Thursday, February 5, 2015

Fix the Splits in the Simulcast Model? Here's an Easy Solution

You've heard about it and so have we. Track A sells their signal to track B for 9%, when takeout is 21%. Everyone seems to lament that the bet taker gets 12% and the track that puts on the races gets 9%. It should be the other way around, says the racetracks.

This is why some of you can't bet Gulfstream at your simo center this winter. It's a big fight.

Magna has some big plans to fix this. From the Bloodhorse "Stronach Group Targets Fundamental Issues"

"Rogers noted the early simulcast model—still largely in place in the industry—that rewards the receiver of a racing signal more revenue than the sending track is problematic and should be reworked. "The days of the buyer importing the signal cheap and keeping most of the revenue (from wagering) are probably coming to an end," Rogers said. "The Stronach Group will do everything possible to deliver a maximum return on the product."

Magna seems sincere about this, and their only goal is to change the "days of the buyer importing the signal cheap and keeping most of the revenue". 

If so, we've got the answer. 

Gulfstream, which sells their signal for 9%, can keep doing that (so they make the same money), but they should lower their takeout to 14%. That way, they get 9% and the bet taker gets 5%, which is "most of the revenue".

Problem solved!

If you are laughing, I don't blame you. Tracks do not want to lower takeout. They want a bigger slice of a high takeout.

That's why you'll hear an echo chamber on twitter or social media from the customers about Mr. Rogers and Magna trying to "fix fundamental issues" in the sport.  It's not fixing them, it's shuffling around the deck chairs.

If the Stronach Group really is sincere about real change, we're here to help any way we can.

Note: Is 14% workable? Probably. Did you know Australian racing passed a law that at maximum 16% could be taken out of any pool? All tracks had to abide by it. In 2014, Australia set a wagering record, and the health of the horse racing business there is considered much better than in North America.


bangem andleavem said...

We need to make the game more interesting to real gamblers. Lower the takeout. By 10%. Just do it.

Why not have a few races on the card with a 10% take. See how it goes. How much can it cost you to experiment.

Frankly , we're sick of battling juicers, insider money, and tax on large scores.

Fred Mertz said...

The Stronach Group is talking out of both sides of their mouth. Xpressbet, which is part of the Stronach Group, pays industry low fees for the most part and have no desire to pay more themselves. For example, if a bettor in Tennessee plays a race from Aqueduct through Xpressbet, the horsemen collectively receive the same or perhaps even a smaller share than they would if the wager was made at a Mid Atlantic OTB or smaller ADW.
Meanwhile, a good chunk of what Stronach wants to take away from Mid-Atlantic will go into his pocket. The net effect is an attempt to get a larger slice of a pie, and because this doesn't create new players as higher signal fees inevitably chase away more and more players every day, Stronach's moves here will only shrink the pie more.