Takeout & Some Fat Cat Republicans

At HANA we study the data and try to come up with a worthwhile policy. Over the past year we have tried to present any data we find as plainly as we can. What we have discovered is that when the data speaks forcefully about something, almost without fail the industry tends to file it away, if it does not fit their preconceived notions, or biases.

In 1998 the University of Louisville came out with a comprehensive economic study of some of the factors that effect wagering. They looked at a few factors and how our customers react to them: Field size, size of purses, takeout reductions and number of races. What they found should not be surprising: A reduction of takeout results in the highest increase of handle (e=-2.3), followed by field size and number of races (e=~ 0.60) and coming in last was purse size (e=0.06).

So in a nutshell, if we place money into increasing purses from the mean it will have literally no effect on overall handles. If we place cash into field size and number of races it will have a small effect on handle. If we place cash into lowering takeout, it will result in a large hike in handle.

The report states: ".... wagering would increase by only 6% if purse were doubled. This is a surprising finding considering the importance that is attached to the purse variable in all major policy decisions to increase the wagering in this industry."

This is not shocking, nor surprising. Massive purses increases in Ontario, at Penn National, Philly Park, Presque Ilse and many other slot rich tracks have done nothing to increase handles. In fact, handle has dove further than the congress's approval ratings.

So why when we read over and over again that if we have more money placed into purses all will be well? Why do we keep raising takeout rates instead of lowering them?

I think the answer is as plain as day. Each faction has their own wants, and will do everything to protect them, even if the data flies right into the face of their arguments. And most importantly, we don't have someone there to make decisions and give everyone one swift kick in the ass when they do that. Facts don't matter, money for their slice does.

In the 1960's the National Football League had some issues and that was television. Pete Rozelle, the commissioner, had to convince the owners that television was the way of the future and that the only way the sport could grow was to work out a collective plan to exploit it for the leagues gain. The owners were up in arms. At that time live gate was the major revenue driver for football. The owners, especially in small cities did not want to do this, fearing a loss of gate revenue.

Eventually Rozelle convinced these businessmen that the status-quo was not an option. The NFL was the first league to embrace television, creating NFL films, the Super Bowl and much more.

Fast forward several years. As television got bigger and bigger and the league and teams were making more and more money there were the inevitable problems. Up popped revenue sharing. Rozelle had to convince 30 or so folks that sharing TV revenue would be good for all.

It worked. Multi-billion dollar TV deals has made the NFL the most successful sport in the western world.

In the words of Art Modell, the then Cleveland Browns owner: Rozelle got "a bunch of fat cat republicans to become socialists".

Now let's think about this: How did a league worth millions upon millions with owners the ego the size of the federal deficit agree on something so large and fundamental to do what is right for everyone, not just a few? The easy answer is that they had a commissioner, and I think that is too easy.

Let's rewind to 1960, but apply some racing to it. Not only is there 25 or 30 owners of the AFL/NFL teams sitting around the table, but each team has a player group associated with it. The players all have a seat and there is not one, but one for each team. As well, let's say they control 50% of all the revenues.

Would they have been able to get together to do what is right? Not a chance.

My bet: The player organization in New York would vote "no" to television to protect their large salaries. The player organization in Green Bay would be mad at them, and not give an inch. The owners would throw their arms in the air and want to leave the madness. Rozelle would probably quit and send in an application to work for the NBA.

In 2009 players are signing ten million dollar contracts due to the forward thinking that went on in the 1960's. Without that forward thinking they would probably be making a million a year, if they were lucky.

In racing we keep slinging billions of slot money to purses and appeasing the masses, because it is easy. It is inconsequential that this has proven to be our death-knell. It is inconsequential that we already put 6% in handle to purses, while the UK places 0.99% into them, and are healthier than we are. The people who yell loudest win, and those who protect their self-interests win. Instead of lowering take and increasing handles, and making our sport more popular, we opt for the cash.

We have hundreds of acronym groups in racing. It is easier to appease, rather than lead. And that my friends is a disease that has infiltrated racing for a hundred years, and that is what we have to extinguish. If we do not, handles will be down even more in 2011 than they have this year and last, and brick by brick racing will fall further down in the sports and gambling conscience of the North American public.