Wednesday, November 18, 2009

Melbourne Cup vs Breeders Cup - Choice and Price?

We were going through the wagering for the Breeders Cup - the news was good (about flat) - but then decided to check this years Melbourne Cup downunder for some comparisons.

It is difficult to get total turnover numbers, but this year our Aussie friends bet over $40M on the event at the "tabs" alone, which was up over 9%. The past 18 months or so as most know, competition and price breaks have been heating up downunder, beginning with the introduction of betfair. This has resulted in more choice and better takeouts for punters.

Takeouts on the tab are held at 16% overall (although with increases in exotic wagering/breakage it usually lies around 18%). As you may know, for many years if takeout over the course of the year is over 16% the overage had to be returned to bettors, not kept by authorities. To achieve that, often times zero percent takeout bets have been offered to horseplayers. In addition, at corporate, fixed odds bookmakers the competition does one thing - help the player. Takeouts can be as low as 6% or 7% on shorter shots as these firms scramble for business the old fashioned way.

There is a culture of fostering customer growth in Australia which is very different than here in North America.

Over US$130M has been bet on the Melbourne Cup in Australia alone, and this is growing.

Conversely, about US$150M was bet on the Breeders Cup this year, mostly at traditional 22% takeouts, and it has generally been only steady.

If Australia can bet $130M should we over here not do a whole lot better? Australia's GDP is about 30% smaller than Canada's. The US and Canada's GDP together are about $16 trillion, or 16 times more than Australia's.

It is pretty clear that consumer choice, more competition and the resulting lower prices are a good thing for turnover (and many would argue the sport of horse racing) there, and has made betting on horses something people "do". Will we in North America ever give it a shot?

Note: Final numbers are in - the Festival downunder set an all time record this year.

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