A Tip Or Tow On OTB

[Horseplayersbet.com]

Q.

Only in N.Y.C. can a betting operation run by government lose such massive amounts of money. It’s high time to let OTB either run more efficiently by getting rid of most of the useless patronages employees and stop taking 5% off the top; take 1 or 2% instead.

If that doesn’t work, then either sell it to the highest bidder or let it crash and burn.
— Posted by el barto
A.

The 5 percent surcharge OTB tacks onto winning wagers made in its storefront branches is one of the best reasons for betting almost anywhere else, El Barto. I would cheer its elimination. Takeout — the amount retained by the racetrack and state for purses and other expenses from each dollar wagered — ranges up to 26 percent, depending on track and bet, and makes it hard enough for horseplayers to maintain a positive ROI. As a friend lamented to me last week, some tracks’ takeout is so high that even with a 65 percent win rate, a bettor can’t get ahead. Big players will wager through services that offer rebates; the price sensitive will shop for the lowest takeout. Patrons of OTB storefronts, though, are getting hit with an exploitative and onerous charge, which unfairly whittles away at any profits they see.

http://cityroom.blogs.nytimes.com/2010/04/27/a-tip-or-two-on-otb/

[classhandicapper]

Here's an update.

Last week 35 non union workers (some of them high paid executives) were terminated. I "heard" the cost savings will be in excess of 3 million annually. That's the first step in a long series of moves that will occur over time.

The next phase of layoffs and possibly incentive retirements for those close to retirement is set to begin right after the Triple Crown races when fewer resources will be needed.

Having the 5% surcharge is actually good for the tracks because it gives some big bettors an incentive to bet at the track instead of OTB. Eliminating it totally would move even more money away from the tracks towards OTB.

As to the cost, many OTB customers are small bettors. 5% of their total handle is less than the cost of gasoline, parking, entrance, track program etc... So most small bettors are better off taking the 5% hit and not going to the track. They save money at OTB. However, even those can easily escape it by opening a phone account and betting by cell phone inside or outside the branch and hanging out there if that's what they like to do.

[Horseplayersbet.com]

Here's an update.

Last week 35 non union workers (some of them high paid executives) were terminated. I "heard" the cost savings will be in excess of 3 million annually. That's the first step in a long series of moves that will occur over time.

The next phase of layoffs and possibly incentive retirements for those close to retirement is set to begin right after the Triple Crown races when fewer resources will be needed.

Having the 5% surcharge is actually good for the tracks because it gives some big bettors an incentive to bet at the track instead of OTB. Eliminating it totally would move even more money away from the tracks towards OTB.

As to the cost, many OTB customers are small bettors. 5% of their total handle is less than the cost of gasoline, parking, entrance, track program etc... So most small bettors are better off taking the 5% hit and not going to the track. They save money at OTB. However, even those can easily escape it by opening a phone account and betting by cell phone inside or outside the branch and hanging out there if that's what they like to do.
If the customer's alternative is bet online, and even get rebates, I can't see how the 5% can be rationalized at all.

It doesn't create more customers. When customers go home with more money, they are more likely to come back quicker and more often.

The OTB is a dinosaur, and it is better to turn each one into a mini museum.

[startngate]

The vast majority of NYCOTB's problems are in these three areas:

1) The amount of money they have to pay NYRA and the State.
2) Union employees.
3) Too many locations.

For them to ever be able to succeed they need to fix those three things. With the government involved, it's a longshot.

[badcompany]

The vast majority of NYCOTB's problems are in these three areas:

1) The amount of money they have to pay NYRA and the State.
2) Union employees.
3) Too many locations.

For them to ever be able to succeed they need to fix those three things. With the government involved, it's a longshot.

4) Horrible image. The public sees it as "The place where all those bums hang out."

[classhandicapper]

4) Horrible image. The public sees it as "The place where all those bums hang out."

That's actually a huge problem.

Most of the branches are profitable, but because of the bad image it's often difficult to open new ones in attractive locations. They've also lost leases on many others that were very profitable.

[classhandicapper]

If the customer's alternative is bet online, and even get rebates, I can't see how the 5% can be rationalized at all.

It doesn't create more customers. When customers go home with more money, they are more likely to come back quicker and more often.

The OTB is a dinosaur, and it is better to turn each one into a mini museum.

Initially the 5% was in the best interests of the tracks because it helped drive big bettors AWAY from the OTB and back to the track.

Now it is more or less irrelevant because it's easy for an OTB customer to avoid it via phone account or online account, but not all do so it's a source of revenue for OTB.

The idea that dropping it would add customers or allow churn to increase enough so that OTB could make more money is a bogus. Most customers haven't got a clue about how the track take impacts them or don't care otherwise they would all already have a phone or online account. Perhaps eventually they will, but for now the 5% is still an incentive for big bettors to not play there (helping the tracks) while makings some extra money for OTB on the remaining customers.

[Robert Fischer]

the 5% is a dealbreaker

the locations/atmosphere can be bad

Just have machine(s) available for any willing bars/restaurants and let them print vouchers and make bets and cashout up to a certain amount...

[badcompany]

That's actually a huge problem.

