How much does your ADW really make off of you?

[adwplayingfool]

Always wondered this, hoping someone that knows the inner workings can answer this for me.

I live in virginia so as I understand there is a 10% source market fee.

I have some understanding of how takeout works with 17% or so for WPS depending on track all the way up to 25% + for exotics. Does the ADW keep the entire amount of your takeout and just pay a flat fee to the track to allow wagering on that track for all their clients or do they give a percentage per bet and then keep a percentage?

Example:

I bet 10k a month on exotics $2500 or so would be the takeout 10% of the 10k I bet goes to VA for source market which is $1000 leaving the ADW with $1500 takeout of my wagers as their profit because they just pay a one time fee to tracks to get the signal.

or

I bet 10k a monthin exotics $2500 is takeout VA gets $1000 then $1500 is divided up 50/50 or whatever it is between track the race takes place at and ADW leaving say $750 for ADW and $750 for the tracks I wager at......

I hope I have been somewhat clear as to what I am asking and someone can answer it for me! Thanks!

[lamboguy]

Always wondered this, hoping someone that knows the inner workings can answer this for me.

I live in virginia so as I understand there is a 10% source market fee.

I have some understanding of how takeout works with 17% or so for WPS depending on track all the way up to 25% + for exotics. Does the ADW keep the entire amount of your takeout and just pay a flat fee to the track to allow wagering on that track for all their clients or do they give a percentage per bet and then keep a percentage?

Example:

I bet 10k a month on exotics $2500 or so would be the takeout 10% of the 10k I bet goes to VA for source market which is $1000 leaving the ADW with $1500 takeout of my wagers as their profit because they just pay a one time fee to tracks to get the signal.

or

I bet 10k a monthin exotics $2500 is takeout VA gets $1000 then $1500 is divided up 50/50 or whatever it is between track the race takes place at and ADW leaving say $750 for ADW and $750 for the tracks I wager at......

I hope I have been somewhat clear as to what I am asking and someone can answer it for me! Thanks!they make an awful lot, they make the breakage, something that most don't know about.

[adwplayingfool]

I am a young guy who started playing around 16 I am now 24 and only in the past 2 years or so have started trying to learn and understand the game a bit more rather than playing wild plays looking for a bucket of gold, as my involvement has grown so has my play and I see it continuing to rise so I figure it is time to figure out what I am paying for what I get in return which is basically nothing haha. few $10 plays at twinspires every so often and .80cents at youbet every few days.

[Ian Meyers]

[QUOTE=adwplayingfool]Always wondered this, hoping someone that knows the inner workings can answer this for me.

I live in virginia so as I understand there is a 10% source market fee. That is correct. 10% on handle is paid to CNL. In addition to the host fee paid(see below)

I have some understanding of how takeout works with 17% or so for WPS depending on track all the way up to 25% + for exotics. Does the ADW keep the entire amount of your takeout and just pay a flat fee to the track to allow wagering on that track for all their clients or do they give a percentage per bet and then keep a percentage?


ADW's keep the entire take-out amount. ADW's pay a pre-determined host fee, a percentage of your handle on that track. That percentage varies by track but will be the same at a given track regardless of pool played.

[InTheRiver68]

Breakage goes both ways. If you have negative break, it's the ADWs (or whoever is accepting the wagers) that eats it.

ADWs also have to pay local taxes. Of course, they choose locales to be based in that are tax-friendly. And it's likely that have to pay tote interface fees, and a few other fees that we're not thinking of.

- InTheRiver68

[Pace Cap'n]

Breakage goes both ways. If you have negative break, it's the ADWs (or whoever is accepting the wagers) that eats it.



- InTheRiver68

Breakage is always rounded down.

[FenceBored]

[QUOTE] That is correct. 10% on handle is paid to CNL. In addition to the host fee paid(see below)



ADW's keep the entire take-out amount. ADW's pay a pre-determined host fee, a percentage of your handle on that track. That percentage varies by track but will be the same at a given track regardless of pool played.

