Panel: Racing Should Invest in Pricing Study

[sandpit]

Originally Posted by Tom

Study shmudy...we know lowering the take out works.
Lower the damn TO at a race meet and watch what happens.

This symposium, as usual, is about 15 years behind the times. the University of Louisville Equine Program, specifically Dr. Richard Thalheimer, did an extensive study on this many years ago. The bottom line was the 12% was the optimal rate for the track and bettors to co-exists in perfect harmony.

[jelly]

According to the people in charge there is no reasons to lower takeout when slot machines are doing so well.

[Robert Goren]

Originally Posted by classhandicapper

Determining the optimal takeout rate is a lot like determining the optimal tax rate in economics. It's complicated.

If the rate is high enough it will stifle activity enough to reduce tax receipts, but if it's too low, it could generate lower tax receipts even if activity booms.

I think the optimal rate could also change based on the competition at that time.

In a world with sports gambling and poker the optimal rate could be a lot different than in a less competitive environment.

Finally, you have to give any changes a long enough test period so the full impact can be determined. Perhaps lowering the take will reduce the track profit initially, but if it slowly attracts sport gamblers over a period of years it could reverse itself (and vice versa).

Unfortunately, governments are too screwed up to allow the tracks to experiment for a long enough period of time to determine what works best.

Name one track that has gone to their state legislature wanting to lower takeout rates and the state legislature said no.

[proximity]

Originally Posted by lamboguy

cutting takeout will help.

yes, it will. i agree!!

[proximity]

obviously there's something magical about having one race every 25 minutes that demands 20% takeout.


slots-low, poker-low, racing-high, sports-low

[classhandicapper]

Originally Posted by Robert Goren

Name one track that has gone to their state legislature wanting to lower takeout rates and the state legislature said no.

Wasn't NYRA against the increase in track take from 14% to 15% and eventually 16% on WPS bets?

I don't think the tracks have as much control as you are implying, but I could be mistaken because I don't know the politics.

[ronsmac]

Originally Posted by classhandicapper

Wasn't NYRA against the increase in track take from 14% to 15% and eventually 16% on WPS bets?

I don't think the tracks have as much control as you are implying, but I could be mistaken because I don't know the politics.

The Otb's used their clout to force the rise in takeout in NY.

[Robert Goren]

Originally Posted by classhandicapper

Wasn't NYRA against the increase in track take from 14% to 15% and eventually 16% on WPS bets?

I don't think the tracks have as much control as you are implying, but I could be mistaken because I don't know the politics.

Thats not the way I remember it, But perhaps someone more familiar with the NY situation could comment on it. I don't why the politicians would want to raise the takeout unless the state was increasing its cut or the tracks and/or the horsemen were pressuring them. Most states, if not all, have given up most of their share of the takeout. When I first starting betting the ponies here in Nebraska, the takeout for WPS was 12% with 5% going to the state. It is now 18% and less than 1% going to the state. It is hard to find the numbers online. I know Nebraska's numbers because I asked the local race track. The numbers use to be be printed on the charts, but since Equibase has been doing the charts that info has been dropped.

[cj]

Originally Posted by Robert Goren

Thats not the way I remember it, But perhaps someone more familiar with the NY situation could comment on it. I don't why the politicians would want to raise the takeout unless the state was increasing its cut or the tracks and/or the horsemen were pressuring them. Most states, if not all, have given up most of their share of the takeout. When I first starting betting the ponies here in Nebraska, the takeout for WPS was 12% with 5% going to the state. It is now 18% and less than 1% going to the state. It is hard to find the numbers online. I know Nebraska's numbers because I asked the local race track. The numbers use to be be printed on the charts, but since Equibase has been doing the charts that info has been dropped.

NYRA was against the takeout increases. It had to do with OTB, but I'm not going to take the time to look up the specifics.

[Robert Goren]

Originally Posted by cj

NYRA was against the takeout increases. It had to do with OTB, but I'm not going to take the time to look up the specifics.

I will take your word for it. My point remains the same, the elected politicians didn't come up with it on their own. Of course in NY, everything is a part of the government anyway. I wonder where the increase went. My guess is that it didn't go to lower the state income tax.

