How Racetracks could increase on track attendance

[DeanT]

Originally Posted by Stillriledup

The price of the gamble is really high. They are charging you 20 cents to make a 1 dollar bet, 40 cents to make a 2 dollar bet and so on. That's way too much. Its 1/5th.You have to pay them 1 bet for every 5 bets you make.

Bingo! When they were the only game in town they could survive on the Average Cost Pricing model (monopolies do), but now they can not. When the cost to the racetrack of playing a $200 bet is the same as the cost of playing a $2 bet, yet the $200 one is taxed at $40 and the $2 one is taxed at 40 cents, we have a serious pricing problem. It is why rebaters and all the rest have taken so much play from the tracks - it is all about pricing; one for a different age, and one on a quasi-marginal cost pricing model which racing now is. They insist on putting a square peg into a round hole, despite the revenues all around them crumbling.

[Indulto]

Originally Posted by riskman

At least AM demonstrates some enthusiasm as apposed to your constant berating which at this point does nothing for the problems at hand. If we all knew what you knew everything would be Heaven on Earth in the horse racing industry. Yes sir reeeeee.

It’s hard to know what to say to someone so offended by a high school football cheer. I remember being very enthusiastic when I first heard it, but less so with repetition preceding continued lack of results.

Perhaps you have it in you to help solve the problems at hand, but nothing in your last 25 posts appears to support that hypothesis

There are already some players for whom takeout is not too high. Under prevailing circumstances, a tiny minority of players receive discounts on the cost of their wagers because the overwhelming majority do not. Merely extending that minority, without improving the lot of the majority, will not change the game’s dynamic; or its downward spiral.

Optimal takeout, from the horseplayers standpoint, will not occur until handle is large enough to support it along with competitive purses and track operating costs. But simply lowering takeout will not increase handle sufficiently to restore the game's stability without a racing product attractive enough to deserve player attention. It isn’t just field size, but large, competitive fields. It isn’t just sound horses, but sound, talented ones – trained and ridden by well-known racing figures.

[Horseplayersbet.com]

"Demand for the product. And they are profitable at that range. Nothing different then I said in my earlier postings.
To clarify I am not saying take out does not effect the bettors bottom line."
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Demand (amount bet) for slots is less than half at 16% than at 8%. The slot operator makes more money at 8% than they do at 16%. Pricing is responsible for how much betting (demand) there is. At 16% less money is lost by bettors collectively, so yes the bottom line is changed depending on the takeout charged.

"Fixed costs and variable costs of operating the plant. Price reductions do not guarantee or generate more profit or guarantee enough income to cover costs. I have illustrated the above many times."
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And this has what to do with the debate? I'm saying that at 21%, tracks will make less money in the long run than at 12%. Sure, I can't guarantee it at this time, but how was the 21% determined? By market forces? I think not. They were arbitrarily raised, and they are totally arbitrary right now. By using the real laws of supply and demand, we've seen a drop in demand lately, and a real drop in demand versus inflation for quite some time. The laws of economics say the price of gambling is too high.


"It is all about the demand. Price does not drive demand, demand drives price."
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Price does drive demand. More than twice the money is bet (more demand) on slots at 8% than at 16%. And if price doesn't drive demand, I guess Wal Mart is an illusion. When I go there I even buy things I don't need because they are so cheap.


"You have it backwards and the idea of corresponding increase in income equaling price reduction is a faulty premise."
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I've proven above that it is you who has it backwards. Looking forward to your next cherry picking post.

[Show Me the Wire]

Yes, as you said a big chunk is taxes. State governments look at racetracks as cash cows.

I don't think rebaters have to contend with high local taxation, do they?

The focus should be on reduced local taxation of the pari-mutual pool, which can led to realistic pricing of the take out.

[Show Me the Wire]

Would the slot operator make money at 4%, if the market dictated 4%?

With respect, you have not proven a price reduction leads to profits. You keep on citing one example where demand and market meet, i.e. slots. You have not proven if demand declines, for slots, a price reduction to 4% will guarantee profit or a profit no matter how low the percentage is reduced?

Please provide proof that your opinion about price reductions leading to profits in a declining market is factual, I am amenable to you proving the hypothetical proposed above.

BTW when you shop at Wal-Mart do you opt for name brands or the Great Value brand. If you opt for Great Value you are certainly a price driven consumer. However, even with Wal-marts prices how do other retailers exist?

Other retailers are profitable, because price is not the determining factor for everyone, like the player that refuses to play poly tracks. No demand for the product, poly tracks, no price reduction is enough. It may help existing customers, but servicing existing customers does not attract new business and that is the bottom line attracting new business.

[DeanT]

Originally Posted by Show Me the Wire

With respect, you have not proven a price reduction leads to profits. You keep on citing one example where demand and market meet, i.e. slots. You have not proven if demand declines, for slots, a price reduction to 4% will guarantee profit or a profit no matter how low the percentage is reduced?

Please provide proof that your opinion about price reductions leading to profits in a declining market is factual, I am amenable to you proving the hypothetical proposed above.