If an ADW pays a percentage of handle to the host track then it doesn't keep 100% of the take-out. One or the other.

[FenceBored]

Always wondered this, hoping someone that knows the inner workings can answer this for me.

I live in virginia so as I understand there is a 10% source market fee.

I have some understanding of how takeout works with 17% or so for WPS depending on track all the way up to 25% + for exotics. Does the ADW keep the entire amount of your takeout and just pay a flat fee to the track to allow wagering on that track for all their clients or do they give a percentage per bet and then keep a percentage?

Example:

(A) I bet 10k a month on exotics $2500 or so would be the takeout 10% of the 10k I bet goes to VA for source market which is $1000 leaving the ADW with $1500 takeout of my wagers as their profit because they just pay a one time fee to tracks to get the signal.

or

(B) I bet 10k a monthin exotics $2500 is takeout VA gets $1000 then $1500 is divided up 50/50 or whatever it is between track the race takes place at and ADW leaving say $750 for ADW and $750 for the tracks I wager at......

I hope I have been somewhat clear as to what I am asking and someone can answer it for me! Thanks!

(B) is closer to the mark. If you bet 10k in exotics on a non-VA track, of the $2500 takeout the source market fee eats $1k, the host fee (let's just use a round 4 pct of handle some are higher, some are lower) is $400 [leaving $1100]. Then there are taxes and fees from the state in which the ADW hub operates (mainly OR [up to 1% of handle]) and the state in which the host track operates, which vary substantially. With a WPS rate of 17% the source market fee and the host fee eat up 14 of the 17% before we even get to state taxes and the ADW's expenses. That makes it look like WPS are a money loser for ADWs in a source market state. Maybe that's why TVG is pimping the P6 and P4 all the time.

[Ian Meyers]

[QUOTE=Ian Meyers]

If an ADW pays a percentage of handle to the host track then it doesn't keep 100% of the take-out. One or the other.


I meant in terms of how it's figured. The takeout belongs to the guest. The guest pays the host. That sounds like its netted, but technically it is not. There are instances where a contract reads that the guest pays the host a simulcast fee within X # of days and then host remits takeout revenue and breakage back to the guest within Y # of days. I was trying to clarify misconception that the guest keeps a fixed percentage and the host keeps a fixed percentage.

[rrbauer]

Breakage goes both ways. If you have negative break, it's the ADWs (or whoever is accepting the wagers) that eats it.

ADWs also have to pay local taxes. Of course, they choose locales to be based in that are tax-friendly. And it's likely that have to pay tote interface fees, and a few other fees that we're not thinking of.

- InTheRiver68

Breakage is purely a one-way street. Go over to www.trackthieves.com and educate yourself.

[Track Collector]

Breakage goes both ways. If you have negative break, it's the ADWs (or whoever is accepting the wagers) that eats it.

ADWs also have to pay local taxes. Of course, they choose locales to be based in that are tax-friendly. And it's likely that have to pay tote interface fees, and a few other fees that we're not thinking of.

- InTheRiver68

You used the wrong term here. What I think you intended to say is in regard to "minus pools". With "minus pools" you are correct that the generally accepted business practice is the individual site (track and ADWs) both cover their own accepted wagers.

[adwplayingfool]

seems like a lot more complicated than I expected. Now I know why rewards are so low for VA residents, what are rewards like for non source market states? Is the system set to give higher amounts based on state or does everyone get the same and the ADW's just take a hit on states like VA?

[Ian Meyers]

You used the wrong term here. What I think you intended to say is in regard to "minus pools". With "minus pools" you are correct that the generally accepted business practice is the individual site (track and ADWs) both cover their own accepted wagers.

In the settlement process minus pools are referred to as "negative breakage" (e.g. if the calculated payoff on a horse is $1.52 and the actual payoff is $2.10, the host is responsible for the $1.52 and the guest has to make up the other 58 cents). Positive breakage is the calculated payoff on a horse less the actual payoff. In other words if a horse should pay $4.19 that is rounded down to $4.00, the $4 payoff belongs to the winning bettor and the 19 cents goes to the guest site that takes the wager. In some states the sum of positive and negative breaks (if greater than zero) goes back to the state regulatory body.

