Evans on his way out

[ponypro]

Why Seth Hancock Quit

http://billyreedsays.com/2008/06/25/hancock-quit-for-a-number-of-good-reasons/#more-399

8-5 Evans out by the end of the year. He started this entire fiasco. A stock price in the low 30's or even 20's should do it for this idiot. Money will eventually talk . I certainly respect Mr Hancock for bailing

[Javagold]

it cant happen soon enough

[discodog]

The horse racing game is going downhill faster than the worlds fastest rollercoaster. Veternarians started the ball rolling 40 years ago, and management just turned a blind eye. Bring in the lawyers and the downward spiral gets even faster.

[andicap]

Now i'm a purist from way back and am appalled at what's been going on at Churchill and the whole ADW thing.

BUT, we have on this board a lot of hard-core free-market capitalists. And I'm not judging them or getting into politics at all.

Here's my question: If you truly believe a company has to serve the interests of its shareholders -- or indeed face liabilitity for negligence -- how do you not back a company whose interest is soley on the bottom line? That is a company, Churchill Downs, whose only apparent interest is maximizing its profit and by extension its stock price,

Wouldn't to do otherwise by Evans invite a slew of shareholder suits and takeover threats?

Is the thinking a little hypocritical in this area?

Now, I will answer my own question since I'm not trying to trick or insult anyone.

The only answer to the question posted above is if you truly think that operating CDI for short and medium-term maximum profitability was in the LONG-TERM a huge detriment to the company and thus shareholders.

If this is true then philosphically as a free-market advocate you would always (OK, there are always exceptions) believe that companies should act, not with the current or intermediate stock price in mind, but with the long-term (even if that long-term is pretty long) interest of the company and shareholders.

[Tom]

What you say makes sense, but from my point of veiw, it is about customers, not shareholders. They, of course need to suck up to who they need to suck up to. But as a customer, I, too, have the right to say screw them and take my business elsewhere. Customers have no incentive to worry about sharerholders. And this one sure doesn't! One tining for sure, CD and Caleder will never see another bet from me - they screwed me, I will never deal with them again. Hopefully, enough other people will feel that way, too.

Andy, I have not watched a full BBall game since the strike. I hold a grudge.:mad:

[highnote]

I can buy Coca-Cola stock from hundreds of brokers. How many companies will broker my bet on races from Churchill Down?

I'm not convinced that limiting the amount of people who can wager on the product is really in the best interest of the shareholders.

Maybe a central bet clearinghouse that all brokers can access is what is needed. Then an individual can choose to go to a discount bet taker or a value-added bet taker.

[Javagold]

Now i'm a purist from way back and am appalled at what's been going on at Churchill and the whole ADW thing.

BUT, we have on this board a lot of hard-core free-market capitalists. And I'm not judging them or getting into politics at all.

Here's my question: If you truly believe a company has to serve the interests of its shareholders -- or indeed face liabilitity for negligence -- how do you not back a company whose interest is soley on the bottom line? That is a company, Churchill Downs, whose only apparent interest is maximizing its profit and by extension its stock price,

Wouldn't to do otherwise by Evans invite a slew of shareholder suits and takeover threats?

Is the thinking a little hypocritical in this area?

Now, I will answer my own question since I'm not trying to trick or insult anyone.

The only answer to the question posted above is if you truly think that operating CDI for short and medium-term maximum profitability was in the LONG-TERM a huge detriment to the company and thus shareholders.

If this is true then philosphically as a free-market advocate you would always (OK, there are always exceptions) believe that companies should act, not with the current or intermediate stock price in mind, but with the long-term (even if that long-term is pretty long) interest of the company and shareholders.

you must be joking , but just to play along how are the shareholders doing since the sausage man has taken over and made millions for himself, while practically no one can bet $2 on CD very own product on CD very own ADW :bang:

[Grits]

http://www.thoroughbredtimes.com/national-news/2008/June/19/Duchossois-approves-of-Churchill-direction.aspx

Many of us are concerned about CDI's direction but given the fact that most of CDI's stock is in the hands of an extremely small number of shareholders, with Mr Duchossois owning the greatest piece of the pie, its not surprising that he would be pleased with clueless Wayward Bob's bottomline.

Seth Hancock has integrity, obviously, his fellow shareholders . . . not so much. And this is pretty unfortunate for racing fans.

[Grits]

And I forgot to add this part. Here's the last paragraph of the piece, guys. It reveals the approved bonuses paid to management.

Now, we're gonna p**s and moan, and b*t*h and whine regarding our fair share of our racing product, (our signal, our ADW's, etc,) while we blow the heads off our horsemen, and YOU, the wagering public. You all surely understand, we have to take care of our in-house leadership.

Yep, lets keep shoving our money through the windows of CDI. Caring bunch that they are!

* Shareholders approved performance bonuses for Churchill executives, including $675,000 for Evans, $384,000 for Chief Development Officer Bill Carstanjen, $348,000 for Chief Financial Officer William Mudd, $360,000 for Executive Vice President of Technology Initiatives Vernon Niven, and $360,000 for Churchill Downs Racetrack President Steve Sexton.

[Kelso]

http://billyreedsays.com/2008/06/25/hancock-quit-for-a-number-of-good-reasons/#more-399 I don't know, or much care, who this Billy Reed clown is ... but his article is just a sophomoric puff-piece for greedy Kentucky horsemen.

From the article:
"It could have been Churchill’s declaration of war against its own horsemen over how the profits from account wagering are divided.

"When the track refused to get its way, it retaliated by slashing purses 20 per cent across the board and filed a suit against the Kentucky Horsemen’s Benevolent and Protective Association (http://www.kyhbpa.org/), which represents the majority of the owners and trainers. It was old-fashioned union-busting, pure and simple, and the result has been a lot of short fields at the current meet because of horsemen defections to other tracks."


<<Aside: "When the track refused to get its way???" What the hell does THAT mean?>>


Evans is a lousy businessman and deserving of much criticism thereof; but at least he had the insight and guts to oppose the owners' naked money-grab.

"Declaration of war" my ass! CDI effected a logical response to a sleezy effort by an outside interest group to sieze a major revenue stream to which it has no right whatsoever. You bust that greedy union good, Bob, and make it last!!

[Grits]

Billy Reed has forgotten more about Churchill Downs and Kentucky horseracing, Kelso, than you will know in your lifetime.

You may not agree with him, but I assure you, you will not no more than this man does regarding what is beneficial for the sport, certainly, in Kentucky.

This clown, as you called him, is one of the most respected journalist (now retired) in the sport.


I don't know, or much care, who this Billy Reed clown is ... but his article is just a sophomoric puff-piece for greedy Kentucky horsemen.

From the article:
"It could have been Churchill’s declaration of war against its own horsemen over how the profits from account wagering are divided.

"When the track refused to get its way, it retaliated by slashing purses 20 per cent across the board and filed a suit against the Kentucky Horsemen’s Benevolent and Protective Association (http://www.kyhbpa.org/), which represents the majority of the owners and trainers. It was old-fashioned union-busting, pure and simple, and the result has been a lot of short fields at the current meet because of horsemen defections to other tracks."


<<Aside: "When the track refused to get its way???" What the hell does THAT mean?>>


Evans is a lousy businessman and deserving of much criticism thereof; but at least he had the insight and guts to oppose the owners' naked money-grab.

"Declaration of war" my ass! CDI effected a logical response to a sleezy effort by an outside interest group to sieze a major revenue stream to which it has no right whatsoever. You bust that greedy union good, Bob, and make it last!!

[Tom]

Chuchill? They still open?
I thought they burned down or something...meth lab in the Derby barn blew up, or something like that.

Oh well, who cares

CD = must miss racing. Forever.

[Kelso]

Billy Reed has forgotten more about Churchill Downs and Kentucky horseracing, Kelso, than you will know in your lifetime.Well ... certainly more than I'll ever care to know, anyway.


you will not no more than this man does regarding what is beneficial for the sport, certainly, in Kentucky.That might very well might be but, if so, one could not conclude such from his article. All he demonstrated, therein, was his knowledge of what's beneficial for his greedy, racehorse-owning cronies. Such is NOT, definitively, what is "beneficial for the sport," in Kentucky or anyplace else.


This clown, as you called him, is one of the most respected journalist (now retired) in the sport.Ahh, that 'splains his problem. He wrote as a hack advocating for a greedy special-interest. He made no apparant effort, with his rant, to conduct himself as a "journalist." It was transparant propaganda in behalf the self-indulgent group under whose spell he clearly labors.

[Grits]

Kelso, I'm sorry I spoke up. Your shots are cheap. Just simple, and cheap.

Get your hands on CDI's proxy, then come back and tell me, whose making the money here.

The horsemen, I don't think so.