How is he supposed to prove it? He ain't Cangamblestradamous.

Slots found a proper price point to maximize profits. It was lower than the 35% in 1970 and higher than the zero percent which means no profit. They settled at around 5%.

The Massachusetts state lottery used to take 70% takeout, but they lowered it and lowered it to its current 31%, which maximizes their profit.

Betfair found a price point which maximizes revenue. They set it at around 5%. If it should be higher, it would be higher.

McDonald's found a price point for a Big Mac. $10 is too high, $2 is too low.

Racing has never found a price point which maximizes revenue in North America because they have never tried. In Australia they maximize profit at 16% takeout, minus about 4% for perks, which means 12% is their maximizing price point. They tried 22%, it was too high, and so on.

Studies show that a take of about 12% will maximize profits for North American racing. Are they right? Who knows, we have not tried. There is NO empirical evidence in North America.

Every racing executive, bar none, says that takeout is too high. That is a given. They just have absolutely no idea how to lower it properly, and can not get together to formulate a proper plan. They are, as Jeff said above, too busy fighting.

[Horseplayersbet.com]

Again, you are simply missing or ignoring the concept of OPTIMAL pricing. OPTIMAL pricing is the price where the seller makes the most profit.

Let me use a simple example for you, because it appears I have to.

Lets say track takeout was 90%. Do you think the track would make more bottom line over 6 months than they do at 21%?

I'll give you the benefit of the doubt and assume you would say they will make less money.

Why? Because many players will be driven away because of the lower prices paid. And those who don't have a clue, won't last very long and just call horse racing a rip off. They won't spend time handicapping, or bringing friends to the track with them.

Now lets say the takeout is 12%. Players will last longer, and they are more apt to spend more time handicapping, and watching races, therefore increasing the likelihood that they will bring friends or family to at least be exposed to betting horses.

Will the track make more money at 12% than at 21%? All studies suggest this will be the case.

The point is that we don't know what the optimum price is because tracks have not allowed the market to dictate those prices.

Just look at the range of takeouts across tracks in North America. 31% for a triactor at Philly, 19% at Keeneland. Neither have to be the optimum price, and both can't be the optimum price either (in fact, both are too high according to studies). Until we see lower across the board takeout reduction, the game will continue to die. It will die until an optimum price is found.

As for Wal Mart, I sometimes buy their brand and sometimes name brands...but I pay less at Wal Mart for name brands than I would at a mom and pop shop. I also buy goods I wouldn't normally buy, so yes a new market is created by lower pricing.

[Show Me the Wire]

[QUOTE=DeanT]How is he supposed to prove it? He ain't Cangamblestradamous.

/QUOTE]

Through economic theory. He is pretending to be Cangamblestradamous as he is predicting price reduction (citing economic theory) is the panacea of racing for attracting new business and increased profits.

Actually, you just have to look at Las Vegas and all the properties in financial trouble to see what happens when demand for the product falls and price reductions do not matter.

The track executives say take out is too high, because of local government taxation of the pari-mutual pools. If all that money went directly to the track, not a one would say take out is too high.

[DeanT]

[/QUOTE]

Through economic theory. [/QUOTE]
Oh ok, that's not hard then. The horseplayersassociation.org site has links to the Cummings Report, the Hong Kong takeout reduction, the University of Louisville study and I think a link to Singapore's takeout reduction as well. The blog has related posts and discussion on them as well. The search box can be used for those.

D

[Show Me the Wire]

Originally Posted by Horseplayersbet.com

Again, you are simply missing or ignoring the concept of OPTIMAL pricing. OPTIMAL pricing is the price where the seller makes the most profit.

Let me use a simple example for you, because it appears I have to.

Lets say track takeout was 90%. Do you think the track would make more bottom line over 6 months than they do at 21%?

I'll give you the benefit of the doubt and assume you would say they will make less money.

Why? Because many players will be driven away because of the lower prices paid. And those who don't have a clue, won't last very long and just call horse racing a rip off. They won't spend time handicapping, or bringing friends to the track with them.

Now lets say the takeout is 12%. Players will last longer, and they are more apt to spend more time handicapping, and watching races, therefore increasing the likelihood that they will bring friends or family to at least be exposed to betting horses.

Will the track make more money at 12% than at 21%? All studies suggest this will be the case.

The point is that we don't know what the optimum price is because tracks have not allowed the market to dictate those prices.

Just look at the range of takeouts across tracks in North America. 31% for a triactor at Philly, 19% at Keeneland. Neither have to be the optimum price, and both can't be the optimum price either (in fact, both are too high according to studies). Until we see lower across the board takeout reduction, the game will continue to die. It will die until an optimum price is found.

As for Wal Mart, I sometimes buy their brand and sometimes name brands...but I pay less at Wal Mart for name brands than I would at a mom and pop shop. I also buy goods I wouldn't normally buy, so yes a new market is created by lower pricing.

You continue to ignoring the idea of demand. What about the players that refuse to wager at tracks with poly surfaces. You are being too simple, in order to, ignore reality.