[startngate]

seems like a lot more complicated than I expected. Now I know why rewards are so low for VA residents, what are rewards like for non source market states? Is the system set to give higher amounts based on state or does everyone get the same and the ADW's just take a hit on states like VA?
When it comes to rebates it's a zero sum game. So, if you live where the outlet is required to pay source market fees, you are going to get less of a rebate. If you are playing a track with a high host fee or low takeout, you will get a smaller rebate. A rebate shop is not going to eat the higher fees and lose money on every bet you make.

The outlet basically decides what % of total handle it needs to retain to pay expenses and still leave a profit, and returns whatever is left to the customer in the form of a rebate. This is blended across the entire customer base and tracks carried, so with most rebate shops the % of the rebate will vary somewhat based on your level of play.

Having said that, many rebate shops are not required to pay source market fees in all jurisdictions, and you can certainly adjust your play to avoid the higher host fee tracks (like TrackNet) to maximize your rebate.

[rrbauer]

When it comes to rebates it's a zero sum game. So, if you live where the outlet is required to pay source market fees, you are going to get less of a rebate. If you are playing a track with a high host fee or low takeout, you will get a smaller rebate. A rebate shop is not going to eat the higher fees and lose money on every bet you make.


How can it be a "zero-sum game" when some horseplayers get zero rebate, some get a couple percent and some get a couple more percent?

[DeanT]

IMO, this is a critical time for players. Rebates are getting squeezed - not for large players, but for regular ones. In a year or two I can envision ADWs that currently offer lower takeout to medium or smaller players unable to give but barely a pittance, while larger players will remain virtually untouched.

And for those of us who hope for lower takeout instead to combat loss of rebates for regular players, well the California situation should be an eye-opener - takeouts are on the way up, not down.

JMO, but this next year is critical to the long term survival of the game. If the price hikers and crowder-outs succeed, racing will go down the tubes.

[Dave Schwartz]

Large players are getting squeezed as well.

The host fees have diminished the typical rebate by 4% in the last 3 years.

[Jeff P]

Everywhere you look it's almost as if tracks are doing their own version of a scorched earth campaign targeted at players... one player at a time... one track signal at a time.

Yesterday, a friend of mine forwarded an email to me received from Youbet as a result of anti-player pressure from Tracknet:

Re: Tracknet Rebate Reduction
From: "Julio Quezada"
To: "Michelle" xxxxxxxxx@yahoo.com

Received: 01-18-2010 04:46 PM

Dear Michelle,

We tried calling you a few times by phone but were unable to reach you.

Due to circumstances beyond our control we had to reduce your rebates on the following Tracknet tracks down to 2% wps and 2% exotics . All other tracks you will keep your same rebate. This reduction was brought about by Magna and Churchill who supervise the Tracknet tracks and it effects all OTB’s. There is an exception for all customers who wager over a million dollars a year so if you think you might hit that number please call us.

Please give me a call or respond to this e-mail if you have any questions.

Julio Quezada
Player Services
Work# (818) 668-2223
Toll Free 888-968-2388 x2223
E-mail: xxxxxxx@youbet.com


If players being squeezed is something that bothers you.... and you are not yet a HANA member:

HANA Sign Up Link
http://www.jcapper.com/HANA/SignUp/HANASignUpForm.asp?source=0



-jp

.

[DeanT]

17% year over year growth rate for ADW's. The ADWs who are sucking business away from Twinspires are beating them on one thing and one thing only: Price. if Tracknet/TS can crush the small ADW's and not allow them to offer a lower price, they scoop up their customers at a higher margin.

TS: $400M at 20% takeouts - 80m in revenue
Other ADWs offering a lower price, say another 400M in handle at say 12% take (lower prices there) = $48M

So, let's say there is $800M handle up for grabs. If TS takes away the $400M from other ADWs and taxes them at 20%, they increase their bottom line (for year one).