[jillybeans]

Bob Evans. Bill Carstanjen.:lol: :lol: :lol:

[Kelso]

Your shots are cheap. Just simple, and cheap.And with vacuous responses such as yours, it's clear that they are squarely on target.

But, to be sure, I'm not the one who exposed the owners' greed. They did it themselves with their THG fiasco; and it's been amply confirmed by comments right here at PA.



Get your hands on CDI's proxy, then come back and tell me, whose making the money here.Your straw man won't work with me, Grits. (Talk about your basic cheap plays.) I don't give two damns what happens at CDI. I haven't made the error of investing in the company.

My stake is in the takeout and rebate money that the greedy owners covet, and that your writer-hero wants them to get.

[PaceAdvantage]

Jillybeans is back...now, did I miss something, or did all those high-profile perp walks you promised us a while back never pan out?

[Grits]

Kelso, two words. CORPORATE GREED. Churchill is world class.

Owners, yes, they make all of money in this sport. Just ask 'em. So do all the wealthy horsemen.

You read like a whale that sits home all day in his underwear in front of his computer banking on his rebate to get even, or grind out his 10%. Its all about you. And yes, that's ok for you.

As I said . . . sorry I opened my mouth. I don't want any more, I've had enough. You got me. I'm too simple to have an opinion. So, apparently, is Billy Reed or anyone else that throws a wrench in CDI's money machine.

I'm done.

[DeanT]

Kelso, two words. CORPORATE GREED. Churchill is world class.

What are the tracks in the UK then? Super-duper corporate greed? 1% of handle goes to purses in the UK, 6% of handle goes to purses here.

Where is the sport in better shape? Not here that's for sure.

Horseman have to get it through their heads that their purses will go up if the sport grows and they will go down if the sport shrinks. It can not grow when you cut off signals or continue to ask for more of a shrinking pie. That is not only common sense, it is the way business has been done since cavemen sold beaver pelts.

[sjk]

The current economic model has been in place for 10 years and has not resulted in a growing pie. Meanwhile the expense of keeping a horse in training has doubled.

If the economic equation continues to worsen for the horsemen you will have nothing but 5 and 6 horse fields to bet if there is any racing at all.

[DeanT]

The ADW model is doing fine. It is attracting players with perks and rebates, all of which will go away if the THG gets their wish.

The model of horse racing is broken not because of what they did. Altho it seems THG wants to break that model too.

Read the jockey club report on what is wrong with the game the last twenty years.

[sjk]

The rebate model is killing the game.

Anyone who does not get a rebate is fighting a 30% take which has probably run off an entire generation of begininning and intermediate level players for whom the learning curve is impossibly steep.

[cj]

How does someone not getting a rebate increase their takeout?

[DeanT]

The rebate model is killing the game.

Anyone who does not get a rebate is fighting a 30% take which has probably run off an entire generation of begininning and intermediate level players for whom the learning curve is impossibly steep.
Don't drink the kool aid sjk.

From the biggest study (paid for by HPBA) done on ADW wagering:

Incentive Wagering Services improve the competitiveness of the racing industry. They provide a critical service (lower takeout) to a very few high-volume customers. Data indicate that doing business with IWSPs has increased tracks’ handle, not reduced it. They moreover provide sorely-needed counterpressure against the widespread industry bias toward
raising the price of wagering. What the industry needs most, and has been working on for more than twenty years, is a
diversified set of delivery mechanisms to bring our product to the customer, as well as attract more customers to our product. These delivery systems have different costs. Customers have different sensitivities to price. If we try to shoehorn all our customers and delivery systems into
one uniform cost/price structure, we’ll be leaving money on the table.

[sjk]

By incenting players who are capable of producing a pre-rebate return of -2% to bet very large amounts.

Just going by things that have been posted here which I have no way of verifying:

If large rebate players account for 1/3 of the pools (this was posted in regards to CD and I have to think the smaller tracks are much more skewed in this regard)

and are achieving a -2% return and

the total takeout is 20% then the return for the other 2/3 of the money is -29%.

[sjk]

These lovers of big words are entitled to their opinion. I think they are dead wrong.

[Indulto]

Don't drink the kool aid sjk.

From the biggest study (paid for by HPBA) done on ADW wagering:DT,
Do you have a link to that article?

If I had to guess, I'd say the author was Maury Wolff.

I would like to see what that hypothesis is based on and whether any study was performed by disinterested parties.How does someone not getting a rebate increase their takeout?cj,
Please correct me if I'm misunderstanding the situation.

If rebates lower takeout, effectively, for those receiving them, then it has to raise takeout, effectively, for those NOT receiving them.

There is some retun on investment for the rebated player even on a losing wager, and the cost of a winning ticket is lower for the rebated player. The rebated player can also effectively purchase some additional exotic wager combinations at no additional cost.

Even if the rebate is coming out of the ADWs pocket, the unrebated player everywhere else is at a competitive disadvantage.

Gentlemen,
Rather than avoiding the issue or attacking the messnger (e.g., saying I don't bet enough, so stop complaining), please, for once, try and actually disprove my contention.

[DeanT]

DT,
Do you have a link to that article?

If I had to guess, I'd say the author was Maury Wolff.


No Maury is a player.

It was done by Cummings and Associates, an independent gambling consulting firm and they were paid by the HBPA (among others to write the report). I saved it on my hard drive when it came out. Interesting piece of work. Of course the tracks pretty much ignored most of it, probably because it did not say what they wanted it to (ie people come to the races for the pretty horses, offshore wagering is the only reason that racing is losing market share, etc).

He studied some of your gripes and offers this:

4. Competitive Pricing Good for Customers, and for the Industry

Finally, aside from all these issues regarding “price,” it has been argued that rebaters are
bad for the industry because their customers are winners, sucking money out of the pockets of the
humble fans at home. This is indeed a potential “externality,” as economists would call it,
because it imposes costs on a third party, the players, that could rebound to the industry’s loss.
The presentation cited above by Curtis Linnell purported to demonstrate that on one random day,
when one rebater’s customers won roughly $100,000 (i.e., bet $800,000 and cashed $900,000 in
winning tickets), there were indeed substantial costs to the industry. I believe this illustration is
highly exaggerated for the following reasons:
First, the day examined may have been random, but it was far from average. Several
IWSPs provided data to me that indicate that the average rate of loss (not win) for their players in
2003 was roughly 5%. Assuming the $800,000 figure for their daily average handle, such players
would lose, on average, $40,000 rather than win $100,000. While this would still be “winning”
from the other players, it would only be at a rate of $120,000 rather than at a rate of $260,00021 --
less than half as much, a very substantial difference.
Second, Linnell assumed a churn factor of 7. As I described above, if you believe that the
average churn rate is really that high, then we should reduce the overall total takeout to just 14%.
It would make us more money (and probably drive the rebaters out of business, too). The actual
average churn rate is probably far less than 7.22
Third, shutting off the rebater, or charging him a price sufficiently high to offset the
supposed costs of his customers’ “winning,” would not eliminate those winners from the parimutuel
pools. It would reduce their betting, but some would move on to another account
wagering service, or continue to bet, though at a reduced rate, getting a lower rebate from their
IWSP. The humble customers would regain only a fraction of their current “excess” losses.
Finally, where do we draw the line? How high is up? What is winning “too much”?
What is an acceptable rate of return? +1%? -8%? -12%? -18%? How do we make that determination? And what do we tell our fans? I believe that is a slippery slope down which we
should fear to tread. Handicapping is a game that attracts customers because it can be beaten. To
draw another parallel with the casino industry, they know full well that if they want to keep the
business coming in, some customers have to win. Not “win for a while, then lose it back,” but
win, period -- and this is their money they’re giving up, not the other players’. The example of a
few winners stimulates many more to try their luck. All the more important, I believe, for
Thoroughbred racing to position itself as a game at which some people win. Sure, we’d all like
more dumb money. The more dumb money in the game, the easier it is for smart players to win.
We must, however, always keep the competition in mind: dumb money doesn’t go to the track.
Dumb money plays the slots. We can’t beat the competition at its game, so we have to emphasize
the strengths of our own. Penalizing some winners would send the wrong message to all our
sophisticated customers.

[DeanT]

Indulto,

I found the writers bio if you are interested.

