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Another great, dismal, industry thread.
We’re arguing that everyone would be better off with a lower takeout due to elasticity modeling that suggests a lower optimal takeout. But the industry already believes it has the optimal (risk-adjusted) takeout, which is why it is what it is. They might even be right, however unfair it seems to smaller players that pay the highest rake.
If they lower takeout, but revenue and profits don’t rise as predicted, they’re scarred with a failed decision that produces financial loss. “Wait, you lowered your commision that you control, and you made less money? How was that a competent decision?”
The status quo makes money without escalating risk. Handle and takeout have been pretty flat over many years (right?).
Consider two categories of potential handle growth: new bettors, and existing bettors betting more. Further consider large and small subcategories of new and existing bettors.
The biggest existing bettors already have lower takeout—after rebates. Surely the whales get the best of it from the racing industry—the largest buyers get some degree of power over the supplier in any industry. I can’t imagine any prohibitive barriers to other high rollers that want to join the pod of whales enjoying the best terms and conditions from the industry. No changes necessary.
Luring in new small bettors is an endeavor greater in scope than takeout. I don’t think handicapping is otherwise prohibitive for young punters. But I do speculate that personal fancy overshadows much of what the industry might try to cultivate entry level players. Lowering takeout might not convert a sufficient number of new bettors, because punters not already predispositioned to play horse races may not be very swayable generally.
That leaves existing small bettors. Many of us. We loathe the takeout, yet we play on. Would we really bet more with lower takeout? How many of us are really on the sidelines but for lower takeout? Some, for sure, but plausibly not enough to justify lower takeout to lure back.
I guess my hypothesis is that horse racing appeals to a certain audience segment that doesn’t change much despite what the industry does, or even how demographics change. Put another way, we’re as stubborn and resistant to change as they are. And beholden to the game.
The focus here is on takeout, but you can apply this line of reasoning to other prospective industry reforms. Not that I’m condoning poor practices. Just trying to reason out why they persist. That said, cheating is not OK, nor is lax enforcement of the rules. On that matter, the interests of all the punters are aligned. However unsatisfying the justice for everyone, at least Navarro did get prosecuted and sentenced.
I’m not sure what might accelerate worthy reform. Unfortunately, probably not our otherwise credible and well-meant entireties here on PA. I’m not even sure it’s going to be competitive pressure from rival gambling venues. Probably won’t be regulation—the constituencies don’t seem expansive enough beyond niche, entrenched interests (never mind polarization-induced gridlock preventing anything productive). Ironically, a growing demographic sensitivity to animal welfare might provide a reforming pressure that actually improves the game, but that’s a long shot threading a needle.
I'd just like to be less reluctant to admit I enjoy the game in mixed company.
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