For year two or three, the $800M is not $800M any longer, it might be $600M because handle goes down when prices are hiked, but TS/Tracknet charges 20% on the $600M and makes more money.

So handle goes down, and continues to go down, but they take more of the shrinking pie and it does ok for their bottom line.

Forward thinking, good for racing? No, it is horrible for racing and horseplayers. But they do not seem to care because they will get more revenue.

Nothing new here, Rich and many others have said this time and time again over the past two years. This has been TS/Tracknets vision all the time, we are finally seeing it come to fruition.

Regardless, if you play less than $1M a year you will be roadkill.

All my opinion, and I welcome criticism of it. I would like to know if there is any other reasonable explanation for this.

[startngate]

How can it be a "zero-sum game" when some horseplayers get zero rebate, some get a couple percent and some get a couple more percent?It's a zero sum game because the rebater sets up its program to retain a fixed % of handle for profit, pays its expenses, and then rebates the rest.

As expenses go up in whatever form (host fees, source market fees, taxes, etc), rebates go down. The rebater simply passes the increase in expenses on to the player, which (as I'm sure you already realize) makes any host fee increase bad for the rebated player. The rebater is not going to eat those additional fees, which was the question I responded to.

Would you prefer I call it a 'simple math game'?

[Track Collector]

Regardless, if you play less than $1M a year you will be roadkill.


Players (at least as of today) who wager less than $1MD per year still have options IF they are willing to give up on the TrackNet content and learn to play other tracks. Those other tracks may not be as well known, but there are still more of them than there are TrackNet tracks. And there are still places that give a decent rebate even if you are not a $1MD per year player.

It may be completely foolish thinking, but would it not be interesting if all the other non-TrackNet tracks organized together with the mindset of offering LOWER signal rates as a means to win players over to them, kind of the opposite of what TrackNet is doing. Their reward would have to be in gaining a bigger piece of the pie, and maybe even grow the pie.

[Horseplayersbet.com]

Players (at least as of today) who wager less than $1MD per year still have options IF they are willing to give up on the TrackNet content and learn to play other tracks. Those other tracks may not be as well known, but there are still more of them than there are TrackNet tracks. And there are still places that give a decent rebate even if you are not a $1MD per year player.

It may be completely foolish thinking, but would it not be interesting if all the other non-TrackNet tracks organized together with the mindset of offering LOWER signal rates as a means to win players over to them, kind of the opposite of what TrackNet is doing. Their reward would have to be in gaining a bigger piece of the pie, and maybe even grow the pie.
This is not a bad idea, and it looks like it is even happening at least in the starting stages in Ontario with harness tracks other than Woodbine and Mohawk:

http://www.standardbredcanada.ca/news/12-21-09/major-national-wagering-initiative-announced.html

[DeanT]

Players (at least as of today) who wager less than $1MD per year still have options IF they are willing to give up on the TrackNet content and learn to play other tracks. Those other tracks may not be as well known, but there are still more of them than there are TrackNet tracks. And there are still places that give a decent rebate even if you are not a $1MD per year player.

It may be completely foolish thinking, but would it not be interesting if all the other non-TrackNet tracks organized together with the mindset of offering LOWER signal rates as a means to win players over to them, kind of the opposite of what TrackNet is doing. Their reward would have to be in gaining a bigger piece of the pie, and maybe even grow the pie.
Hi TC,

"If" they dont bet Tracknet is the key to that, imo. I think Tracknet and other high take places are depending on players to bet into tracks that give a good rebate, then with the rebate bet their tracks. It is the classic tragedy of the commons problem, and high take tracks benefit from others lowering prices, while they keep theirs high.

[rrbauer]

It's a zero sum game because the rebater sets up its program to retain a fixed % of handle for profit, pays its expenses, and then rebates the rest.

