence?

Anonymous said...

It's very simple for me. I Hate the Poly,all weather,tapeta, pro ride,cushion , & WHATEVER! It's a joke. I hope this trend continues.

Anonymous said...

Talk about how much Indiana Downs handles per day as opposed to Hollywood Park. Also, Indiana Downs is a relatively new track as they should have a general increase in handle through their first few years!!

Steve Zorn said...

Three variables: surface, field size, and simulcast fee. Hard to say for sure which had more impact.

I'm working on the takeout vs. handle size issue, struggling with it all the time. The few experiments out there are, I fear, inconclusive.

And my real fear is that too low a fee for the signal means too little money for purses. Remember, it's not just gamblers who lose money at the races; most owners do too. Do we know how much Indiana's and Hollywood's purse accounts changed with this year's changes in total handle?

The 1/3-1/3-1/3 model may not be perfect. It probably leaves way too little for the kind of rebate schedule that we need to generate decent handle. But a one-size-fits-all bargain-basement simulcast fee will starve those of us who provide the "content" that people bet on.

Anonymous said...

Daily average handle only increased 4.5 percent at Indiana Downs, according to DRF. Hollywood daily average handle was down 11 percent. Good for Indiana, bad for Hollywood, but not quite as dramatic as the post here.

Totals can be misleading because of an increase or decrease in the number of racing days.

HANA said...

Steve,

I am looking forward to what you come up with. But a little food for thought from a horseplayer group, studying wagering economics? Think big.

I am just studying what happened in the UK when Tony Blair changed the betting tax in 2000. 6% was dropped from pricing, and the government knew that handle would go up. The egghead types who project these things for government (and I say that in a nice way, because they tend to be better than people give them credit for) estimated that with the lower takeout, bettors would respond and handle would rise 33% in year one. Not bad at all.

However, they were way wrong. It turned out that handle grew from 7 billion pounds to 12 billion pounds - a 70% increase. Over double what they were projecting.

So, when you say that the source can not handle 5% or whatever to pay for purses, well all I would offer for evidence is that. If we do get better pricing as players we could blow handle right out of the water, just like in the UK.

Thanks for the response.

webmaster said...

"The 1/3-1/3-1/3 model may not be perfect. It probably leaves way too little for the kind of rebate schedule that we need to generate decent handle. But a one-size-fits-all bargain-basement simulcast fee will starve those of us who provide the "content" that people bet on."

That is why I think its very important that when the industry talks about splits they do it post-rebate. If we want some price experimentation to take place there has to be explicit room left open for it. But I think you're right, a fixed split of takeout fits all model just is not a very likely first step.

If we begin the discussion instead talking about a fixed split of effective takeout (i.e. post rebate) some good things start to happen I think. Everyone gets a fixed % of the revenue, but takeout can move, because the split is figured after rebates are taken out.

The ADWs will naturally seek out and attempt to find the point at which their revenue is highest -- and since the tracks and horsemens share move in direct proportion, the ADWs highest revenue point is also the highest revenue point for tracks and horsemen.

ITP said...

Mr. Zorn,

I'll give you a real life example so you can understand the value of a low signal fee.

If I bet $10K per night on Indiana Downs charging a 3% signal fee and after my rebate, I hold 3%, they make $300 and I make $300 per night. Let's say they raise their fee to 8% like a lot of other tracks and my rebate gets lowered by the extra 5% they are charging.....I'm not going to bet anymore but using Fred Pope's logic and other dolts in the industry, they think I'm still going to keep betting. Isn't a 3% signal fee on $10K of handle per night better than 8% of nothing? I know the answer but somehow most people in charge of racing don't.