The National Thoroughbred Racing Association and Equibase Company Thursday released the “Thoroughbred Racing Economic Indicators“ for United States and Canadian pari-mutuel wagering on U.S. Thoroughbred racing.
The figures released covered the third quarter of this year and how it reflected on purses and number of racing days.
During the third quarter, pari-mutuel handle decreased 9.85 percent from last year‘s seasonal figures. As compared to what on the Dow Jones average, 40 percent from October to October?
As a result of reduced handle, purses in the third quarter of 2008 were down 2.3 percent compared to the third quarter of last year, while race days were 1.2 percent fewer.
For the nine months that ended September 30, wagering was down 5.75 percent compared to 2007 levels, with purses dipping 0.04 percent and race days by 0.87 percent.
Thus far, $10.7 billion has been wagered this year as opposed to $11.4 billion in the first nine months of 2007, those figures including worldwide commingled wagering on U.S. racing and separate pool Canadian wagering on American races.
If the current trend continues, total betting for the year would fall below the $15 billion-mark, the annual average handle this decade.
Should this trend continue, the contribution that parimutuel taxes makes to state coffers where racing is conducted would be reduced sharply, which traditionally results in a loss of services via budget cuts, especially in the area of education, which can ill afford it.
The good news is that there’s a way to reverse the trend, possibly as soon as the middle of 2009.
But unlike the recent Congressional “bailout,” there’s no pork attached to this measure, not if the goal is to raise revenues as soon as next year. The taxpayers, read horseplayers here, would garner instant rewards, too, infusing their added income into the thoroughbred economy.
This is the tide that can lift all boats, those of the customer’s, racetrack’s, horsemen and states where betting on horses is legal. And where does this infusion come from? What can reverse the current trend and stimulate an industry that contributes to so many economies?
It’s called a tax reduction; lowering parimutuel takeout. Whenever and wherever lower takeout has been enacted, over time it’s resulted in increased handle--read revenue to all here. For the groups mentioned above, it’s a win, win, win, win. Less is more; a little smaller slice of a much larger pie
Brains, vision and guts, based on positive past performances. What could be easier?
11 Oct 2008 at 12:07 pm | #
The private organizations that own and operate OTBs and racebooks across the USA along with those that are out of the country certainly do not want to see takeout lowered. Ever wonder why casinos have built such state-of-the-art racebooks within their casino? Surely a racebook does not contribute very much to the overall income of the casino, but it certainly pays for itself in a hurry. Along with poker, a racebook/OTB is in a no lose position as they are quaranteed from ten cents to upwards of twenty-five cents on every dollar wagered (obligated to pay three to five cents to each racetrack they receive a signal from).
Why not have a racebook, as it is like stealing candy from a baby. Any reduction of takeout will cut their income, so it is clear where they stand.
Takeout, I am afraid, will never be reduced as the decision makers at the various racetracks do not gamble, and as I have said many times, the vast majority of bettors have no clue how takeout works anyway.
11 Oct 2008 at 03:54 pm | #
I think your analysis is right on but racing has deeper problems. Lowering the take out would increase handle amoung the people like us that play the horses regularly. However the “big picture” involves getting young and new people into the game. Thats the real problem i see with the game. I know you go to simulcast in Saratoga, take a look at the “regulars” that go, most of us are over 40. We like to read and do the math to pick winners. Many of todays younger people want to push a button and see if they win in a matter of seconds. I don’t have the answer someone has to come up with a handicapping method that brings people in but is simple and exciting. Also the venues should do more twilight racing with the happy hour specials and live music. They got to get some young people excited or the numbers will probably keep trending down.
11 Oct 2008 at 06:14 pm | #
yes, let’s strip our struggling tracks of more revenue. this is on the right track though. how marketing produce more bettors, or will the sport ever get to that question?
11 Oct 2008 at 08:10 pm | #
Right on. Decreasing takeout will cause more betting from those already in the game, and it will entice others to play because winners will actually be created like they have been created in low takeout games like poker and sports betting.
A player that last longer, may invest more time and money playing as well.
11 Oct 2008 at 09:25 pm | #
Takeout reduction certainly should make sense in principle; after all, Economics 101 says that if you lower the price, you’ll sell more. But there are at least two caveats:
First, are there any decent studies that show what optimum takeout levels would be? If you cut the takeout to 1% from 15%, I’m sure betting volume would soar, but by a multiple of 15?
Second, in addition to squeezing the off-track facilities, as wmcorrow points out, a takeout reduction would mean that much less available for rebates to the “whales” who probably account for at least 20% of total handle. Their ability to negotiate rebates is based on the spread between takeout and the amount that ADWs and other off-track facilities pay the sending track. A takeout reduction will lower that spread, presumably, and could push some of the whales into a different, non-thoroughbred, betting ocean.
12 Oct 2008 at 01:23 am | #
Thanks for the comments. I had a conversation with Cary Fotias about the optimum takeout level and I remember him saying 10 percent. I’ll make inquiries from people better versed in math than me. We will revisit this. Happy Carryover!
John
12 Oct 2008 at 11:22 pm | #
Maybe some venue can just lower the takeout on races where 6 or less horses are in the gate. Over time they can test the results compared percentage wise to their other races. If we re correct they can then lower the other heats. This continued racing with smaller fields and three horses at 2-1 or less is just absurd.