As expenses go up in whatever form (host fees, source market fees, taxes, etc), rebates go down. The rebater simply passes the increase in expenses on to the player, which (as I'm sure you already realize) makes any host fee increase bad for the rebated player. The rebater is not going to eat those additional fees, which was the question I responded to.

Would you prefer I call it a 'simple math game'?

Call it what you like...it IS NOT A ZERO-SUM GAME.

[Pace Cap'n]

In a zero-sum game, the amount the winners win is exactly the same as the amount the losers lose.

This is not the case in horseracing, due to takeout.

Say you and your buddy go to the races, and happen to be the only two folks there. You each have $100. As luck would have it, the next race is a match race, and you each pick a different horse, and bet your entire bankrolls. Your horse loses, and you are out a hundred bucks. Your buddy only gets to collect around $80, after the track takes its share. Not zero-sum.

[lamboguy]

Everywhere you look it's almost as if tracks are doing their own version of a scorched earth campaign targeted at players... one player at a time... one track signal at a time.

Yesterday, a friend of mine forwarded an email to me received from Youbet as a result of anti-player pressure from Tracknet:




If players being squeezed is something that bothers you.... and you are not yet a HANA member:

HANA Sign Up Link
http://www.jcapper.com/HANA/SignUp/HANASignUpForm.asp?source=0



-jp

.what is interesting here is that there are a few shops that still give out the "real" million dollar rates. churchill 6 1/2 wps, 10% exotics. higher on gulfstream. they have not been effected by the tracknet rate change to date. i was promised a retroactive rate change to the higher million dollar rates over a year ago and never got them. i stopped playing those tracks waiting for the change and have not got it, and at this point i doubt that i will ever get it from them. i doubt that when churchill does take over UBET that i will get it either unless i want to do busines at their preferred shops. the people that i have underneath me have basically given up tracknet tracks, but they still like to play with the UBET interface for all the others.

[Pacingguy]

Aren't there any anti-trust issues involved here?

[startngate]

In game theory (http:///wiki/Game_theory) and economic theory (http:///wiki/Economic_theory), zero-sum describes a situation in which a participant's gain or loss is exactly balanced by the losses or gains of the other participant(s). If the total gains of the participants are added up, and the total losses are subtracted, they will sum to zero. Zero-sum can be thought of more generally as constant sum where the benefits and losses to all players sum to the same value of money (or utility (http:///wiki/Utility)). Cutting a cake (http:///wiki/Cake_cutting) is zero- or constant-sum, because taking a larger piece reduces the amount of cake available for others. Since I was responding to the poster of the question about what happens to rebates in the face of a source market fee, I was talking about the distribution of the takeout (where the rebate comes from), not the distribution of the entire betting pool.

In that context, all the participants include the customer receiving the rebate, the outlet, the host track, the source market fee recipient (if any), and any taxing authority involved. The cake example from Wikipedia is a perfect explaination of the point I am trying to make. As the other participants take bigger pieces of the cake (takeout) the rebated player will be left with a smaller piece.

Lowering takeout would also lower the rebate amount, however the effective takeout rate (takeout-rebate) for the rebated player will end up being the same if the other participants in the takeout keep their shares the same. But of course lowering takeout will likely result in greater profits for the rebated player, and has the added benefit of helping the non-rebated player as well.

Call it what you will, but that doesn't change the math, or the theory.
what is interesting here is that there are a few shops that still give out the "real" million dollar rates. churchill 6 1/2 wps, 10% exotics. higher on gulfstream. they have not been effected by the tracknet rate change to date.Exactly. And when TrackNet decides to hit those outlets with the increase (assuming they can), the rebates will go down at those outlets too. Assuming the takeout rates stay the same, any increase in host fees (or any other expenses) will negatively impact the rebated player. That's one of the reasons I was also so vocal against the THG's efforts, and why the industry's current attempts to grab a bigger piece of a smaller pie will ultimately hurt the industry instead of helping it.

[lamboguy]

Since I was responding to the poster of the question about what happens to rebates in the face of a source market fee, I was talking about the distribution of the takeout (where the rebate comes from), not the distribution of the entire betting pool.