Mr. Cummings has engaged in management consulting since 1975. Prior to founding Cummings
Associates, Mr. Cummings directed consulting firms including Christiansen/Cummings Associates,
Inc., specializing in entertainment and legal gambling, and Killingsworth Associates, Inc., focusing on
professional sports and pari-mutuel racing. His early experience was with Pugh-Roberts Associates,
Inc., which specialized in applying the techniques of system dynamics to strategic planning and
forecasting in a wide range of industries, including, for the Jockey Club, the first wide-ranging study
of the economics of Thoroughbred racing in North America.
Mr. Cummings has directed studies of the economics, management, operations, taxation, and
regulation of leisure and entertainment businesses in more than forty states, provinces, and foreign
countries, with particular focus on gaming and wagering. The subjects of these studies have included
sports, entertainment, communications, casinos, sports wagering, lotteries, and all segments of the
racing and pari-mutuel wagering industries. His engagements have included:
• Assessing the overall economic contribution of commercial gambling industries to countries,
states, and individual localities;
• Estimating the degree of saturation and potential for growth in various markets, and assessing
the interactions among numerous competing facilities;
• Due diligence and other assessments of the performance, current value, and/or likely prospects
of a variety of firms engaged in the sports and gambling businesses, or as suppliers thereto,
including professional sports teams, race tracks, casinos, state lottery agencies, and vendors of
goods and services to these industries;
• Evaluation of proposed cable television networks for a major U.S. media company;
• Assistance to government entities privatizing racing and wagering facilities, including the
Patronato Hipodromo V Centenario in the Dominican Republic, Connecticut’s State-operated
OTB system, and the Fondo de Inversiones de Venezuela; and
• Expert testimony in a variety of legal cases and regulatory procedures regarding issues such as
facility licensing, financing, racing dates, Native American gaming, charitable casino
gambling, anti-trust issues, and fair trade practices.
Mr. Cummings received his Bachelor’s and Master’s degrees from the Sloan School of Management
at the Massachusetts Institute of Technology. He has testified before the U.S. Congress, state
legislatures, local government bodies, and regulatory agencies. He has also appeared as a featured
speaker before the Association of Racing Commissioners International, Racetracks of Canada, the
World Greyhound Federation, the University of Arizona Race Track Industry Program and its annual
Symposium on Racing, and other leisure industry organizations.

[whobet]

I don't understand why the ADW war let's this place take wagers on all the tracks, what am I missing:

https://www.ebetusa.com/racing/

[chickenhead]

They are basically saying that for people in it for the money (price sensitive), give them incentives, for people who are either in it for entertainment, or just don't have the wherewithal to be aware, they'll pay a bigger bite and will happily subsidize the others to the extent that their bankrolls will allow.

I don't think there is any argument that makes rebating 0.1% of players a better move for racing than reducing takeout for 100% of them , it's imo trying to solve the problem without admitting there is a problem.

[richrosa]

What are the tracks in the UK then? Super-duper corporate greed? 1% of handle goes to purses in the UK, 6% of handle goes to purses here.

Where is the sport in better shape? Not here that's for sure.

Horseman have to get it through their heads that their purses will go up if the sport grows and they will go down if the sport shrinks. It can not grow when you cut off signals or continue to ask for more of a shrinking pie. That is not only common sense, it is the way business has been done since cavemen sold beaver pelts.

To be fair, at the UK tracks, they charge the equivalent of $40 to get on-track to get access to the bookies, plus TV rights are sold for a lot more per capita then they are in the US for their ordinary races. The bookies also pay rental fees to set up shop. The multiple revenue streams benefit the horsemen.

Also, I'm not sure that you can actually calculate an exact takeout, except from the track totes, which isn't where most of the pool money really is.

Its a different game over there. Much more civilized too for the second or third best country in the world.

[Kelso]

If rebates lower takeout, effectively, for those receiving them, then it has to raise takeout, effectively, for those NOT receiving them.Takeout is takeout, and X% rake remains X% rake whether a player is receiving a 10% rebate from an ADW, a 20% rebate from his grandmother or diddly-squat from Bob Evans.

When a player, in consequence of a rebate, dumps increased sums into pools, he is doing much more than "effectively" affecting takeout rates ... he is actually lowering them.

He's the one providing the new gold the greedy owners claim they need and deserve in order to continue profiting from their hobby. Without his new gold, the greedy owners would be whining EVEN LOUDER for higher takeouts. That's what 'growing the pie' is all about.

[Indulto]

DT,
I appreciate your posting those additional portions. If the HPBA paid for the study, it would explain why the horsemen are exempting RGS and Elite from their signal ban.

I think Chick’s reply was the most accurate, but until that problem is actually solved, I’d play with a rebate myself (if it were available) to try and level my own playing field. I just won't pretend the advantage doesn't exist. I’m sure there are some here who have convinced themselves otherwise, and that’s OK too.

I just feel obligated to make sure the glasses are clean whenever I hear the Kool-Aid being poured. ;)

[DeanT]

DT,
I appreciate your posting those additional portions. If the HPBA paid for the study, it would explain why the horsemen are exempting RGS and Elite from their signal ban.

I think Chick’s reply was the most accurate, but until that problem is actually solved, I’d play with a rebate myself (if it were available) to try and level my own playing field. I just won't pretend the advantage doesn't exist. I’m sure there are some here who have convinced themselves otherwise, and that’s OK too.

I just feel obligated to make sure the glasses are clean whenever I hear the Kool-Aid being poured. ;)
You're welcome. I will galdly send the entire 72 page pdf via email if you are interested.

Clearly the point of the report is that rebates for anyone who chooses to seek them out is most preferred. Which is why I support places like Ian's. Places like that grow our game allowing price sensitive folks a chance to win at a craft they are serious about. Betfair grew from 20,000 to 1.3 million players like that in six years. I'd love to see all of us have a chance at that for our game over here.

It is also why I do not support THG. To me they are trying to take away our only chance at lower prices (open ADW's with rebating) and that is exactly what we do not need.

[ezrabrooks]

If rebates through ADW's are so good for business, then should the industry raise take outs, and funnel a larger percentage to the ADW's, thereby allowing larger rebates? Study or no Study, it is nonsense to think that the industry can grow its way out of its problems simply by allowing better wagering deals to part of the handle. Rebates, as they are now used, will kill the game..

[DeanT]

EZ,

Really dude, c'mon. They effectively lower prices. The two largest studies show that optimal revenue comes at 10-12% rake. Rebates lower prices, so handle would go up and revenue would go closer to optimal.

Think of it this way. A place sells chairs, the optimal price for revenue maximization is $10 but they sell for $20. If they offer a sale now and again that sale lowers the price closer and closer to optimal and they sell more chairs. This has been going on forever in business. Racing is the same way.

Betfair has been running for seven years. They are private, they won two awards for business and innnovation, they will IPO for $3B soon. Do you really think they do not know an optimal price? Do you think they do not give volume discounts? Of course they do. Their optimal revenue price is 5% rake, racing is 21%. Anything that lowers the price in racing will raise revenues. Economics 101.

[trigger]

If rebates through ADW's are so good for business, then should the industry raise take outs, and funnel a larger percentage to the ADW's, thereby allowing larger rebates? Study or no Study, it is nonsense to think that the industry can grow its way out of its problems simply by allowing better wagering deals to part of the handle. Rebates, as they are now used, will kill the game..

Yea, if rebates are so good for the game longterm, why not just increase the takeout to 50% and give back 40% as rebates to whales and and 30% to mini-whales?
Because, if they did, the pools would very quickly consist of whales only. Large rebates are bad for the game and the current 10%-15% rebates to whales are way to big.
For most parimutual type games like poker, I'm guessing casinos pay whales "rebates" (comps) in the 2-3% range....a rate that the non-rebatees can ,at least, have a chance of contending against with some success.

[ezrabrooks]

EZ,

Really dude, c'mon. They effectively lower prices. The two largest studies show that optimal revenue comes at 10-12% rake. Rebates lower prices, so handle would go up and revenue would go closer to optimal.

Think of it this way. A place sells chairs, the optimal price for revenue maximization is $10 but they sell for $20. If they offer a sale now and again that sale lowers the price closer and closer to optimal and they sell more chairs. This has been going on forever in business. Racing is the same way.

Betfair has been running for seven years. They are private, they won two awards for business and innnovation, they will IPO for $3B soon. Do you really think they do not know an optimal price? Do you think they do not give volume discounts? Of course they do. Their optimal revenue price is 5% rake, racing is 21%. Anything that lowers the price in racing will raise revenues. Economics 101.

Dean, I understand your point..but, have you ever seen a pari mutual furniture store? The system works when you return the total bets, less the total take out, to all of the winning players...without any kick backs.

[Indulto]

From Equidaily:

http://www.harnesstracks.com/2008%20annual%20meeting/Swimming%20with%20Whales.pdf (http://www.harnesstracks.com/2008%20annual%20meeting/Swimming%20with%20Whales.pdf)

PDF Transcript

Swimming with Whales: Will they Beach Offshore or Can They Be Returned to the Racetrack?