[jelly]

Originally Posted by Robert Goren

Thats not the way I remember it, But perhaps someone more familiar with the NY situation could comment on it. I don't why the politicians would want to raise the takeout unless the state was increasing its cut or the tracks and/or the horsemen were pressuring them. Most states, if not all, have given up most of their share of the takeout. When I first starting betting the ponies here in Nebraska, the takeout for WPS was 12% with 5% going to the state. It is now 18% and less than 1% going to the state. It is hard to find the numbers online. I know Nebraska's numbers because I asked the local race track. The numbers use to be be printed on the charts, but since Equibase has been doing the charts that info has been dropped.

I wonder why?

[rwwupl]

Even Steven Burn of BetFair knows things are not right in California.....

http://www.bloodhorse.com/horse-raci...paign=20111209

Racing Industry Told to Innovate or Suffer

Excerpt:

TVG Betfair CEO Stephen Burn outlined his company’s plans to launch exchange wagering on a limited basis in California, perhaps in May 2012. Burn said a sticking point has been the revenue model.

In Great Britain the commission on exchange wagers is 5%, but in California—and other North American markets should it be approved by regulators—it’s likely to be about 10%. In a submission to the California Horse Racing Board, however, TVG Betfair states the optimum number may be 6%-8%.

“For it to work (in the United States) it needs a degree of trust,” Burn said. “We need the racing industry to work with us on a pricing model. There has to be an optimal pricing point. We’re completely prepared to take a long-term view.”

In pushing the TVG Betfair product, Burn said the U.S. is poised to relax online gambling restrictions, and horse racing, the only legal form of online betting in the country, needs to be out in front.

“Racing has to be careful it doesn’t get left behind,” Burn said. “It’s too small an industry for us to be beating the crap out of each other and filing litigation. The future of the industry should be about collaboration.”

Burn also contended monthly reports showing continued declines in pari-mutuel handle but increases in purses are “disastrous.” He said there is too much reliance on revenue from gaming machines and not enough innovation to grow pari-mutuel offerings.

Read more: http://www.bloodhorse.com/horse-raci...#ixzz1g3mcJGVZ

Roger Way

[Caroline]

Field experimental study IS direct market research in varying takeout at tracks. And for the record, there are many gaming interest businesses (think ADWs and consultants) which already use field experimental techniques as applied market research to determine optimal "pricing" - racetracks, racing jurisdictions in the US don't.

It's a call for tracks/jurisdictions to systematically vary takeout (most sensibly, by wager type initially) in their own market i.e. experiment with their own customers in a controlled fashion to assess the handle and revenue response to changes in takeout - and over a wide range of takeout rates. As an extreme example, what WOULD happen at 5% WPS?? Would billions of currently offshore money be interested? Would tracks and horsemen go broke within a couple of months? But most of all - does anyone have a clue??? Nope.

Direct market experimentation generates the most relevant data, and immediately, that I can think of to assess which takeout rate maximizes revenue by wager. It is the efficient way forward, relative to any additional statistical/econometric study based on "out of (relevant market) sample" data - 40 years' worth of evidence from which, as pointed out, has been ignored by the industry in any case...

Current market conditions are inevitably taken into account in direct market research. You can dismiss arguments that historical empirical research showing takeout reductions increase revenue isn't relevant because the institutional and competitive environment has changed, for example. Currently relevant revenue sharing agreements are also taken into account in assessing the impact of takeout changes for the host/experimenting track's take.

My only qualification is that any experimentation be subject to (scientifically verified) appropriate design. In particular, you have to establish "control" pools/races if you want to validate causation from takeout to handle. In other words, there must be selective experimentation (perhaps a sub-sample of races on a day's card which can be compared to a "control" sub-sample for which takeout isn't changed), so that any observed changes in handle and revenue following takeout adjustments can and will be attributed to the experimental takeout adjustments - rather than to the weather out east, the economy, or anything else.

NY could lower takeout tomorrow as suggested by Eng today and others - handle and revenue could increase - and someone out there will still argue that nobody can "prove" it's due to the takeout reduction because so many factors influence handle, yada yada yada ...