Horseplayer Magazine article on CA Takeout Increase

[highnote]

Has anyone read the Horseplayer Magazine article called "The Skinny on Takeout" in the January/February 2011 issue? The driving force behind the article seems to be CalRacing.com.

I found the article interesting because it is "pro-California Takeout Increase" and uses HANA's takeout chart to support the argument.

In the first paragraph the article says that "100 percent of the entire takeout increase on exotic wagers will go directly overnight purses."

Can someone verify the accuracy of this statement?

The article says that the increased takeout will benefit the player by making the product better -- bigger purses mean bigger fields and more competitive races. More competitive races lead to better wagering opportunites and healthier payouts.

The article says that because of slots at other tracks that tracks without slots can only be competitive by having similar purse structures and the money has to come from somewhere -- from horseplayers, of course.

The article continues with a quote from a CalRacing Fact Sheet -- "This purse increase is the most definitive and positive action taken in years to assure the California racing product is strong and competive with the rest of the country."

The article concludes by saying that "The increased purse money, along with the installation of a brand-new dirt track at Santa Anita, has already attracted trainer Steve Assmussen, who for the first time, sent a string of horse to compete on the Southern California circuit."

[rwwupl]

John,

This was the ill advised and inaccurate spin promoted by the California Marketing Committee (CMC)to justify the raise in take out.

Nothing has come true to match the claims. The purses were not funded as stated (long story), field size did not grow, handle down in California approx. 100 million dollars, and the theory of bigger purses will cure the problems has been tried before and has never been successful in California.

The 100% goes to purses is false(long story)

Bigger purses, no matter what or who pays or who is hurt, is always the first choice of the current horsemen leadership

The CMC is funded (by horse players) at approx. 6 million dollars a year, and can be used for almost any purpose...This was total B.S.

See ...http://www.playersboycott.org/


Roger Way

[Jeff P]

In the first paragraph the article says that "100 percent of the entire takeout increase on exotic wagers will go directly overnight purses."

Can someone verify the accuracy of this statement?That's mostly accurate. If I'm not mistaken, some ADWs (Twinspires comes to mind) were able to keep half of the takeout increase for themselves for a few months.


The article says that the increased takeout will benefit the player by making the product better -- bigger purses mean bigger fields and more competitive races. More competitive races lead to better wagering opportunites and healthier payouts.That was the belief system of those who thought raising the takeout to raise purses would be a wise thing to do.

However, that belief system flies in the face of the recommendations found in the industry's own paid for economic studies.

Here's a link to one such study titled An Economic Analysis of a Parimutuel Racetrack-Racebook authored by Richard Thalheimer that I found on the website of the University Of Louisville:
http://cobweb2.louisville.edu/eip/Newsletters/research/economic%20analysis.pdf

Excerpt from pages 8 - 9: Examining the own-elasticities, it can be seen that of the four variables, wagering on a subject racetrack's races is most elastic with respect to its takeout rate, least elastic with respect to its average purse and comparably elastic with respect to number of races and average field size. The median takeout rate elastici~ was found to be -2.30 indicating that wagering is strongly responsive to takeout rate changes. This is consistent with prior findings in the literature (Gruen, 1976; Morgan and Vasche, 1979, 1980, 1982; Suits, 1979; Thalheimer and Ali, 1992, 1995a, 1995b; Ali and Thalheimer, 1997).

The takeout rate of -2.30 indicates that revenue will increase with a drop in takeout rate up to the optimum level where takeout rate elasticity is -1.00. If host fee cost is deducted from the takeout rate the optimum level will occur at an elasticity greater than -1.00. It can be shown that for elasticities of the order of magnitude found in this study, the present level of takeout rate is such that it can be lowered without changing the host track fee, to increase net revenue to the racetrack-racebook (after host fee deduction). ..However, the racetrack-racebook will get a proportionally lower increase in net revenue than the host racetrack. For example, at a takeout rate level of 20% and a host fee of 3%, the net revenue maximizing elasticity is computed to be -1.18 which is still less than the typical elasticity of -2.3 found in this study. Of course, if the host track fee is lowered in proportion to the change in takeout rate, revenue for all parties (host track, racetrack-racebook, horsemen) will in crease in the same proportion.

Median own-elasticities with respect to number of races and average field size were found to be 0.64 and 0.58, respectively. There is no prior study to gauge the magnitudes of these elasticities but it seems wagering is moderately responsive to changes in number of races or field size. Finally, median average purse elasticity was found to be 0.06 which is considerably smaller than elasticity with respect to takeout rate, number of races or field size. This average purse elasticity is quite small and it suggests, for example that wagering would increase by only 6% if purse were doubled. This is a surprising finding considering the importance that is attached to the purse variable in all major policy decisions to increase the wagering in this industry.-emphasis (bolding) added by me.


The belief system that says "We HAVE to raise purses because it will make everything right." is flawed. (Not because I say so.) People much smarter than myself have researched it extensively and reached that conclusion.

I haven't seen the artcile. I wonder, does the article mention the following:

Even though avg purse per race and total purses paid out was raised, field size at Santa Anita this year vs. last year is down approx .5 horses per race.

All sources handle through last weekend at California's two thoroughbred tracks is down more than 130 million dollars this year vs. last year.

During the same time period, handle at many other tracks this year vs. last year is UP.

It has become crystal clear to me that California's takeout increase has become a really good example to other racing jurisdictions of exactly what not to do.




-jp

.

[cj]

The belief system that says "We HAVE to raise purses because it will make everything right." is flawed. (Not because I say so.) People much smarter than myself have researched it extensively and reached that conclusion.


Not only isn't it accurate, I would say one of the biggest faults of the current model is that too much purse money is given away on races that nobody wants to bet.

[highnote]

I haven't seen the artcile. I wonder, does the article mention the following:

Even though avg purse per race and total purses paid out was raised, field size at Santa Anita this year vs. last year is down approx .5 horses per race.

All sources handle through last weekend at California's two thoroughbred tracks is down more than 130 million dollars this year vs. last year.

During the same time period, handle at many other tracks this year vs. last year is UP.


I don't have the magazine with me, but I believe the article must have been written early in the SA meeting -- it was the Jan/Feb issue. I don't recall it mentioning field size being down.


It has become crystal clear to me that California's takeout increase has become a really good example to other racing jurisdictions of exactly what not to do.

About the only industy that can get away with raising prices in a recession is the health insurance industry because most customers don't want to go without it. For those people whose income does not depend on race horse betting, it's not a big deal to go without betting. And for those whose income does depend on racing, there are plenty of lower cost alternatives.

[andymays]

Not only isn't it accurate, I would say one of the biggest faults of the current model is that too much purse money is given away on races that nobody wants to bet.

And the TOC seems to be very comfortable with that situation. They are accelerating the demise of California Racing. They've lost so many customers over the last year and a half that you would think they'd wake up. When the numbers come out next week California (including Golden Gate) handle will be down around 150 million.

I think we will see more changes but the problem is that the changes are coming too late to matter to people who already left.

[rwwupl]

And the TOC seems to be very comfortable with that situation. They are accelerating the demise of California Racing. They've lost so many customers over the last year and a half that you would think they'd wake up. When the numbers come out next week California (including Golden Gate) handle will be down around 150 million.

I think we will see more changes but the problem is that the changes are coming too late to matter to people who already left.

Any one who is comfortable with California racing at this time needs to seek a doctor.. or at least quit.

It is hard to put manure back into the horse.

rw

[andymays]

Any one who is comfortable with California racing at this time needs to seek a doctor.. or at least quit.

It is hard to put manure back into the horse.

rw

Exactly! :lol: