Saturday, August 8, 2009

Andy Beyer Had it Right, in 1991

Doing a google search tonight I came across an Andrew Beyer article, way back in 1991. It was titled "Taxing the Bettors, Taxing the System"

Whenever U.S. racetrack executives get together at industry conclaves, they talk endlessly about the need to broaden the sport's popularity and attract new fans. But perhaps their real problem is that their horseplayers don't bet enough.

Why do American racegoers bet so little? The reason is certainly not a lack of gambling fever or a lack of high-rollers. The casinos of Atlantic City and Las Vegas are filled with players who routinely bet thousands. And the country is filled with people who regularly make large wagers on sporting events. The magazine Gaming and Wagering Business estimates that $25 billion a year is bet illegally on sports -- compared with the $9.2 billion bet legally on horses in 1990. There are plenty of people who are ardent, enthusiastic horseplayers, yet might bet $300 on a Sunday afternoon at Laurel while they are rooting for $1,000 in pro-football bets.

The explanation for this phenomenon is that even gamblers are reasonably rational about the economic decisions they make, and they know that horse racing is usually a bad gamble. Tracks typically take from 17 to 25 percent of every dollar wagered, and those in Pennsylvania have blazed new trails by grabbing an exorbitant 30 percent from trifecta wagers.

It is no wonder that big gamblers in America prefer to call their bookie
and bet on a sports event, where there is only a 4.5 percent disadvantage against them. If horse racing is ever going to attract big players, it will have to reduce takeout to more reasonable levels.

This 1991 article could have been written in 2009. And sadly, will probably be written in 2029. We never change. We keep losing market share, and continue to do nothing about it.

Full article here.


The_Knight_Sky said...

Mr. Beyer should write more articles on this topic - not the ones that glorify the Pick 6 pools and the Twin Trifecta hits.

A writer of his stature should be able to drive home the point that in horse racing's heyday, the takeout rates were far more hospitable to playing the win-place-show pools with the 8 to 10% takeout rates. This is the bread and butter of the game and should be made worthwhile to pursue these pools - not the Superfecta, Pick 4 pools, etc. Beginners must learn the ropes first and the win-place-show pools remain a neglected starting point in many recent handicapping texts.

We also need to go back to those takeout levels and create a larger segment of winning players, instead of relying on alternative gaming to pacify vocal horsemen. The temporary crutch that is VLT's has no real future for horse racing.

Furthermore, takeout reductions should be implemented on a long term basis. Not singular meets lasting several weeks. An handle data from a short-term experiment cannot possibly be sufficient enough to reflect national interest. The momentum must be allowed to build.

Mike D said...

There has been a lot of chatter recently about track takeout. The knee-jerk response is that the takeout is too high, and as a result, the two-dollar bettor is slowly going broke or leaving the game while the big bettors are wagering through rebate shops getting as much as 7% on every dollar wagered. But what many horseplayers fail to appreciate is that tracks get a relatively small portion of the takeout. For example, in California about 73% of the takeout pie is out of the track’s control.

Some suggest that reducing this tax on the bettor not only keeps more players in the game through increasing the churn, but also attracts new players, which in turn increases wagering pools and as the saying goes: you’ll make it up in volume. Well, let’s suppose a track has a handle of $1M per day with a takeout of 20%. Then the takeout is $200K per day. Now suppose the takeout was reduced to 10%, then the track would have to handle $2M per day to maintain its takeout. If this is the only track with a 10% takeout, then it may attract enough bettors from other tracks, but if this move is successful, then more tracks will follow suit. And once enough tracks had done so, where will the extra revenue come from? Bettors are not going to start doubling down, and slot players in the racinos will not be racing to the windows. And don’t count on the big money players. The rebate shops are not going to give up their best customers without a fight. And also there’s the unintended consequence of limiting wagers from off-site locations. This is what happened in 2007 when Ellis Park had a 4% takeout for the Pick 4. Sportsbooks in Vegas weren’t accepting bets because the 3% fee they were required to pay to carry the signal left only a 1% margin to cover their cost.

The argument of lower takeout is a straw man; if takeout was such an overpowering factor in the mind of horseplayers, then why do exotic wagers account for roughly 70% of all monies wagered on horse racing. The takeout for WPS is normally 17% - 18%, while the takeout for exotic wagers are mostly 25% or higher. Smart players will tell you that’s because there’s more value to be found in these wagers. And why is there more value, because the overwhelming majority of players in these pools are just looking for a big score – to heck with takeout.

In the end, the great takeout debate is less about keeping the two-dollar player at the track and more about the big bettors getting just a little more edge on the game. If you’re a player pushing a half-million dollars through the windows per year, then just a 2% reduction in the takeout puts another $10,000.00 in your pocket. As tracks do a better job catering to their high-end customers with their own version of rebates and incentives, you will hear less about high takeout. After all, it’s cold hard cash that wins the hearts and minds of horseplayers.