In that context, all the participants include the customer receiving the rebate, the outlet, the host track, the source market fee recipient (if any), and any taxing authority involved. The cake example from Wikipedia is a perfect explaination of the point I am trying to make. As the other participants take bigger pieces of the cake (takeout) the rebated player will be left with a smaller piece.

Lowering takeout would also lower the rebate amount, however the effective takeout rate (takeout-rebate) for the rebated player will end up being the same if the other participants in the takeout keep their shares the same. But of course lowering takeout will likely result in greater profits for the rebated player, and has the added benefit of helping the non-rebated player as well.

Call it what you will, but that doesn't change the math, or the theory.
Exactly. And when TrackNet decides to hit those outlets with the increase (assuming they can), the rebates will go down at those outlets too. Assuming the takeout rates stay the same, any increase in host fees (or any other expenses) will negatively impact the rebated player. That's one of the reasons I was also so vocal against the THG's efforts, and why the industry's current attempts to grab a bigger piece of a smaller pie will ultimately hurt the industry instead of helping it.i am glad someone else understands me here. if they increase the rates at RGS or ELITE those players will not play tracknet either. if they don't play then the lower or no rebate player won't play either. what most peple look at before placing a bet is the amount of the total handle. they want to know if they risk their money that they can win something in return. the rebate or track take is secondary to those people. the industry makes more money on the people that get low rebates but need both to exist these days,

[InTheRiver68]

You used the wrong term here. What I think you intended to say is in regard to "minus pools". With "minus pools" you are correct that the generally accepted business practice is the individual site (track and ADWs) both cover their own accepted wagers.
I used the right term, but I concede that most people don't see it as the right term. Ian is correct, in the settlement process, "minus pools" (the term many players use) and "negative break" both refer to a situation where the host track's state-mandated minimum payout price ($2.10 or $2.20 for a $2 wager) is higher than the actual, calcuated payout price, and the site that accepted the wager must make up the difference. The money that has to be added into the net pool to make up the difference shows up as a negative in the breakage pool, indicating money owed by the site...hence the term "negative break."

Perhaps I should have said "Breakage *cuts* both ways."

- InTheRiver68

[Horseplayersbet.com]

what is interesting here is that there are a few shops that still give out the "real" million dollar rates. churchill 6 1/2 wps, 10% exotics. higher on gulfstream. they have not been effected by the tracknet rate change to date. i was promised a retroactive rate change to the higher million dollar rates over a year ago and never got them. i stopped playing those tracks waiting for the change and have not got it, and at this point i doubt that i will ever get it from them. i doubt that when churchill does take over UBET that i will get it either unless i want to do busines at their preferred shops. the people that i have underneath me have basically given up tracknet tracks, but they still like to play with the UBET interface for all the others.
That is a really interesting observation. And it seems to be backed up by fact.
Fairgrounds is getting clobbered for example:


NEW ORLEANS - The betting handle on races at the ongoing Fair Grounds meet continues to decline from last meet. All-sources daily handle dropped 28 percent in December compared to December 2008, coming on the heels of a 31 percent drop in November.

http://www.drf.com/news/article/110146.html

[Jeff P]

posted by Startngate:
Lowering takeout would also lower the rebate amount, however the effective takeout rate (takeout-rebate) for the rebated player will end up being the same if the other participants in the takeout keep their shares the same. But of course lowering takeout will likely result in greater profits for the rebated player, and has the added benefit of helping the non-rebated player as well.

and...

Exactly. And when TrackNet decides to hit those outlets with the increase (assuming they can), the rebates will go down at those outlets too. Assuming the takeout rates stay the same, any increase in host fees (or any other expenses) will negatively impact the rebated player. That's one of the reasons I was also so vocal against the THG's efforts, and why the industry's current attempts to grab a bigger piece of a smaller pie will ultimately hurt the industry instead of helping it.

Agree 100% :ThmbUp: :ThmbUp:



-jp

.