Tuesday, February 19

Nick Eaves, Woodbine Entertainment Group
Maury Wolff, racing economist & long-time major bettor
Dave Johnson, Sirius Satellite Radio, moderator

[Kelso]

should the industry raise take outs, and funnel a larger percentage to the ADW's, thereby allowing larger rebates?It appears that you've enjoyed a long career in government Ezra. "Send more to the politicians so they can take credit for sending it back to you ... less their handling fee, of course." :eek:

[DeanT]

Dean, I understand your point..but, have you ever seen a pari mutual furniture store? The system works when you return the total bets, less the total take out, to all of the winning players...without any kick backs.
Fairly true, but the point is this: Racing has had 50 years to do that, and they have not. They will not. Lowering prices for all is not in their playbook. Places like Ian's are the only places who are keeping handles afloat (as witnessed last year with the 17% increase in ADW wagering). Now THG wants more of that for themselves. It will kill the only growth mechanism this sport has. They want to keep a bigger share of that shrinking pie forever, just like they have the last 50 years. The players will never see it back in their pockets and the game will shrink and we'll all lose.

Never support rising prices EZ - ever. Even if it is for a whale who you seem to not like. If they get burned there is no hope for anyone to get lower prices and win more at this brutally tough game. The next person getting pinched with a takeout increase will end up being you.

[ezrabrooks]

Dean, I am in no way supporting increase price...and agree that lower take out should grow the handle (even though the Maryland and Ellis experiments last year were not all that successful). Where we disagree, is how to lower the take out. Discount Rebates, or Rebates for marketing purposes, as in the PTC operation (to which you referred), will not get the job done, and will finally implode...pitting rebatee vs rebatee until an after rebate ROI is not possible. Horse race wagering was legalized based on a pari mutual system, not some discount, kick back marketing scheme. I respect your opinions and posts, but we just disagree on this one.

[thruncy]

My sentiments exactly. Churchill management plays the Kentucky Derby as their trump card. F... the Kentucky Derby AND Churchill Downs. FOREVER!

[DeanT]

Bill Nadar has always been one who 'gets it', eventho his hands were tied here. Hong Kong asked for taxes to be taken on turnover not in % of handle, so they could develop player rewards and rebates to keep some of their price sensitive customers with them and encourage churn. Handle up 5.75%. Kudos to Nadar. I wish we had him as a commissioner here a long time ago. He'd get stuff like this done and we would not have seen negative 25% real growth the last twenty years.

http://racing.scmp.com/freeservice/news/news20080705a.asp

Highs of a 5.75 per cent growth in racing turnover to HK$67.7 billion in the season just completed......... "The decision by the government to agree to our proposals [to change the way racing is taxed, from turnover to profit-based] has enabled us to introduce the betting rebates, which have offset the activity of illegal operators," Nader said.

The only avenue here to act like HK is Premier Turf Club, and it seems they have to act like a circus seal to even get a sniff of licensing. Great work tracks & horseman groups.

[rrbauer]

Dean, I am in no way supporting increase price...and agree that lower take out should grow the handle (even though the Maryland and Ellis experiments last year were not all that successful). Where we disagree, is how to lower the take out. Discount Rebates, or Rebates for marketing purposes, as in the PTC operation (to which you referred), will not get the job done, and will finally implode...pitting rebatee vs rebatee until an after rebate ROI is not possible. Horse race wagering was legalized based on a pari mutual system, not some discount, kick back marketing scheme. I respect your opinions and posts, but we just disagree on this one.

If you're saying that when everybody gets a rebate, it's like nobody gets a rebate. True statement! But, a truer statement is that when everybody gets a rebate we've achieved the lower cost that we're looking for. So, achieve the lower cost by across-the-board takeout reductions; or, achieve the lower cost by effectively lowering the takeout via rebates. This has nothing to do with how horse racing pari-mutuel wagering was legalized. When that came to be it was the only game in town. The purest of monopolies. Today, that is no longer the case. Lotteries and casino wagering handle dwarf pari-mutuel handle in this country. Why is that? Try distribution and price!

But, we still have the monopoly mentality at work in the industry from both the horseowners groups and the ractrack/racing association operators. Their whole mantra is that our money is an entitlement to them. The fact that there are these battles over bigger slices of the pie; and, that there are some rebates available and more rebates on the table (except that they're being stymied via a variety of blocking manuevers) screams high prices and the market mechanisms that could get them lowered are being interfered with.

Just as the distribution via ADW's is being interfered with because somebody figured out a way to enter a void in the marketplace and operate a profitable niche with some growth potential and the folks who didn't get there first are sore because somebody else is making a profit on their product.

All the while, the product continues to deteriorate and most horseplayers don't seem to care. At least care enough to do something about where their money is going.

[ezrabrooks]

"If you're saying that when everybody gets a rebate, it's like nobody gets a rebate".


No, that is not what I was saying. If everybody got a rebate, the end result would be lower take out, and the pot would be right. I was offering that rebates would run non-rebated players out of the pools...and that would leave the majority of the pools to be divided up by the rebated players only... Is that what you want?

[ezrabrooks]

Bill Nadar has always been one who 'gets it', eventho his hands were tied here. Hong Kong asked for taxes to be taken on turnover not in % of handle, so they could develop player rewards and rebates to keep some of their price sensitive customers with them and encourage churn. Handle up 5.75%. Kudos to Nadar. I wish we had him as a commissioner here a long time ago. He'd get stuff like this done and we would not have seen negative 25% real growth the last twenty years.

http://racing.scmp.com/freeservice/news/news20080705a.asp



The only avenue here to act like HK is Premier Turf Club, and it seems they have to act like a circus seal to even get a sniff of licensing. Great work tracks & horseman groups.

Dean, aren't Hong Kong rebates a different animal than what we are dealing with here?

[cj]

"If you're saying that when everybody gets a rebate, it's like nobody gets a rebate".


No, that is not what I was saying. If everybody got a rebate, the end result would be lower take out, and the pot would be right. I was offering that rebates would run non-rebated players out of the pools...and that would leave the majority of the pools to be divided up by the rebated players only... Is that what you want?

Sure, because then it is a lower price being paid by all the bettors.

Three choices here:

1) High takeout for all
2) Rebates for some, not for others
3) Lower price for all

I'd prefer 3. If not, I'll take 2. With 1, the pools would shrink to the point that they aren't worth playing.

[ezrabrooks]

Sure, because then it is a lower price being paid by all the bettors.

Three choices here:

1) High takeout for all
2) Rebates for some, not for others
3) Lower price for all

I'd prefer 3. If not, I'll take 2. With 1, the pools would shrink to the point that they aren't worth playing.

Would you prefer #2 if you were not receiving part of the rebates? No disagreement with a yes to #3 and a big no to #1.

Are you sure you would like to play in pools that were 80% rebated?

[DeanT]

EZ,

HKJC's rebates are 10% on lost bets. Not at all dissimilar.

This thread has gone on to "rebating", which we've been through before. What we agree on is important. Lower prices are better for the game. Everyone who so chooses to be rebated should be able to be, to raise handles and grow the game. Ian's place is a fine example; he offers rebates to all. So support that model, support him, and do not support people who are against that. Right now if you live in a certain state, or if a track or horseman group chooses they can shut places like Ian's out (like some are doing now with the THG dispute), it results in higher prices and we all lose. Can we agree on that? That is why I never, ever dispute lowering of prices. If we are all on the same page with that, we can get something done. Hong Kong did.

[cj]

Would you prefer #2 if you were not receiving part of the rebates? No disagreement with a yes to #3 and a big no to #1.

Are you sure you would like to play in pools that were 80% rebated?

Yes. I do it every day.

[rrbauer]

"If you're saying that when everybody gets a rebate, it's like nobody gets a rebate".


No, that is not what I was saying. If everybody got a rebate, the end result would be lower take out, and the pot would be right. I was offering that rebates would run non-rebated players out of the pools...and that would leave the majority of the pools to be divided up by the rebated players only... Is that what you want?

I don't see non-rebated players leaving the game because of rebates. So it appears that your premise is faulty (any chance you're an economist?).

It's more likely that rebated players will leave the game, if their rebates are terminated. One of the problems is that there is an illusion that players receiving rebates are all winners....far from it. Their money is in the pool (regardless of the level of rebates they happen to be receiving) and there for the taking by all the other players in the pool. The money that ends up in the rebaters pocket never was in the pool and never will be in the pool. That money was all handled pre-pool and what happens to it is a function of whatever allocation formula is in place for the track in question. However, the money that ends up in players' pockets contributes to the churn and I don't care where it comes from!

Like Dean says, this thread wasn't about rebates!

