Wednesday, December 07, 2011

Curb Super-Exotic Madness or Continue Losing Handle

SARATOGA SPRINGS, December 7, 2011—A very interesting blog entry on the Horseplayers Association of North American site Tuesday indicating that, according to details in an exchange wagering application made by TVG in the state of California, the churn rate for wagering in the U.S. has fallen from a bellwether 7 times starting bankroll per wagering session to 4.

How alarming is this? Let's count the ways.

The example that was given for this phenomenon is easily understood and, if you missed the original blog post, it bears repeating:

If a crowd of people show up at a racetrack or simulcast facility with $100,000 to wager collectively, at a churn rate of 7, the crowd would push $700,000 through the windows. The same crowd and starting bankroll with a churn rate of 4 would produce $400,000 in total handle.


First and foremost, of course, are takeout rates which, with notably few exceptions, have been climbing steadily for a decade. The continued plummeting of U.S. handle is clearly tied to this factor.

The pari-mutuel hold is inexorable. To put it in yet another way: The less money returned on winning bets, the less money bettors have to wager in return.

The second factor contributing to the loss of handle is what is termed cashable bets
Every bettor, myself included, wants to win a lot for a little. The proliferation of super-exotic bets has fed this a-lot-for-a-little approach, especially bettors with limited bankrolls—virtually all bankrolls are limited to some extent.

Super-exotic bets are, by definition, exotic or high risk. They yield for bigger payoffs—scores, if you will--allowing players to stay in the game for longer periods of time, a cushion to absorb losing sessions that are sure to come.

My super-exotic weakness is the superfecta. For me, the degree of difficulty is more than commensurate with the added degree of difficulty, superfecta payoffs often returning four or five times more on average than a winning trifecta.

But bets such as the Super High 5 are bankroll killers, sucker plays. It's extremely ratre to see a three-digit ALL payoff in the superfecta. Empirically, it seems there almost are as many High 5 carryovers as Pick 6 carryovers.

But large High-5 payoffs seldom approach large Pick 6 returns. Given that the Super High 5 is priced at a one-dollar minimum, it’s one play most bettors really can't afford to make.

When it comes to takeout increases, greedy horsemen’s groups and unsophisticated off-track interests notwithstanding, the industry often falls victim to legislators who cannot pass a sensible state budget much less understand the nuances of the pari-mutuel system.

However, with tracks needing state approval to conduct its business, there is little that racetracks can do to stem the tide of quick fixes so popular in states where pari-mutuel horse racing is conducted.

But there is something tracks can do, and that’s to stop worshipping at the altar of super-exotics. There should be fewer of them, not more. If a track offers Pick 4s, Pick 5s and the Pick 6, wagers like the Rolling Pick 3 become not only unnecessary but churn killers.

The Pick 3 is the quintessential trap. In practice, it’s much more difficult to win than it appears at first blush. Further, if a track is offering the exotic Pick 4, 5 and 6, there’s no need for a Rolling Pick 3. Rolling Doubles are much more player friendly and still offer a chance for a sizable payoff because takeout is extracted once, not twice, as is the case with parlays.

Another benefit to offering bets that players can win more often is the positive effect it would have on ever-sagging pool liquidity. Further, it is imperative to offer fractional wagering on any sequence involving a three-tier payoff and that includes the trifecta.

Tracks think they are doing their big customers a service by keeping minimums higher so that whales can throw more money to insure a win in a difficult sequential wager. But only by returning more money to winning bettors more often and increasing churn, can pool liquidity—and handle—stop reversing itself.

This helps big and small bettors alike, just as lowering takeout would act as a disincentive to competitive offshore rebate shops.

Written by John Pricci

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