Most of the branches are profitable, but because of the bad image it's often difficult to open new ones in attractive locations. They've also lost leases on many others that were very profitable.

Ironically, when I started posting, here, and would describe the conditions at NYCOTBs, guys from other parts of the country thought I was a troll who was here to run down horseplayers.

Of course, the NYC guys knew I was just telling it like it is.

[Robert Fischer]

Ironically, when I started posting, here, and would describe the conditions at NYCOTBs, guys from other parts of the country thought I was a troll who was here to run down horseplayers.

Of course, the NYC guys knew I was just telling it like it is.
the one i went to was a bare-bones facility, somewhat bummy, and there were fleas jumping around

all that i could deal with to an extent and just be in my own space...

then when i cashed my ticket and it hit me for 5%... GONE

[Horseplayersbet.com]

The idea that dropping it would add customers or allow churn to increase enough so that OTB could make more money is a bogus. Most customers haven't got a clue about how the track take impacts them or don't care otherwise they would all already have a phone or online account. Perhaps eventually they will, but for now the 5% is still an incentive for big bettors to not play there (helping the tracks) while makings some extra money for OTB on the remaining customers.
The overwhelming majority of slot players have no clue is the casino hold is 5%, 8% or 20%. Yet the casinos mostly keep the hold under 8% because that gives the optimum return in the long run.

A player does not have to have a clue what the takeout is, and unless they are dealing with horseplayers who go to the OTB once a year or more, the surcharge does have an affect on churn, and the player's psychology when it comes to how often they come, and how much they play as opposed to other forms of gambling and entertainment.

[riskman]

The overwhelming majority of slot players have no clue is the casino hold is 5%, 8% or 20%. Yet the casinos mostly keep the hold under 8% because that gives the optimum return in the long run.

A player does not have to have a clue what the takeout is, and unless they are dealing with horseplayers who go to the OTB once a year or more, the surcharge does have an affect on churn, and the player's psychology when it comes to how often they come, and how much they play as opposed to other forms of gambling and entertainment.

Yes, it does have an effect on churn but the majority of horseplayers at NYC OTB are unaware of it and basically do not give a crap. The players at the majority of the NYC OTB branch locations are mostly retired, unemployed, mentally disabled , alcoholic and druggies, and all around f***kups. The exception is the NYC OTB that house a restaurant or a pub. You pay a $5 admission, they give you a program and you are expected to purchase food and drinks. This keeps the riff raff out.

[jnchapel]

Wow, people arguing for a surcharge on winning wagers on the PA board?

I'm a little surprised.

It hardly matters whether the average OTB branch patron is insensitive to the 5% hit -- the principle that drives calls for reduced takeout and keeping churn up is the same. And to say that these guys are f*ckups and it doesn't matter if OTB takes advantage of these customers because they don't care and they'll keep coming back is to essentially repeat the same arguments for which people on this forum have vilified industry executives in the past.

If you believe in returning more money to bettors, you should believe in returning more money to *all* bettors.

[classhandicapper]

Wow, people arguing for a surcharge on winning wagers on the PA board?

I'm a little surprised.

It hardly matters whether the average OTB branch patron is insensitive to the 5% hit -- the principle that drives calls for reduced takeout and keeping churn up is the same. And to say that these guys are f*ckups and it doesn't matter if OTB takes advantage of these customers because they don't care and they'll keep coming back is to essentially repeat the same arguments for which people on this forum have vilified industry executives in the past.

If you believe in returning more money to bettors, you should believe in returning more money to *all* bettors.

I don't think anyone is arguing FOR the surcharge or for increased takes.

I think people perceive the OTB surcharge as some sort of greedy move by OTB to make more money off the customers when in fact it originally gave big bettors an incentive to go to the track. It was good for tracks because it made OTB unattractive to many bettors!

In the era before phone and computer betting if there was no surcharge the tracks would have gone into an even worse death spiral because some of the big bettors that went to the track to avoid the surcharge would have gone to the OTB too.

Back in those days I used to avoid OTB because of the surcharge because the 5% added up. If there was no surcharge, I would have gone to OTB instead of the track because it would have been a lot cheaper for me.

That's partly why the 5% existed to begin with. To help create a comparative advantage for the tracks.

[Zman179]

Back in those days I used to avoid OTB because of the surcharge because the 5% added up. If there was no surcharge, I would have gone to OTB instead of the track because it would have been a lot cheaper for me.

That's partly why the 5% existed to begin with. To help create a comparative advantage for the tracks.

The surcharge, which is actually 6% (it was increased from 5% in 1994 by Hazel Dukes), wasn't created to give an advantage to the racetracks, it was created as a revenue source for the city/town and county; all surcharge monies are given directly to the respective governments in which the branches are located. When OTB first opened up, there was no surcharge. That came later on during the 1970's fiscal crisis in New York.

[classhandicapper]

The surcharge, which is actually 6% (it was increased from 5% in 1994 by Hazel Dukes), wasn't created to give an advantage to the racetracks, it was created as a revenue source for the city/town and county; all surcharge monies are given directly to the respective governments in which the branches are located. When OTB first opened up, there was no surcharge. That came later on during the 1970's fiscal crisis in New York.

