There is a fascinating post up on Colins Ghost (in my opinion one of the best, well written blogs out there) on how the pari-mutuel system came to be. It is an amazing account on how it was not embraced immediately, and how it became mainstream.
Back in 1908: "The public is gradually becoming impressed with the fact that the average of odds returned through the machines is better than formerly, when the books were in operation."
It seems that bookmakers, if you were out to bet $2, would not give you a very good price (probably not unlike today in the UK and elsewhere, where bookies have a high take on longshots). It does appear that way back over 100 years ago, bettors were looking at prices as a part of their wagering.
Of particular significance, was that price. Yes folks, the takeout was 5%.
"When Kentucky initiated the mutuel system after 1906, the takeout stood at 5% — a figure that seems quaint today."
Oh my, what we'd be betting with 5% takeout. I have spot plays that are 0.90ROI and are red light plays. They would become immediate green light plays with a low takeout. Instead I don't bet.
Gambling expert Wil Cummings said in his report to the industry in 2003: "the racing industry fails to understand that when raising takeout the $100 bet will not be $100 anymore." In 1908 they knew what to do. It is a damn shame we got "progressive".
I'll leave it to a talented scribe to sum it up. From Colins Ghost: "As wagering evolves in places where peer-to-peer wagering and bookmaking is permissible, the U.S. remains tied to a system that is conceptually brilliant but has become rigid and stultifying by the political forces that insist on sucking it dry."
Colin has the original DRF story linked, so for a bit of history, check it out!
Thanks for the link and kind words! Kevin
I'm going over there to check it out right now. Colin's Ghost always keeps coming up with the "blasts from the past".
And we know racing needs to go "retro" in many areas.
This is all well and good, and I agree, the takeout needs to be a lot lower.
But how sad is it that even with the confiscatory take, the tracks struggle to make a profit.
What we really need is a 5% takeout, much fewer tracks , much fewer horses. Hong Kong style.
The game can't support the farms, the billions in real estate used for tracks, and all the rest on the backs of a dwindling number of horseplayers.
Jim, the takeout may be the problem why tracks struggle to make a profit.
If WalMart charged $100 for a pair of blue jeans, they would struggle to make a profit too.
If Walmart had to compete with Target, K-Mart and Sears at the same time of day, their market share would also be cut.
In other words...there is too much racing.
And we can thank slots for creating more mediocrity from New Mexico to Indiana and along with it, the problems of unwanted racehorses from those relatively weak state-bred programs.
Knight Sky, I'm going to disagree. I think if takeouts are reduced enough everywhere, a whole new slew of bettors would be created, and there wouldn't be too many races.
Cangamble - I respect your view.
But parimutuel wagering has become so passe' that right now in order to go forward, we must cut back to what Jim Davis commented above.
Once horse racing resuscitates itself
only then would we be in a position to "lower the takeout rates everywhere." Currently we are not.
But with every closure of racetracks, farms and reduction of slots infused purses we're getting closer to the point when the racing industry will ask. Let's stop and finally move together or none of us will be here.
I believe that day will happen at least 5 years from now. And that's what hurts - racing moves way too slowly to do anything, including straightening the steering wheel of the skidding, out-of-control vehicle.
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