Reducing parimutuel takeout to increase the bottom line is not a new concept. It’s been tried before and has worked when given the right opportunity.
The New York Racing Association, for instance, lowered takeout three times since the 1970s if memory serves. Every time, the trial period resulted in a handle increase.
Keeneland tried it six years ago but its effect was unclear since both of their boutique meets are short in duration and the simulcast venues balked because they thought they would lose money and failed to buy the signal.
In the short term, they would be right. And since executives are paid for what they’ve done lately and state houses shutter when any revenue shortfall fails to meet their bloated projections, the concept often doesn’t get a fair shake.
Takeout is too high but politicians will pay lip service to lowering taxes and supply-side theory only when it suits their campaigns. But they just refuse to get it when it comes to the hold on parimutuel wagers.
The states believe that the revenue generated from wagering gives them a right to tax tracks, OTBs and horseplayers at a far higher rate than anyone else. The concept of churn is lost on them.
Then how do we know that when more money is returned to winning bettors the more they bet in return? Because every serious study proved it.
Instead, politicians and myopic track operators look at the bottom line and figure that low takeout is bad for profits as if the system’s inefficiencies have nothing to do with it. Some OTBs even overtly campaign for a higher take.
But the tide may be turning. When the Ellis Park meeting opened recently, new owner and president Ron Geary instituted a Pick Four with a four percent takeout, the lowest parimutuel hold anywhere in America.
Despite a lack of promotion because Ellis was awaiting commitments from some simulcast venues and had a racing dates overlap with Churchill Downs, early results were very promising.
In week one, Ellis averaged daily handle of almost $19,000. After the word spread, week two averaged $46,148, with a record high of over $65,000 last Saturday. In 2006, the bet averaged $18,000 daily.
[Ed. Note] A chart of payoffs comparing the 4% Pick Four with a conventional four-race parlay and with last year’s payoffs with a 22% hold is available at http://www.ellisparkracing.com.
“So far we’re very pleased,” Geary said by telephone Thursday. “It’s growing every day. Our goal is to reach $100,000 when we host the National Claiming Crown [August 4th]. That will be our first national platform.”
“I applaud him” said Lou Raffetto, chief operating officer of the Maryland Jockey Club, whose Laurel Race Course will institute a “Ten Days at Ten Percent” promotion at their upcoming 10-day race meet beginning August 10.
The short summer session will feature a blended takeout of 11.4 percent that includes a mandated 1.4% for the Maryland Million Fund. It’s the lowest takeout of any race meet in the country.
“We needed to do something to get people to focus on our races and this is a perfect time to experiment with a lower take. Not only does lower takeout increase churn but it takes rebates off the table. The rebate is built in,” Raffetto explained yesterday.
Clearly, Raffetto and Geary get it. Geary already is reaping a financial benefit. In lowering his takeout rate to the lowest in the country, Raffetto put Laurel on the map at a time when all roads lead to Del Mar and Saratoga.
Not coincidentally perhaps, the trend seems to be spreading internationally. Two major betting platforms in Australia have reduced the takeout on their superfecta wager from 22.5 percent to 3.12 percent.
The superfecta is significantly more popular in Australia than it is here, attracting more than five percent of the betting market. Its appeal lies in the very large fields and huge jackpots that result when no one hits it.
Racing often is a strange game. The industry acts as if wagering is an embarrassment instead of its the life-blood. Handicapping is not promoted as an interesting diversion, an intellectual pursuit akin to poker in that it’s also a game of people, played with horses instead of cards.
There are lessons to be taught that would give customers an edge, giving them a better chance than the 52.5 win percentage needed to break even making illegal bets on NFL games. Racing doesn’t teach that.
With forward-thinking track executives like Geary and Raffetto leading the way, all might learn what a great wagering game thoroughbred racing can be, including legislators.
There is that point where proper pricing allows demand to meet supply to optimize profits. The lowering of parimutuel takeout gets us closer to that truth.