Where does this break down?

[DJofSD]

I like to make analogies. Some times it gets me to the next level of understanding.

To wit, I would think that wagering on the horses, at least at a higher level of abstraction, is not that different from trading equities.

Companies offer stocks and bonds. Horses offer possible pay outs for various wagers. The market place and differences of opinions set prices.

Exchanges trade issues for companies that list with them. The race track offers the races for the wagering public.

I trade equities through a broker. I get charged a commission based upon various factors which are different amongst the different institutions. I can get a cheap, no frills, no reseach, internet based account with lower commissions or go with a high valued added broker with all the traditional offers that I pay a higher price to use. It does not make any difference which avenue I use, I get to trade the same stock. The exchanges apparently do not care to exclude brokers. They make arrangements for some that are preferred clients for whatever reason.

Why can't ADW companies act as brokers? Who's being a pig?

[DeanT]

I dont think that is a bad analogy at all.

The NASDAQ created a market and gets fees paid to them to run that market. The brokers distribute that market to make sure it is successful and are allowed to charge their clients whatever fees their business can stand for max profits and volume.

What would happen to the NASDAQ and our capital markets if this was the case: You could not buy and sell stock in every state or country, and for every $1000 trade on a stock by hitting send in your Etrade account, it was charged $250. I would submit that you would not have a market.

Where it breaks down imo, is at the following. The tracks do not want to just put on a show and get paid for it, and let others who are experts distribute it for a cut, like brokers. They want to backward link and control it. To parallel that to the stock market, it would be this: The NASDAQ says "hey, these brokerage companies are making some money selling our market to clients. I have an idea...... let's shut them out and not let them sell the market any more, then let's create our own trading platform, sell it for a high price and we can make money instead of them.

No one in their right mind would let that happen, imo, because that would be the death of your capital markets.

And I hope we do not let it happen with racing. All my opinion.

[DJofSD]

Where it breaks down imo, is at the following. The tracks do not want to just put on a show and get paid for it, and let others who are experts distribute it for a cut, like brokers. They want to backward link and control it. To parallel that to the stock market, it would be this: The NASDAQ says "hey, these brokerage companies are making some money selling our market to clients. I have an idea...... let's shut them out and not let them sell the market any more, then let's create our own trading platform, sell it for a high price and we can make money instead of them.


Sounds like what some of the brokerage houses want to do/are doing -- private markets.

[trigger]

I like to make analogies. Some times it gets me to the next level of understanding.

To wit, I would think that wagering on the horses, at least at a higher level of abstraction, is not that different from trading equities.

Companies offer stocks and bonds. Horses offer possible pay outs for various wagers. The market place and differences of opinions set prices.

Exchanges trade issues for companies that list with them. The race track offers the races for the wagering public.

I trade equities through a broker. I get charged a commission based upon various factors which are different amongst the different institutions. I can get a cheap, no frills, no reseach, internet based account with lower commissions or go with a high valued added broker with all the traditional offers that I pay a higher price to use. It does not make any difference which avenue I use, I get to trade the same stock. The exchanges apparently do not care to exclude brokers. They make arrangements for some that are preferred clients for whatever reason.

Why can't ADW companies act as brokers? Who's being a pig?

Presumedly, one buys stock in a company via a broker because it is making a profit or has the potential to make a profit. The company does not get any part of the commission/fee paid by the investor to the broker to buy its stock. The company generates its own revenues via operation of its particular business.
A racetracks business is running races and taking a commission(too high!) on wagers on their races to fund their operating costs.
How would a racetrack fund purses, build and maintain facilities, pay employees, etc., and make a profit under your scenario?

[DJofSD]

How would a racetrack fund purses, build and maintain facilities, pay employees, etc., and make a profit under your scenario?

The purpose of the thread was not to offer a different business model. It was to clairfy the current messed up situation with having to subscribe to multiple ADW's in order to play all tracks.

[DeanT]

How would a racetrack fund purses, build and maintain facilities, pay employees, etc., and make a profit under your scenario?

It would be not that dissimilar if racetracks get out of internet betting.

They would get their percentage, eg 5%, and then let the free market run and increase volume thru lower rakes, promotion, innovation and customer service. They spend money on getting people out to the track and they can charge whatever they want on track.

Not unlike the UK does in racing right now. The business models are really not that different, imo.

[DJofSD]

It would be not that dissimilar if racetracks get out of internet betting.

Currently, that is what I think needs to happen. In days of yore, the racetrack was basically the end-all, be-all, when it came to racing. Times change and I believe the industry needs to evolve.

