Canterbury to cut takeout across the board

[Tom]

No one is forcing me to bet on races.
If the industry is happy to screw its customers, I am happy to stop betting.
No one needs to support this pathetic game.

The list of tracks I will bet now is longer than the one of tracks I will.

Racing is no longer the only game in town.
It is probably the worst one, though.

Because of the attitude you just expressed.

[OTM Al]

Originally Posted by Tom

No one is forcing me to bet on races.
If the industry is happy to screw its customers, I am happy to stop betting.
No one needs to support this pathetic game.

The list of tracks I will bet now is longer than the one of tracks I will.

Racing is no longer the only game in town.
It is probably the worst one, though.

Because of the attitude you just expressed.

What, that I'd rather it was healthy so I could also be better off?

[Tom]

That we take whatever table scraps they throw to us and be happy about it.

[cj]

Originally Posted by OTM Al

No. Because then you get into the prisoners' dilemma type situation. Then other tracks would need to lower but overall they would all do worse. We win in the short run, but in the long run the industry loses even faster than they are now, and then we are worse off too

I have no idea why you assume others tracks would do worse by lowering takeout. At the very least more churn is produced so there is more money being bet. It is also possible you would have more winners and actually attract more gamblers. How can the sport possibly grow at the current rake? It is not going to survive as a spectator sport which seems to be the goal of many in charge. They are the ones thinking short term, not gamblers.

[whodoyoulike]

Originally Posted by OTM Al

No. Because then you get into the prisoners' dilemma type situation. Then other tracks would need to lower but overall they would all do worse. We win in the short run, but in the long run the industry loses even faster than they are now, and then we are worse off too.. ..

Wouldn't this be the effect of a truly competitive business?

Those which do well will survive and prosper. I suspect you work for or you are dependent on the tracks maintaining a status quo or a slow downward spiral until you can retire.

Every product I can think of has been improved by true competition e.g., cell phones, cars, tv's, internet access etc.

[OTM Al]

Originally Posted by cj

I have no idea why you assume others tracks would do worse by lowering takeout. At the very least more churn is produced so there is more money being bet. It is also possible you would have more winners and actually attract more gamblers. How can the sport possibly grow at the current rake? It is not going to survive as a spectator sport which seems to be the goal of many in charge. They are the ones thinking short term, not gamblers.

An industry as a whole can be price inelastic even if all the individual firms are price elastic. Consumers move around the industry gravitating toward the low price firms but if all firms lower price, the distribution of customers and how much they buy in total is the same, thus the firms all just gets less in the end. It is essential that lowering the prices in fact does bring in more consumer dollars. Churn doesn't count as no new money is created. It is absolutely obvious that a firm lowering its price should increase sales, perhaps also leading to increased revenue and profit if the old price was too high. But for it to really work, the new sales can't be wholly from cannibalizing other firms' sales. Industry as a whole must show increase.

[OTM Al]

Originally Posted by whodoyoulike

Wouldn't this be the effect of a truly competitive business?

I suspect you work for or you are dependent on the tracks maintaining a status quo or a slow downward spiral until you can retire.

Every product I can think of has been improved by true competition e.g., cell phones, cars, tv's, internet access etc.

I'm a dean at a university who studied economics, so you would be wrong. I've also seen plenty of short sighted behavior from tracks. I'm waiting for the day that someone actually models this problem and shows what is really happening rather than parroting what others have repeated from something someone else said. See what I just wrote and think about the industry as a whole and how tracks interact rather than the effects on a single track. Can things grow, as we hope, or do we simply switch deck chairs while the boat sinks? That is the real question.

[cj]

Originally Posted by OTM Al

An industry as a whole can be price inelastic even if all the individual firms are price elastic. Consumers move around the industry gravitating toward the low price firms but if all firms lower price, the distribution of customers and how much they buy in total is the same, thus the firms all just gets less in the end. It is essential that lowering the prices in fact does bring in more consumer dollars. Churn doesn't count as no new money is created. It is absolutely obvious that a firm lowering its price should increase sales, perhaps also leading to increased revenue and profit if the old price was too high. But for it to really work, the new sales can't be wholly from cannibalizing other firms' sales. Industry as a whole must show increase.

You are saying (best I can tell) that people will bet the same amount in total regardless of price. I don't agree with that and neither does every study I've ever seen done. Racetracks have for the most part ignored these studies, many they funded themselves, and thus find themselves in the poor position they are in today. Forgive me if I have no sympathy for any of them and love seeing somebody try something new.

You should put these posts together and get a resume update. Churchill would snap you up in a second.

[whodoyoulike]

Originally Posted by OTM Al

... See what I just wrote and think about the industry as a whole and how tracks interact rather than the effects on a single track. Can things grow, as we hope, or do we simply switch deck chairs while the boat sinks? That is the real question.

Sorry for the mischaracterization of your background. It was based on your postings. But, if there was true competition in this industry, the end product would have improved years ago and I think still can. And, I'm not talking about 50+/- tracks doing pretty much similar things and thinking this is what their customers want.

Actually, I'm thinking the tracks customers are the owners and trainers and not the bettors because they are accommodating the owners/trainers all the time. They forget that the bettors are just the third party which helps fund a majority of the activities in this industry.

[OTM Al]

Originally Posted by cj

You are saying (best I can tell) that people will bet the same amount in total regardless of price. I don't agree with that and neither does every study I've ever seen done. Racetracks have for the most part ignored these studies, many they funded themselves, and thus find themselves in the poor position they are in today. Forgive me if I have no sympathy for any of them and love seeing somebody try something new.

You should put these posts together and get a resume update. Churchill would snap you up in a second.

