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Tuesday, December 6, 2011

Horse Racing's Churn Rate Gets Annihilated

For as long as we all can remember, horse racing's publicized churn rate (the number of times you as a player, collectively, roll over your bankroll, explained in detail here) was 7. If everyone at the track had $100,000 in their pockets, chances are handle would have been somewhere around $700,000.

Two major variables that go into the churn rate, as the article alludes are:
  • Takeout rate - the higher the takeout, the lower the churn
  • Cashable bets - WPS pools, with no exotics would have high churn because we'd have many winners rebetting, a card with pick 6's and nothing else would have almost zero churn, because we have one or two winners, who probably go home to celebrate after they win.
TVG, while submitting their application for exchange wagering in California, provided us with a shocking statistic: The estimated churn rate of 2011 TVG customers is not seven, but four. 

Today, at a churn rate of four, that handle in our example has plummeted to $400,000.

In macro-terms, with a $10B annual handle in the US, that means there is about $2.5 billion in players wallets to bet racing. If racing was at the historical churn factor of seven, annual handle would not be $10 billion, but $17.5 billion.

High takeout, fingers in the pie from everywhere wanting more of the $2.5B, and the proliferation of hard to hit bets with wall to wall racing have killed player bankrolls to the point where the average person can only roll their bankroll over four times, and that's a problem for everyone.

6 comments:

Pacingguy said...

I would like to know why the commission spread elsewhere is 5-2% yet in California (and likely New Jersey, the spread will be between 10-5%

Anonymous said...

"I would like to know why the commission spread elsewhere is 5-2% yet in California (and likely New Jersey, the spread will be between 10-5%"

That's an easy one!!!!!!

-because people who run racing in North America (especially horsemen groups) don't bet and don't understand betting. They think taking more will make them more money, when in the long run, handle will fall, and they will make less money.

Anonymous said...

Something tells us your memory isn't very long.

Horse racing's publicized churn rate was "five" in the 1970's.

The natural evolution to "seven" became effective upon the introduction to full-card simulcasting.

As the takeout has changed minimally since the onset of full-card simulcasting, it simply is not a function of takeout that the
"churn rate" has been altered.

Had you been a government official, pointing out the greatly reduced revenue to the states from handle in recent decades, then you could rightfully gripe, as that has been very real.

Fact is, from the perspective of the churn rate, nothing has changed with regard to takeout data.

The heightened popularity of multi-race wagers is exactly certain to be the catalyst for any reduction in churn rate you cite.

Those with balances on a TVG account are far more likely to spot-play into big, multi-race pools than were the working class guys back in the 1970's playing W-P-S all day.

This insane logic of yours can not disguise the fact that, as one of racing's perceived insiders, you ARE the problem, and as such, you can not be a part of the solution.

Anonymous said...

Is it possible the dismal churn rate associated with TVG account holders has something to do with the roi performance of TVG on air "talent" constantly hawking poorly thought out on air tickets?

Just asking.

Anonymous said...

Something tells us your memory isn't very long.

Horse racing's publicized churn rate was "five" in the 1970's.

The natural evolution to "seven" became effective with the introduction of full-card simulcasting.

As the takeout has changed minimally since the onset of full-card simulcasting, it simply is not a function of takeout that the "churn rate" has been altered.

Had you been a government official, pointing out the greatly reduced revenue to the states from handle in recent decades, then you could rightfully gripe, as that has been very real.

Fact is, from the perspective of the churn rate, nothing has changed with regard to takeout data.

The heightened popularity of multi-race wagers is exactly certain to be the catalyst for any reduction in churn rate you cite.

Those with balances on a TVG account are far more likely to spot-play into big, multi-race pools than were the working class guys back in the 1970's playing W-P-S all day.

This insane logic of yours can not disguise the fact that, as one of racing's perceived insiders, you ARE the problem, and as such, you can not be a part of the solution.

HANA said...

Hi,

Thanks for the note anonymous.

The churn rate cited, and the reasons churn rate changes are referenced in "Analysis of the Data and Fundamental Economics Behind Recent Trends in the Thoroughbred Racing Industry" dated 2004. Mr. Linnell of the TPRB has been quoted as such.

Much of our prose has been spoken about by Mr. Cummings and other gambling experts over the last several decades.

Thanks again for your note.

HANA