[Indulto]

I don't see non-rebated players leaving the game because of rebates.But they are putting less into the pools.... It's more likely that rebated players will leave the game, if their rebates are terminated.Again, will they leave the game or simply bet less?One of the problems is that there is an illusion that players receiving rebates are all winners....far from it.Of course there are rebated players who are not in the black, but hasn't it been posted here in the past that tracks generally have negative settlements with rebate shops? Isn't it fair to say that, collectively, rebated players do better than non-rebated players? How would one prove it was due to superior handicapping, better money management, and/or bigger bankrolls rather than rebates?Their money is in the pool (regardless of the level of rebates they happen to be receiving) and there for the taking by all the other players in the pool. The money that ends up in the rebaters pocket never was in the pool and never will be in the pool.I assume you mean "rebated players" rather than "rebaters."That money was all handled pre-pool and what happens to it is a function of whatever allocation formula is in place for the track in question. However, the money that ends up in players' pockets contributes to the churn and I don't care where it comes from!I agree, and that's one reason why non-rebated players are at a competitive disadvantage.

[ezrabrooks]

EZ,

HKJC's rebates are 10% on lost bets. Not at all dissimilar.

This thread has gone on to "rebating", which we've been through before. What we agree on is important. Lower prices are better for the game. Everyone who so chooses to be rebated should be able to be, to raise handles and grow the game. Ian's place is a fine example; he offers rebates to all. So support that model, support him, and do not support people who are against that. Right now if you live in a certain state, or if a track or horseman group chooses they can shut places like Ian's out (like some are doing now with the THG dispute), it results in higher prices and we all lose. Can we agree on that? That is why I never, ever dispute lowering of prices. If we are all on the same page with that, we can get something done. Hong Kong did.

Hey, you are the one that brought up rebates on this thread...and caused it to go off course..(see #21).

Aren't there more strings attached to the Hong Kong rebates...like amount of losses?

Like I have said before, I am in favor of lower takes...but, a level playing field is as important...

[ezrabrooks]

I don't see non-rebated players leaving the game because of rebates. So it appears that your premise is faulty (any chance you're an economist?).

It's more likely that rebated players will leave the game, if their rebates are terminated. One of the problems is that there is an illusion that players receiving rebates are all winners....far from it. Their money is in the pool (regardless of the level of rebates they happen to be receiving) and there for the taking by all the other players in the pool. The money that ends up in the rebaters pocket never was in the pool and never will be in the pool. That money was all handled pre-pool and what happens to it is a function of whatever allocation formula is in place for the track in question. However, the money that ends up in players' pockets contributes to the churn and I don't care where it comes from!

Like Dean says, this thread wasn't about rebates!

As to taking the thread off course, it wasn't me. I disagree with your premise that non rebated players will leave the game... Yep, I am a economist for my own account...and can figure out when I am getting the short end of a trade. I never said that rebated players are all winners...I just maintain that they have an advantage. All this time I thought you were a crusader for lower take outs across the board, but now it appears that you just are just crusading for you own personal gain, no matter who is at a disadvantage.

[ezrabrooks]

Yes. I do it every day.

In that case, your opinion is respected on this end.

[rrbauer]

As to taking the thread off course, it wasn't me. I disagree with your premise that non rebated players will leave the game... Yep, I am a economist for my own account...and can figure out when I am getting the short end of a trade. I never said that rebated players are all winners...I just maintain that they have an advantage. All this time I thought you were a crusader for lower take outs across the board, but now it appears that you just are just crusading for you own personal gain, no matter who is at a disadvantage.

Screw you. What have you done for horseplayers in the last 10 years in an attempt to better the game for them? All of a sudden a philosophical argument turns personal. You want to make it personal: Like I said, Screw you!

[sjk]

I don't see non-rebated players leaving the game because of rebates.

How is it that you think you know if they are or are not.

It is certainly my guess that they are. Anyone who does not play the game at a very high level and/or gets rebates is likely to get slammed and give up on the game fairly quickly.

If the handle is only marginally more than it was 10 years ago it is my guess that there is a barbell effect where there are serious profitable players and there are small time recreational players but we have lost a lot of the folks in the middle who might otherwise have aspired to work their way up the ladder of success but who get knocked down very quickly.

[ezrabrooks]

Screw you. What have you done for horseplayers in the last 10 years in an attempt to better the game for them? All of a sudden a philosophical argument turns personal. You want to make it personal: Like I said, Screw you!

Humm... a thin skinned crusader. I took your little personal jabs in stride...so, back at you with the SY comment.

[DeanT]

Once again who is getting one and who is not getting one is irrelevant. The simple fact is there is an ADW that wants to give you one - everyone here can have one. Think about that, you have a business that wants to sell you a lawn chair at $5 instead of $10, and wants to sell every brand of lawn chairs, yet they are being blocked from offering it to everyone who chooses to buy one at a low price. Ask yourself who is blocking everyone here from getting a rebate and why, and therein you have what is wrong with racing.

[chickenhead]

I've can't help playing devils advocate....Ian does have minimums, doesn't he? Or at least I know he's talked about his need to have them, that his business model requires them. Since I'm legally barred from betting there I don't know for sure. :mad:

herein you have what is wrong with racing.

Isn't the real problem that the sticker price for the lawn chair makes people not want to have lawn chairs in the first place? So they decide to go buy a hammock instead?

With full understanding that lawn chair aficionados can get a deal by buying lawn chairs by the gross, that doesn't make the purchase any less satisfying for the guy that only wants to outfit his patio.

So long as someone who visits a track on a lark pays a 25% rake...racing has a very serious problem, imo.

[DeanT]

Isn't the real problem that the sticker price for the lawn chair makes people not want to have lawn chairs in the first place? So they decide to go buy a hammock instead?

I don't think so Chick. People who are new to racing come for racing. If they get hooked they lose for awhile, realize that they can't win, and in a non-monopoly gambling market, try a 5 cent/10 cent poker table and grind out for awhile, and possibly win. If they have an opportunity to grind in a tight ADW with good rebates as they become interested in the sport, maybe they are buying a jcapper program instead of a probablity program about a flop.

So long as someone who visits a track on a lark pays a 25% rake...racing has a very serious problem, imo.

I dont think so. A lot of people go to the track not having the foggiest what the rakes are, and they do not care. They might win a trifecta, and it means nothing to them if they get $900 for it, instead of $1000, while for me and you and most here it means a lot.

When Andrew Black created the betfair market he knew that there were price sensitive players priced right out of racing; and they are 100% different than the casual player. Betfair is not for everyone. Some people like betting into the pools, or with bookmakers. Some players love exotics. This is a fundamental growth mechanism with many products that can be delivered on the web today.

The primary difference between us in North American racing, and others who have profited and are doing well is the steadfast unwillingness to change, by not recognizing the market, and the two solitudes of that market.

Here is an example of the demographic of wagering and how we have left millions on the table by not recognizing that chasm. It is from a venture capital firm and their study of betfair. This could very well be Premier Turf Club, or IRG for that matter, the principle is very similar, and imo it is where we need to be within the next decade here in NA. Notice the paragraphs on the differences between flutter and betfair and their target markets. This is a truism of all gambling enterprises, imo.

http://www.startup-review.com/blog/betfair-case-study-target-a-niche-and-expand.php

[chickenhead]

I dont think so. A lot of people go to the track not having the foggiest what the rakes are, and they do not care. They might win a trifecta, and it means nothing to them if they get $900 for it, instead of $1000, while for me and you and most here it means a lot.

We can just agree to disagree on this I guess. People don't need to even understand what a rake is, all they know is they pretty much always leave with no money in their pockets, more often than not losing every single bet they make over the course of a day. Sounds like great fun! For horseracing to be somewhat interesting, the payoffs when they come do need to seem large enough to make them want to come back. Whereas the penny machine at the casino sometimes lets them play for hours on end for $20, winning often, and sometimes they leave with $50.

We make fun of casino players, but for the person who is going to bet on something 5 or 6 times a year, horseracing is not a positive expectation game...and they are making a rational choice, whether they know it or not, by choosing slots over horses for their entertainment $. Nothing about rebating whales changes that, or will ever change that.

I submit that there is no such thing as a non price sensitive retail customer. In the short term it might look like there is, but in the long term they migrate to better games.

Again, this isn't to argue that other markets and price structures are not welcome, just that the base rate, the rate that we tax the people who are just coming in the door for the first time, and the rate we are going to continue to tax a large number of people at under any selective ADW rebate program, is bad-for-business high.

The extent to which we squeeze the very people we need to attract to make this a worthwhile endeavor is self defeating. Price always matters in the long run.

[DeanT]

Price doesnt matter in the long run to some people chick. That is why lotteries with 75% rakes attract millions. People like the lottery and the dream of it. If we offered zero rakes, people would still leave the track with no money. The problem is - if they decide to be a player we have no mechanism for them. None. If they go searching for lower prices all they get is an ashtray. Then they go play online poker, or bet football.