[DeanT]

Currently, that is what I think needs to happen. In days of yore, the racetrack was basically the end-all, be-all, when it came to racing. Times change and I believe the industry needs to evolve.

The thing that stumps me is that they don't seem to change despite getting hit in the head with it.

Take for example Pinnacle. They complained about them stealing customers - fair enuff. But they put all their energy into trying to shut them down, instead of looking at what they did to get all this wagering. Pinnacle did a few things: 1) Offered all tracks 2) Had a customer base which could easily fund their accounts and withdraw from their accounts in a snap. 3) Offered their product out to everyone in the world to bet. and 4) Offered lower pricing to everyone, so they churn more betting dollars and stay a customer by having a chance to win.

Why didnt racing concentrate on those three things if it worked for Pinnacle? Instead they have fractured the landscape even more, imo. Heck, when a place like PTC comes online and says "we want to do what Pinnacle does, but we want all the money to go into the pools" that would/should be welcomed. Instead they have to jump thru a hoop to land a track for their betting menu. Makes no sense to me.

[trigger]

It would be not that dissimilar if racetracks get out of internet betting.

They would get their percentage, eg 5%, and then let the free market run and increase volume thru lower rakes, promotion, innovation and customer service. They spend money on getting people out to the track and they can charge whatever they want on track.

Not unlike the UK does in racing right now. The business models are really not that different, imo.

I think the UK model is primarily built around exchange type betting (like stock market) where you get fixed odds when you make your bet. I don't know the details on how the UK tracks get paid ....I assume the bookies and Betfair, etc. pay a % of their handle to the tracks (anybody know the %?). This approach sounds fine to me but I wouldn't hold my breath waiting for it to happen in NA.
Also, as you suggest, a 5% (or even 10%) track percentage(takeout) under the current pari mutuel system with the current array of tracks would quickly bankrupt most of the smaller tracks leaving only a few of the premium tracks standing. (Many tracks are having trouble staying in business now with a 20% takeout .)
IMHO, this is what needs to happen anyway in order to have any chance of saving NA racing in the future in the face of the other gambling competition.

[DeanT]

Hi Trigger,

The UK has about 6% rakes on win betting, betfair of course a bit less. They are doing fine and the industry is making money.

Imo, and with respect, that is old time thinking at its finest, "tracks will go broke if they charge less". It's worse than old time thinking and it has not, nor will ever be true, imo. It is like saying if McDonald's raised the price of a Big Mac to $6 they would make more money. They will not, they will lose money as people go to Wendy's. Right now in NA we are trying to sell $6 Big Mac's to a world who are paying $3 for a poker-burger at Wendy's. No matter how much tracks and their execs yell and scream about it, it is a model doomed for failure.

Places like Pinnacle and the UK and racing in Australia cut prices and offered their product out to anyone who wants to play it. Their handles are good, and the sport is in pretty good shape. They attack alternate forms of gambling by offering a good product at a fair price. We would be well-served to heed that lesson, imo.

[trigger]

Hi Trigger,

The UK has about 6% rakes on win betting, betfair of course a bit less. They are doing fine and the industry is making money.

Imo, and with respect, that is old time thinking at its finest, "tracks will go broke if they charge less". It's worse than old time thinking and it has not, nor will ever be true, imo. It is like saying if McDonald's raised the price of a Big Mac to $6 they would make more money. They will not, they will lose money as people go to Wendy's. Right now in NA we are trying to sell $6 Big Mac's to a world who are paying $3 for a poker-burger at Wendy's. No matter how much tracks and their execs yell and scream about it, it is a model doomed for failure.

Places like Pinnacle and the UK and racing in Australia cut prices and offered their product out to anyone who wants to play it. Their handles are good, and the sport is in pretty good shape. They attack alternate forms of gambling by offering a good product at a fair price. We would be well-served to heed that lesson, imo.

Dean T, I essentially agree with you but ,imho, lower commissions either via much lower takeouts or a low fixed % from any and all ADWs, OTBs, etc. will quickly weed out many of the less prosperous tracks. This has to happen, imho, in order for the remaining tracks to generate enough funds from the existing gross NA handle to sustain themselves at a low commission.
Bottom line is ,I think, we currently have too many tracks for a lower takeout to work ( even with a subsequent increase in handle) but drastically decreasing the number of tracks will be very painful for many(including the bettors) and, accordingly, may never happen .
Do you (or anyone) know how many tracks are there in the UK and what the total amount bet on horse racing is over there?