Right you pay less for brand names, the same item you can buy any place. Your mistake is you are looking at gambling as a fungible item. I understand now. You are not taking in the uniqueness of the bettor or the product offered by each track.

That is our difference. You see gambling as gambling. I see it as a unique product at every track, sort of like boutiques. I believe the boutique economic mentality is more applicable to racing than the fungible mentality.

Okay let's agree to disagree as I am not going to go into great detail as to my belief. Suffice to say one of the examples you are ignoring in your fungible concept is factors like poly track, which negate your theory.

[Show Me the Wire]

Through economic theory. [/QUOTE]
Oh ok, that's not hard then. The horseplayersassociation.org site has links to the Cummings Report, the Hong Kong takeout reduction, the University of Louisville study and I think a link to Singapore's takeout reduction as well. The blog has related posts and discussion on them as well. The search box can be used for those.

D[/QUOTE]

Economic theory to prove his assertion, about price reduction, applies to slot machines being reduced to 4% from 8% will lead to increased profits.

[Horseplayersbet.com]

I've already used the polytrack example by comparing it with those who play slots and those who don't and never will.
There are people playing both polytrack and slots today.

When slots were 16% the operators made less money bottom line that at 8%. Simply because existing customers lose just as much if not more when combined with the more people they expose to slots because they last longer and feel OK about the length they can sit and gamble mindlessly.

The same is true with polytrack betting. Studies have shown that 12% will make more money for the track bottom line than at 21%. And it won't be because players who wouldn't play polytrack before would play it now. It would be because those who already play polytrack would bet more, and expose more new people to it.

[riskman]

Originally Posted by Indulto

It’s hard to know what to say to someone so offended by a high school football cheer. I remember being very enthusiastic when I first heard it, but less so with repetition preceding continued lack of results.

Perhaps you have it in you to help solve the problems at hand, but nothing in your last 25 posts appears to support that hypothesis

There are already some players for whom takeout is not too high. Under prevailing circumstances, a tiny minority of players receive discounts on the cost of their wagers because the overwhelming majority do not. Merely extending that minority, without improving the lot of the majority, will not change the game’s dynamic; or its downward spiral.

Optimal takeout, from the horseplayers standpoint, will not occur until handle is large enough to support it along with competitive purses and track operating costs. But simply lowering takeout will not increase handle sufficiently to restore the game's stability without a racing product attractive enough to deserve player attention. It isn’t just field size, but large, competitive fields. It isn’t just sound horses, but sound, talented ones – trained and ridden by well-known racing figures.

There you go again. Typical Indulto poke to get attention and to put someone in their place.

Your assumption is correct, there is little that I could offer to help solve the numerous problems facing horse racing in todays environment. That I will leave to knowledgeable experts like yourself.

There are many interests in racing as you are well aware from the track/owner-operators,horse owners, trainers, stable personnel,jockeys, local and state governments, concessionaires, vets, suppliers of equipment, farms and training facilities,etc., and yes even the gambler/handicapper and others that supply info to these people ( cappers/gamblers)who appear to be at the bottom rung of the totem pole in the view of track managers and many owners. From my perspective being a gambler I want what you want, now damn it give it to me and I am not waiting much longer or I will take my gambling money and play another game. People are leaving because the product has deteriorated, many of the racetracks look like outdoor toilets, the takeout is unreasonable and the medication and drug issues is a laughing stock. Add the integrity of the tote board and cyber money floating in a magical mystery tour.

[Horseplayersbet.com]

Originally Posted by Show Me the Wire

Through economic theory.

Read this before you post again on this thread:
http://www.nationalhbpa.com/resource...ort7-17-04.PDF

[Show Me the Wire]

Originally Posted by Horseplayersbet.com

I've already used the polytrack example by comparing it with those who play slots and those who don't and never will.
There are people playing both polytrack and slots today.

When slots were 16% the operators made less money bottom line that at 8%. Simply because existing customers lose just as much if not more when combined with the more people they expose to slots because they last longer and feel OK about the length they can sit and gamble mindlessly.

The same is true with polytrack betting. Studies have shown that 12% will make more money for the track bottom line than at 21%. And it won't be because players who wouldn't play polytrack before would play it now. It would be because those who already play polytrack would bet more, and expose more new people to it.

The slots statement I agree with as gambling on slots is random and you are betting against the house.

Handicapping is not random. The statement about betting more, by existing customers, on poly track does not take into account the law of unintended consequences. Wagering on horses is a pari-mutual system. The more you wager you bet against yourself lowering the odds, more money wagered by existing customers will lower the odds enough to cancel any price reduction in betting.

Your premise is to attract new customers and the study you cite refutes this idea, stating the increase will come from additional sales to existing customers. Also, if current customers are not exposing new customers now, why would increased sales to the same customer produce different behavior? The answer it wouldn't.

That is exactly what I said many posts ago, price reductions may increase sales to existing customers, but not necessarily improve the bottom line. Maybe I ain't so ignorant after all, and I am not cherry picking either.

In this case the bottom line will not improve for anyone. Horse racing is boutique economics and not fungible random gambling economics..