[chickenhead]

so you believe retail, non "player" interest level and participation in the sport is at a healthy level?

Really?

Have you been to a track recently?

[DeanT]

No absolutely not. But it will never be that with the competition out there. It's a pipe dream. In 1950 the majority of people went to gamble, not to watch and have love for the sport, no matter how many people have that romantic assertion. We will never turn back the clock to that ever. Unless we become a monopoly again of course, then we would not be having this conversation.

My argument is that racing is a game and that game appeals to a tight demographic - gamblers who enjoy skill games that they can beat. We need to worry about making that demographic have a chance to win, and become a regular. If we do, we will all win.

[chickenhead]

That is why lotteries with 75% rakes attract millions.

Whereas we rake 25% for $14 Pick 4 payoffs. 50% in CA for a chance at millions doesn't really sound that bad in comparison.

Interesting study from the CA lottery, some suggestions they made to the Gov. based on other states success (and it doesn't get more retail than the lottery):

;; Other States’ Prize Payout Percentages. Several states with
higher per capita sales pay out a higher percentage of lottery
revenues in prizes. Some states that have increased payouts
have found that this increases lottery profits.

http://www.lao.ca.gov/handouts/state_admin/2008/Lottery_3_11_08.pdf

I'm sure the people buying the tickets didn't realize the percentages had changed...they just bought more tickets. Massachusetts lottery, highest per capita sales, is at 31% rake!

People are more rational than they look :)

[DeanT]

I think Mass went down to below 50%. Getting more winners does encourage more play for sure. The payouts are mainly on the lower end. If a guy gets reabted back $5, he just buys 5 more tickets next week.

It still is not our market tho. Picking numbers is not studying a form or analyzing a flop. There is probably close to a one trillion dollar gambling handle market on skill games like sports betting and poker out there. We in racing only need a smidgen of it to grow from our paltry $15B in yearly handle here in NA.

Edit - just saw your Mass note. Ya, that was big news for those of us speaking of lower rakes in the blogosphere :) You seem to think I might be against lower rakes. Of course not. Gimme 9% across the board anyday. However, it is not going to happen. Not in our lifetime. We have to work in the framework we have. It is the only way we can change. The rest is undoable.

[chickenhead]

You seem to think I might be against lower rakes. Of course not. Gimme 9% across the board anyday. However, it is not going to happen.

You were arguing that it doesn't matter. That's not the same as being against it, but surely if it matters in a lottery, and it matters on a slot machine, it matters here. Price is relevant, at all levels, for everything.

We have to work in the framework we have. It is the only way we can change. The rest in undoable.

The framework we have makes everything undoable, unfortunately.

[DeanT]

I would never say price doesnt matter and mean it intrinsically. Hell, I wrote a piece for a magazine called Price Matters :)

Of course I was referring to people who treat racing like a luxury good with elasticity of demand of 1, which are the same types who will play a lottery at 75% rakes a dollar a week, or 25% rakes a dollar a week. Those types will never save racing handles. People like us on the board will.

The framework we have makes everything undoable, unfortunately.

Now that we end the night in agreement, I will go to bed. Nice chatting with ya as usual Chick.

[chickenhead]

I actually came across your blog twice through google searches today for different info searches I was doing, good work you're doing there. Take care.

[Cangamble]

Racing makes money from what people lose. Forget what the takeout is for a second.
Outside of slot revenues,total money that goes towards purses, track owners and ADWs is what people lose.
Collectively, there is only so much money current horse players will lose per year on betting horses.
A lot has to do with competition, and what gives a gambler more bang for his buck. A gambler who wants to make decisions (non slot, non lottery player) may choose online poker or betting exchanges or sports betting over horse racing simply because they know they will last longer, and with that comes the idea that they might be able to beat the game if they get lucky enough or do more research on how to play properly.
Most gamblers are not price sensitive, but as Chick states, they realize where the seem to have no chance versus where they might have a chance, and they tend to avoid games where they lose faster.
Of course, horse racing with an average takeout of 18-21% will cause players to lose faster.
And at those rates, yes, lotteries with large million dollar jackpots and 50% takeouts are more attractive to many over a 25% takeout on a triactor where the average $1 payout is $400-500.
The only chance to grow the game in light of all the competition, is to lower the takeout. I say across the board, but rebates are acceptable for now.
Lowering takeout won't cost the tracks any money that they make over the long run from collective players, but it could bring new players in, who will add to the amount lost by players, which is good for the tracks, horsemsen, and ADWs.
All that will happen is that most players will be able to last longer, whether they realize it or not as to why, they will be more inclined to bet more races, and as more time is spent by one handicapper in the family, chances are family members and friends will be forced to get involved to some degree, much like it was when horse racing was a monopoly.
The buzz created by winners or even those who come close to breaking even will create more players as well as word goes around that the game is now beatable if you do enough homework and are lucky enough.
Most of those people who perceive they are breaking even will most likely be losing just as much or perhaps a little less over a long period, their ROI though will go down enough to make it appear that they are close to winning. They will just be betting a lot more and probably making bigger bets.
And the odd person that wins, will be great for the game creating a lot more players. They are the best advertising the game could have regardless if they took away a small amount of the pie money. The pie will grow big time thanks to them, unless they are quiet about it.....like that would ever happen:)

[raybo]

Now i'm a purist from way back and am appalled at what's been going on at Churchill and the whole ADW thing.

BUT, we have on this board a lot of hard-core free-market capitalists. And I'm not judging them or getting into politics at all.

Here's my question: If you truly believe a company has to serve the interests of its shareholders -- or indeed face liabilitity for negligence -- how do you not back a company whose interest is soley on the bottom line? That is a company, Churchill Downs, whose only apparent interest is maximizing its profit and by extension its stock price,

Wouldn't to do otherwise by Evans invite a slew of shareholder suits and takeover threats?

Is the thinking a little hypocritical in this area?

Now, I will answer my own question since I'm not trying to trick or insult anyone.

The only answer to the question posted above is if you truly think that operating CDI for short and medium-term maximum profitability was in the LONG-TERM a huge detriment to the company and thus shareholders.

If this is true then philosphically as a free-market advocate you would always (OK, there are always exceptions) believe that companies should act, not with the current or intermediate stock price in mind, but with the long-term (even if that long-term is pretty long) interest of the company and shareholders.

Dang, don't get me started on Corporate America. The word "incorporated" refers to a "corporation" or "corp." which, after all, is a 4 letter word. IMO, Corporate America is the root of the economic problems in this country. The demands of the stockholders to continually increase profits/stock value is self-defeating, in the end, and is a scurge upon the customer base. In short, IT SUCKS!

[startngate]

Racing makes money from what people lose. Forget what the takeout is for a second.

Outside of slot revenues,total money that goes towards purses, track owners and ADWs is what people lose.No, racing makes money from what people BET, not what they LOSE.

Lowering takeout (as you mention) in theory allows people to bet more over the long term because their money will last longer before they have lost whatever bankroll their comfort level allows. And therefore, in theory racing would make more money because people are betting more.

This is the foundation of the lower takeout argument. While the theory is sound, in several instances where tracks have tried lowering takeout, it did not result in an sufficient enough increase in betting to offset the revenue loss to the track. That makes it harder for the tracks to try it again.

I have always maintained that lowering takeout will only work in a vacuum. Every track needs to do it. If only one, or a few tracks do, even price sensitive customers (like those of us on this board) will still play tracks with higher takeout when betting opportunities occur. This in effect penalizes the tracks that lowered their takeout as they won't see all the benefits (revenue increases) of the lowered takeout.

Given the current state of affairs and the unlikelyhood of all racetracks lowering their takeouts collectively, the only way I see to address the pricing issue is by rebating. As much as rebates might not be as "fair" to all customers as lowered takeout is, unless all tracks lower the takeout the theory of increased revenue over time won't work.

[Indulto]

No, racing makes money from what people BET, not what they LOSE.

Lowering takeout (as you mention) in theory allows people to bet more over the long term because their money will last longer before they have lost whatever bankroll their comfort level allows. And therefore, in theory racing would make more money because people are betting more.

This is the foundation of the lower takeout argument. While the theory is sound, in several instances where tracks have tried lowering takeout, it did not result in an sufficient enough increase in betting to offset the revenue loss to the track. That makes it harder for the tracks to try it again.

I have always maintained that lowering takeout will only work in a vacuum. Every track needs to do it. If only one, or a few tracks do, even price sensitive customers (like those of us on this board) will still play tracks with higher takeout when betting opportunities occur. This in effect penalizes the tracks that lowered their takeout as they won't see all the benefits (revenue increases) of the lowered takeout.