13 Oct 2008 at 01:54 am | #
How can a business stupid enough to refuse to take money from potential customers be expected to be smart enough to find a way to get even more them? We are dealing with idiots here John. Michael Liarberg looks like a perfect fit for racing’s first commissioner.
13 Oct 2008 at 03:32 am | #
The best stimulus for horse players would be to eliminate “breakage”.
If my horse is paying $2.39, don’t give me $2.20. No inconvenience to off track bettors, and tellers could give vouchers. The only reason for “breakage” is no longer valid. It’s the horse players” money - why should we not be paid every penny? At what other gambling venue does the house keep some of your winnings just because it would be “inconvenient” to pay you?
13 Oct 2008 at 03:38 am | #
Dammit people! You’re making so much sense I can’t figure out why I’m playing this game! I’ll try to make more of this come Wednesday. Thank you all.
John
13 Oct 2008 at 11:50 am | #
Right on,There is no better way to rebuild the dwindeling fan base. Rebuild the fan base and everything else will take care of itself. More winners will equal more churn and return.
rwwupl
13 Oct 2008 at 01:25 pm | #
Hate to revisit Eight Belles but this needs to be said. She was lame on Derby post parade. Fox Hill pushes hard and have been all over the trainers map. Jones, a decent guy, had no say. Obviously, they have driven him out of the biz. He will not really go but it was the only way to rid himself of those greedy, uncouth liars. They have a new puppet, but who really lost? The horse, as always. Same as they killed George Washington for a lousy insurance settlement bigger than Curlin’s win pot. Big Brown is going to snap too. Somehow those suspensories had been brought back up @ Mth but they will drop again. Can’t stand to watch him run anymore. Frauds, killers, chemists and stupid admministration. Still, the horses keep putting on the show; God love them.
13 Oct 2008 at 02:44 pm | #
Karl’s definitely right about the breakage issue; with 90% of bets being made off-track, mostly through some form of wagering account, it’s easy enough to pay to the penny. Even at the track, more and more bettors are using their account cards or cash cards that one purchases at the track, which could be programmed to pay exactly.
Of course, the tracks count on the breakage, and many of them earmark it for some purpose. So there’ll be resistance to this very good idea.
13 Oct 2008 at 03:15 pm | #
Steve, there aren’t any real studies regarding lowering takeout, because it needs to be done by 4 or 5 tracks to really see the affects of it.
The best we can do is look at the explosive growth of poker and Betfair type exchange betting, even with the ban on US players.
It only makes sense that a horse racing bettor will bet to the last drop.
I would say that the majority of players would love to play more if they lasted longer. In other words, they will lose whatever they were going to lose in the first place, only over a longer period of time.
But by allowing this to happen, two things happen, because the player lasts longer. They devote more time to handicapping, and this may draw in family and friends as well, and because of lower takeouts there could be many that become either close to having the game beat, or actually winning over a long term. This too, will draw more players into the game as well...it has worked in poker and on Betfair.
As for breakage. It is small potatoes in the scheme of things. Sure, they should pay to the penny, and perhaps, if they did, the big show bettors would more and more often, but attracting more show bettors isn’t going to get the game to grow very much.
13 Oct 2008 at 04:55 pm | #
Cangamble says breakage is “small potatoes”.
If I attend my local track’s simulcast facility (live season over) I have only one option for comfortable seating. So after $4.00 admission fees, $5.00 program, $5.00 tip to the hostess, $20.00 lunch (there is a minimum table charge), I’m out $34 before I make a bet. I spot a horse that looks good in the first, and, to try and make my nut, bet $200 to place. Glory be! He runs second. After takeout and an arcane surcharge, he should pay $2.39, giving me a profit of $39, thus paying for my daily expenses with 5 bucks to spare. But wait! Because of breakage, my payoff is reduced to $2.20, cutting my winnings nearly in half. Multiply this scenario by several times a day over the course of a week,and it becomes “big potatoes” to me.
Maybe eliminating breakage won’t “get the game to grow very much”, but I am more concerned with getting every penny I’ve won than I am growing the game.
I’ve supported horse racing for over 50 years, but it is tougher now to show a profit than in the past. All the novices are at the casinos, and using your binoculars at the track to make trip notes is no longer an advantage due to the wealth of information available from numerous sources. So if I’m lucky enough to hit a winner, I would like to be paid to the penny, which, as I have pointed out, adds up to dollars. Is that to much to ask?
13 Oct 2008 at 05:18 pm | #
tx cangamble; insightful
13 Oct 2008 at 08:59 pm | #
Hey Folks,
This post obviously struck a deep chord. Our follow-up will be delayed because of the Big Brown retirement and Breeders’ Cup draw, but we WILL get back to this nuts and bolts issue. Cangamble? I’m afraid you’re incorrect re: the effect of lower takeout on handle and will prove it to you in a later post. Thanks again, one and all. We need to beat this drum until somebody hears the horseplayer.
John
14 Oct 2008 at 06:24 am | #
John, how about eliminating the tax on winnings of 300-1 or greater. Replace it with a .10 cent tax on each wager made. There are far more losing tickets than winners. If you make twenty wagers in a day it cost you 2.00 dollar. No taxes to file, no accounting, the money is collected up front. A big score for a player is really a big score. Think of it as a flat tax. Thank You, Ruben in San Diego