Interesting.

I started playing in the late 70s (around 76-77) and remember the surcharge always being there. The era of no surcharge must have been relatively brief or I missed it.

Either way, if there was no surcharge the tracks would have died off even faster. There is no question it served as a disincentive to play at OTB and helped the tracks keep big bettors going there.

So they may have accidentally corrected a major problem for the tracks.

[Indulto]

Wow, people arguing for a surcharge on winning wagers on the PA board?

I'm a little surprised.

It hardly matters whether the average OTB branch patron is insensitive to the 5% hit -- the principle that drives calls for reduced takeout and keeping churn up is the same. And to say that these guys are f*ckups and it doesn't matter if OTB takes advantage of these customers because they don't care and they'll keep coming back is to essentially repeat the same arguments for which people on this forum have vilified industry executives in the past.

If you believe in returning more money to bettors, you should believe in returning more money to *all* bettors.jc,
I believe you're confusing the PA board as a whole with HANA which originated from a group of PA board members.

I agree with your bolded statement above, but I would take it a step further. IMO equal takeout should be applied to all bettors regardless of wager size, volume, and location of placement.

[classhandicapper]

jc,
I believe you're confusing the PA board as a whole with HANA which originated from a group of PA board members.

I agree with your bolded statement above, but I would take it a step further. IMO equal takeout should be applied to all bettors regardless of wager size, volume, and location of placement.

To be honest, I question the hole idea of a lower take creating more revenue "for the government". The tracks are another issue.

To begin with that's basically a supply side economics argument that certainly has merit at confiscatory tax (take) rates, but not necessarily at all tax rates.

The problem is that governments sponsor all sorts of gambling. If they lower the track take it may or may not create more profits for the government from racing by increasing the churn, but it might also reduce lottery revenues, casino revenues etc... by an equal or greater amount if the total gambling pie runs flat (inflation adjusted) and gamblers simply switch games. The government is only interested in maximizing total gambling revenue, not just horse racing revenue.

I think the model needs to change entirely.

We need a bunch of private companies competing for gambling dollars and for the government to get it's share via taxes from profits. That would allow several private companies to raise or lower their takes until they maximized their own profits. It would also give them an incentive to make their services more attractive etc....

OTB could be part of that, as would ADWs, the tracks etc... And they would all pay the tracks a piece of the action.

Of course the risk is that they determine they can make more with a higher take than exists now, but I really doubt that would be the case given that rebate shops and exchanges are doing so well and they only occasionally have had to tinker their rebates lower (and take higher) in some situations (that I am aware of).

The big risk of that model would be that the tracks continue to die because it's more expensive and less convenient for many to go there much of the time and there are no surcharges for betting away from the track that change the incentives to make the track more attractive. But over time, the ADWs, OTB etc.. would have the incentive to negotiate fair deals otherwise they would go bust too. No track no betting.

[jnchapel]

Indulto, you're right. I did conflate HANA-PA. Hope I've caused no offense. One of the reasons why I've kept visiting over the years (but haven't delurked until now, sorry and hello!) is because of the robust debate that happens here around every issue.

[Indulto]

Indulto, you're right. I did conflate HANA-PA. Hope I've caused no offense. One of the reasons why I've kept visiting over the years (but haven't delurked until now, sorry and hello!) is because of the robust debate that happens here around every issue.De-lurked, debated, deluded, and delighted, eh? Your pseudonym and deployment of the word "conflate" suggest you may be the blogger, Jessica Chapel? Whether or not that's the case, you're obviously a welcome addition to the board.

[Indulto]

... The problem is that governments sponsor all sorts of gambling. If they lower the track take it may or may not create more profits for the government from racing by increasing the churn, but it might also reduce lottery revenues, casino revenues etc... by an equal or greater amount if the total gambling pie runs flat (inflation adjusted) and gamblers simply switch games. The government is only interested in maximizing total gambling revenue, not just horse racing revenue.

I think the model needs to change entirely.

We need a bunch of private companies competing for gambling dollars and for the government to get it's share via taxes from profits. That would allow several private companies to raise or lower their takes until they maximized their own profits. It would also give them an incentive to make their services more attractive etc.... ...Thanks for your input, CH. I wish to amend my statement as follows: “IMO equal takeout should be applied to all bettors IN THE SAME PARI-MUTUEL POOL regardless of wager size, volume, and location of placement. The objective being to be able to compete on a level playing field whenever and wherever one chooses to place a bet.

As I understand it, one problem with taxing the tracks and/or the bet-takers on profits rather than handle is that few if any functional mechanisms exist to minimize costs and maximize profits in that industry. If tracks are to be taxed on profits, then the cost of off-track bet-taking to the tracks should be minimized, and the signal price loop-hole that enables rebating eliminated.

Another approach to lowering the cost of wagering to players might be to reduce the size of the various stakeholders’ (including government) pieces of the pie (and returning more to the winners) as handle reaches predetermined levels, i.e., lowering takeout collectively in a specific pool in exchange for higher combined volume; as each qualifying pool demonstrates increased popularity on its own.