Given the current state of affairs and the unlikelyhood of all racetracks lowering their takeouts collectively, the only way I see to address the pricing issue is by rebating. As much as rebates might not be as "fair" to all customers as lowered takeout is, unless all tracks lower the takeout the theory of increased revenue over time won't work.I agree.

Short of establishing a central industry governing authority, lowering direct takeout to uniformly lower levels at all tracks is just a dream. If ADWs and tracks are able to rebate competitively, however, it might eventually wind up forcing tracks to go to a single non-profit-center ADW approach which in turn could facilitate lower direct takeout.

OTOH if non-whale handle ever expands to the point where lower direct takeout would undeniably fuel increases in net handle, then everybody will jump on the bandwagon.

[Cangamble]

No, racing makes money from what people BET, not what they LOSE.

Lowering takeout (as you mention) in theory allows people to bet more over the long term because their money will last longer before they have lost whatever bankroll their comfort level allows. And therefore, in theory racing would make more money because people are betting more.

This is the foundation of the lower takeout argument. While the theory is sound, in several instances where tracks have tried lowering takeout, it did not result in an sufficient enough increase in betting to offset the revenue loss to the track. That makes it harder for the tracks to try it again.

I have always maintained that lowering takeout will only work in a vacuum. Every track needs to do it. If only one, or a few tracks do, even price sensitive customers (like those of us on this board) will still play tracks with higher takeout when betting opportunities occur. This in effect penalizes the tracks that lowered their takeout as they won't see all the benefits (revenue increases) of the lowered takeout.

Given the current state of affairs and the unlikelyhood of all racetracks lowering their takeouts collectively, the only way I see to address the pricing issue is by rebating. As much as rebates might not be as "fair" to all customers as lowered takeout is, unless all tracks lower the takeout the theory of increased revenue over time won't work.
Though I agree that it would take tracks to collectively lower takeouts for a full benefit to show. If a group of say 5 or 6 did, it would be enough to show the industry and cause a change in mindset.

However, it is what people inevitbly collectively lose that equals what the racing industry makes.
If you have 10,000 to lose a year on gambling, you may win or lose x amount on lottery tickets, x amount on sports betting, win or lose x amount on horse racing etc.
You are most likely to allocate most of your funds to where you are lasting longer.
How much is collectively bet really doesn't matter, though mathematically it always works out to betting amount times collective track takeout that equals how much is made by the industry, but when dealing with a stagnant audience, which racing is more or less dealing with, the amount lost is more relevantly compared to being a product of how much the stagnant audience is willing to lose, not the takeout. Not when it is as high as it is right now.

It works that way in slots too. In slots they give the gambler the illusion that they can win especially short term and that they can last with their $100 or $200. There is an optimum amount of time that needs to be spent on the machine before gamblers are willing to up the amount they are collectively willing to spend and perhaps go to the well again.

If takeout didn't matter, why doesn't slots have a 20% takeout level? Why is it 8-11%?

Why is blackjack around 2%?

There has to be room for people breaking even and perhaps winning in orderr to create a buzz and get new money or get all the gamblers mad money.

[startngate]

Though I agree that it would take tracks to collectively lower takeouts for a full benefit to show. If a group of say 5 or 6 did, it would be enough to show the industry and cause a change in mindset.

However, it is what people inevitbly collectively lose that equals what the racing industry makes.
If you have 10,000 to lose a year on gambling, you may win or lose x amount on lottery tickets, x amount on sports betting, win or lose x amount on horse racing etc.
You are most likely to allocate most of your funds to where you are lasting longer.
How much is collectively bet really doesn't matter, though mathematically it always works out to betting amount times collective track takeout that equals how much is made by the industry, but when dealing with a stagnant audience, which racing is more or less dealing with, the amount lost is more relevantly compared to being a product of how much the stagnant audience is willing to lose, not the takeout. Not when it is as high as it is right now.

It works that way in slots too. In slots they give the gambler the illusion that they can win especially short term and that they can last with their $100 or $200. There is an optimum amount of time that needs to be spent on the machine before gamblers are willing to up the amount they are collectively willing to spend and perhaps go to the well again.

If takeout didn't matter, why doesn't slots have a 20% takeout level? Why is it 8-11%?

Why is blackjack around 2%?

There has to be room for people breaking even and perhaps winning in orderr to create a buzz and get new money or get all the gamblers mad money.I'm sorry, it's late and I've just come off a 3 hour drive, but I must be missing something in your post.

On one hand you are saying it doesn't matter what takeout is because a track's real revenue is based on what people lose. On the other hand you are saying takeout matters because slots and blackjack have a much lower takeout than racing.

If I go to the track with $100, and make a $100 show bet on a horse which doesn't hit the board, I have lost $100. The track's revenue in Ohio is $18 (18% takeout on WPS).

If I win my bet and the horse pays $2.10 and I take the $105 and go home, the track gets the same $18.

If I win my bet and the horse pays $2.10 and then I place a $105 show bet in the following race and that horse doesn't hit the board, I have lost the same $100. The track's revenue is now $36.90 ($205 x 18%). Same loss to me, more revenue for the track.

If I keep winning and betting back some or all of the money, but eventually tap out, I've still just lost the $100. The track has collected revenue on every bet I've made.

Based on the above, I still have to argue that how much is collectively bet really does matter, and this is precisely why lowing takeout will increase handle (in theory). Churn is what drives revenue, and if the customer can make more bets before losing their entire bankroll, the track makes more money (same thing with slots, which is basically a pari-mutuel game with takeout too).

Or, if the track could fingure out a way to make everyone a winner ... well that would work too ... :D

[chickenhead]

On one hand you are saying it doesn't matter what takeout is because a track's real revenue is based on what people lose. On the other hand you are saying takeout matters because slots and blackjack have a much lower takeout than racing.

If I keep winning and betting back some or all of the money, but eventually tap out, I've still just lost the $100. The track has collected revenue on every bet I've made.

The tracks make exactly the net losses of everyone added together, regardless of churn or takeout. If there were only 1000 horseplayers on the planet and they each had $10, if they played long enough, the track would make $10,000. It's physically impossible for them to make more.

If you had a high takeout, the churn will be less. If you had a low takeout, the churn will be higher. In both cases, the track will eventually make the same amount of money, assuming the players play.

In the real world, with a high takeout, the players won't play. They'll do something else. With a low takeout, they will play. It's less about churn than about net inflows of money into the pool.

The money the track is taking needs to be replaced with new money continually.

[startngate]

The tracks make exactly the net losses of everyone added together, regardless of churn or takeout. If there were only 1000 horseplayers on the planet and they each had $10, if they played long enough, the track would make $10,000. It's physically impossible for them to make more.

If you had a high takeout, the churn will be less. If you had a low takeout, the churn will be higher. In both cases, the track will eventually make the same amount of money, assuming the players play.In theory, you are correct, however, in reality people make one bet and tap out their $10, or hit big and go home. Even over time, there will still be net winners and net losers. So while the maximum the track could make is $10,000 in your example, the tracks will always be making less than that theoretical maximum because not all of the players will bet until their $10 is gone. Those that go home with a profit take that money out of the revenue stream.

In the real world, with a high takeout, the players won't play. They'll do something else. With a low takeout, they will play. It's less about churn than about net inflows of money into the pool.

The money the track is taking needs to be replaced with new money continually.I agree that lower takeout = more play, and that's what will increase track revenue. I also believe that lower takeout creates more churn, which gets the track closer to the theoretical maximum revenue they could receive.

[Cangamble]

Remember, I'm talking collectively here. Right now, racing has pretty much a fixed population who will lose around X amount of dollars every year collectively no matter what the takeout is.
The only way to get the X amount to go up is to attract new money, which will come from new players, and/or from existing players who wind up allocating more money towards horse race betting because they think they can last longer and may feel they are closer to breaking even if they do things a little differently.
Right now, Joe Gambler may have $5000 devoted to be lost on horse racing in a season. He may not bet as much as he wants whenever he wants and might even sit out for a few weeks as well taking his attention away from horse racing. The average Joe Gambler will get to make $25000 in bets for the year.
Now lets say takeouts were 10% instead of 20%. Now Joe starts realizing he is losing slower, and has streaks where he seems to have the game beat. He'll bet more often, maybe larger, and it is guaranteed he'll bet the $50,000, and since he'll see he is only down $5,000 he will most likely start devoting more time to reduce his ROI. He will be spending more time picking horses, and probably get family members and friends involved at various points (potential new customers and money) as well.
And most probably he'll change his loss maximum to $7,500 or $10,000 because of the added amount of enjoyment he gets from being able to last longer.

I think this is more than just "in theory."

[DeanT]

Good synopsis CG.

It's like stock trading. At $300 commission a trade how many trades did you make in a day? You bought and held. You might be able to devote only four trades a year as $1200 was your "loss threshold" on commissions. Now you can make 120 trades a year for the same $1200.

[Cangamble]

Good synopsis CG.

It's like stock trading. At $300 commission a trade how many trades did you make in a day? You bought and held. You might be able to devote only four trades a year as $1200 was your "loss threshold" on commissions. Now you can make 120 trades a year for the same $1200.
To go a step further, you would be devoting more time to it, and assuming one has friends and family, to know you is to know where your enjoyment comes from.
You are bound to attract a friend or family member who sees what you are doing and that person starts doing it themselves.

[ezrabrooks]

The tracks make exactly the net losses of everyone added together, regardless of churn or takeout. If there were only 1000 horseplayers on the planet and they each had $10, if they played long enough, the track would make $10,000. It's physically impossible for them to make more.

If you had a high takeout, the churn will be less. If you had a low takeout, the churn will be higher. In both cases, the track will eventually make the same amount of money, assuming the players play.

In the real world, with a high takeout, the players won't play. They'll do something else. With a low takeout, they will play. It's less about churn than about net inflows of money into the pool.

The money the track is taking needs to be replaced with new money continually.

Chick, excellent post. Good job of explaining the process. I guess the real world question is whether lower take out will increase the 'new money' to make up, and exceed, the current take out on the 'old money'. I understand that in theory is should, but?

[Cangamble]

Chick, excellent post. Good job of explaining the process. I guess the real world question is whether lower take out will increase the 'new money' to make up, and exceed, the current take out on the 'old money'. I understand that in theory is should, but?
The old money will still be lost during the course of a year. People will be able to bet more money and/or on more races.
New money may be added by the regular players, but most importantly, new players and new money should be attracted if the takeout is reduced enough.

[ezrabrooks]

The old money will still be lost during the course of a year. People will be able to bet more money and/or on more races.
New money may be added by the regular players, but most importantly, new players and new money should be attracted if the takeout is reduced enough.

I understand your theory, and can't disagree with what your are saying, but don't think it is a slam dunk to work that efficiently in the real world. I really thought the Ellis and Maryland experiments last year would be eye openers, but they weren't.

[DeanT]

I understand your theory, and can't disagree with what your are saying, but don't think it is a slam dunk to work that efficiently in the real world. I really thought the Ellis and Maryland experiments last year would be eye openers, but they weren't.

Startngate explained that. Their simulcast money went up, but people bet into 31% Penn National pools with the savings. Churn is stifled.

Look no further than Australia. They have a mandated rake of 16%. If at the end of the year effective rakes are higher than 16% the money is put back into the business by offering price breaks. They sometimes have whole meets with takeout breaks. One was a 5% Daily double, one is a 2% superfecta. The one that especially catches fire is a pick 4 with no rake. Yep, you read that right - no rake. When they offered that the last time, the pick 4 pool (which usually has $200,000 in it) came in at a pool size of over $3,000,000.

We have lived with high rakes for so long (our blended rakes are over 21%) that we seem to think lowering them is impossible. It's not. Other jurisdictions do it, and do it very successfully every day. It's not theory, it's reality.

[chickenhead]

Chick, excellent post. Good job of explaining the process. I guess the real world question is whether lower take out will increase the 'new money' to make up, and exceed, the current take out on the 'old money'. I understand that in theory is should, but?

I think the answer is eventually, yes. There is a point of diminishing returns somewhere, but I don't think we're very close to it. We can just look at the normal business world. Does working on thin margins justify working on thin margins? Amazon and WalMart say yes, but it takes time...but eventually you get a larger and larger share of whats available.

[ezrabrooks]

Startngate explained that. Their simulcast money went up, but people bet into 31% Penn National pools with the savings. Churn is stifled.

Look no further than Australia. They have a mandated rake of 16%. If at the end of the year effective rakes are higher than 16% the money is put back into the business by offering price breaks. They sometimes have whole meets with takeout breaks. One was a 5% Daily double, one is a 2% superfecta. The one that especially catches fire is a pick 4 with no rake. Yep, you read that right - no rake. When they offered that the last time, the pick 4 pool (which usually has $200,000 in it) came in at a pool size of over $3,000,000.

We have lived with high rakes for so long (our blended rakes are over 21%) that we seem to think lowering them is impossible. It's not. Other jurisdictions do it, and do it very successfully every day. It's not theory, it's reality.

Missed S-Gate's post on the Ellis to Penn episode. Not sure how that could be tracked, but he seems to be pretty up on such things. Personally I find it hard to believe that smart players would go to Ellis, to bet into a lower take, and then turn right around and play more into the Penn pools, with its excessive take. Did the same thing happen in Maryland?

How do you have a mandated 16% take in Australia, and then a effective take higher than that? I am for a lower take out, and have never said anything to contrary. I guess we just differ on the term reality

[Cangamble]

Missed S-Gate's post on the Ellis to Penn episode. Not sure how that could be tracked, but he seems to be pretty up on such things. Personally I find it hard to believe that smart players would go to Ellis, to bet into a lower take, and then turn right around and play more into the Penn pools, with its excessive take. Did the same thing happen in Maryland?

How do you have a mandated 16% take in Australia, and then a effective take higher than that? I am for a lower take out, and have never said anything to contrary. I guess we just differ on the term reality
Anyone who hit an Ellis Park Win 4, most likely in all probability bet the proceeds back by either betting more on other simulcast plays or eventually bet more than they would have for the year because of the extra money made thanks to the lower takeout.

[ezrabrooks]

Anyone who hit an Ellis Park Win 4, most likely in all probability bet the proceeds back by either betting more on other simulcast plays or eventually bet more than they would have for the year because of the extra money made thanks to the lower takeout.

That is not what I was asking... I was questioning the fact that these smart, price intensive players, were coming to Ellis to bet into a low take, and then, all of a sudden, based on the availability of the bargain at Ellis, were plunging their money into the over priced Penn pools, thereby negating what Ellis was trying to accomplish. Just doesn't make sense, but I will admit my 'real world' is pretty small.

Once again, I am not disagreeing with your premise, I just have trouble with the claim as being fact.

[DeanT]

It was a euphemism EZ. No one knows where the savings and churn went, howeve it went somewhere. If a guy hits a pick 4 at Ellis in Twinspires and gets back $1300 instead of $1100 back he does not take the $200 savings and stick it in a sock.

Laurel simulcast went up. The ELP pick 4 had $40000 average pools instead of $17000. Whatever the case, lower prices have made people bet more. In IRG, in Pinnacle, at Betfair, at Ellis, in Australia, in Hong Kong. Take your pick.

[ezrabrooks]

It was a euphemism EZ. No one knows where the savings and churn went, howeve it went somewhere. If a guy hits a pick 4 at Ellis in Twinspires and gets back $1300 instead of $1100 back he does not take the $200 savings and stick it in a sock.

Laurel simulcast went up. The ELP pick 4 had $40000 average pools instead of $17000. Whatever the case, lower prices have made people bet more. In IRG, in Pinnacle, at Betfair, at Ellis, in Australia, in Hong Kong. Take your pick.

Euphemism? Sorry, I took your statement as being literal, especially since you were some what quoting another post. Savvy players, who would be price conscience, wouldn't just throw profits away, and make the same plays as normal, and would come back to play in the same low take out pools. In any event, it didn't work at Ellis or Maryland, as the handle didn't support these noble experiments.

Was the mandated Australian example of take out a euphemism also?

[DeanT]

I'll let the others respond if they wish to. Good luck at the races.

[Cangamble]

Euphemism? Sorry, I took your statement as being literal, especially since you were some what quoting another post. Savvy players, who would be price conscience, wouldn't just throw profits away, and make the same plays as normal, and would come back to play in the same low take out pools. In any event, it didn't work at Ellis or Maryland, as the handle didn't support these noble experiments.

Was the mandated Australian example of take out a euphemism also?
Price sensitive bettors will be attracted to have played the Ellis Park Win 4's, but after they cash and the dust clears, the money as Dean said won't go into stocks.
It might go whatever tracks the individual winners like the best for whatever reasons. And lets not forget, not just price sensitive players cashed the bets on the win 4's.
Maybe a few people took their winnings and deposited it with PTC and enjoyed way more bang for the buck.
But the reality is that the extra winnings went back into the pools eventually.

[ezrabrooks]

Con and Dean, Bottom line...we agree on lower take out. What happens in such an event is what I am not sure of, and just not as confident as you. No problem in that...is there?

[Cangamble]

Con and Dean, Bottom line...we agree on lower take out. What happens in such an event is what I am not sure of, and just not as confident as you. No problem in that...is there?
No problem. Have you ever received half decent rebates? I think those who have received them know the scoop.