I'm saying it's possible, not that it is true. I'm also saying this could be used as a perfect test case since this place was making so little it had nothing to lose really trying. The pool size is still brutal, so hoping that bigger players come in as the horses show running lines at the track. Made and hit two bets there today in P3s, total of $3 played in each, and made a total of $5. So people that know what they are doing are already in the pools. Just doesn't pay right now to make bigger bets.

[OTM Al]

Originally Posted by whodoyoulike

Sorry for the mischaracterization of your background. It was based on your postings. But, if there was true competition in this industry, the end product would have improved years ago and I think still can. And, I'm not talking about 50+/- tracks doing pretty much similar things and thinking this is what their customers want.

Actually, I'm thinking the tracks customers are the owners and trainers and not the bettors because they are accommodating the owners/trainers all the time. They forget that the bettors are just the third party which helps fund a majority of the activities in this industry.

That's why I'm saying we need the knowledge so we don't make easy characterizations. True competition in any industry is rare to nonexistant. This industry may be better characterized as an asymmetric oligopoly or a monopolistic competition with a couple really big players and several small ones. It becomes even more complicated due to the use of ADWs and simulcasting which actually may make it better for some tracks to hype the product of other tracks. Thus they aren't exactly competitors at all. Then throw in the government. The bettor is the only real customer. Trainers and owners are really suppliers, who also come in many different sizes, so that side of the equation is also quite complex. But as you know, a business does have to cater to suppliers as well as customers.

I would say in my experience, and I do have a bit with them, that the vast majority of the people who work at tracks genuinely do care about customers. There are executives that feel that way too, but I will agree there are also enough that don't care about it more than a pay check that make it all look bad.

[johnhannibalsmith]

I like reading your stuff Al. Can we entertain the notion of competition within the gambling industry rather than solely within the horse racing industry? By that, I mean, I'd like to hear you expand on the effect that you describe might also have as racing competes with other forms of gambling for customers that are going to gamble and which may be/are price sensitive. Basically, do you see an upside in which the racing industry under the scenario you lay out could - while potentially creating internal problems or unexpected outcomes - also in the broader sense pull money in from the outside competition by competing on that front as well and not merely against the other tracks?

I hope that made some sense because the mind is on 23 RPMs right now.

[dilanesp]

Originally Posted by cj

You are saying (best I can tell) that people will bet the same amount in total regardless of price. I don't agree with that and neither does every study I've ever seen done. Racetracks have for the most part ignored these studies, many they funded themselves, and thus find themselves in the poor position they are in today. Forgive me if I have no sympathy for any of them and love seeing somebody try something new.

The basic problem with all these arguments is that "lowering price increases demand", while generally true in almost every field (total demand inelasticity is very rare), doesn't prove that it is PROFITABLE to lower the price.

THAT depends on the slope of the demand curve at the price point you are at. In plain English, it's not enough that people will bet more at the lower takeout-- they must bet ENOUGH more that the total track share of the takeout increases despite the cut in the percentage.

And the studies thrown about by horseplayers do not really prove that, or at least do not really prove it in all instances.

I suspect, for instance, that you would be hard pressed to demonstrate that lowering the takeout of the Kentucky Derby would be profitable. If anything, I bet Churchill could get away with raising the takeout on the race, because the handle is so gigantic and the desire to bet it is so strong that they would make even more money at the higher takeout. (Similar to the pricing of tickets for the Derby.)

On the other hand, there are situations where lowering takeout plausibly could increase handle. If there's a track that offers the type of racing product that could attract simulcasting bettors, but where takeout is set ridiculously high currently, a reduction in takeout could have a positive effect. It's possible Canterbury is such a track; the track I kind of think of as the paradigmatic example of it is Lone Star.

There's one other thing about this-- there are tracks that have a good image and which could get away with a takeout decrease as a customer service gesture. Del Mar or Saratoga, for instance. It might or might not pay off the in the sort term, but it would reinforce the message that they are customer-friendly racetracks.

But any time a poster here says "lowering takeout increases handle"-- that's a person who failed economics 101. It does, usually, increase handle. And I assure you that tracks know this. But that doesn't prove that it's profitable to do it.

[cj]

Originally Posted by dilanesp

The basic problem with all these arguments is that "lowering price increases demand", while generally true in almost every field (total demand inelasticity is very rare), doesn't prove that it is PROFITABLE to lower the price.

THAT depends on the slope of the demand curve at the price point you are at. In plain English, it's not enough that people will bet more at the lower takeout-- they must bet ENOUGH more that the total track share of the takeout increases despite the cut in the percentage.

And the studies thrown about by horseplayers do not really prove that, or at least do not really prove it in all instances.

I suspect, for instance, that you would be hard pressed to demonstrate that lowering the takeout of the Kentucky Derby would be profitable. If anything, I bet Churchill could get away with raising the takeout on the race, because the handle is so gigantic and the desire to bet it is so strong that they would make even more money at the higher takeout. (Similar to the pricing of tickets for the Derby.)

On the other hand, there are situations where lowering takeout plausibly could increase handle. If there's a track that offers the type of racing product that could attract simulcasting bettors, but where takeout is set ridiculously high currently, a reduction in takeout could have a positive effect. It's possible Canterbury is such a track; the track I kind of think of as the paradigmatic example of it is Lone Star.

There's one other thing about this-- there are tracks that have a good image and which could get away with a takeout decrease as a customer service gesture. Del Mar or Saratoga, for instance. It might or might not pay off the in the sort term, but it would reinforce the message that they are customer-friendly racetracks.

But any time a poster here says "lowering takeout increases handle"-- that's a person who failed economics 101. It does, usually, increase handle. And I assure you that tracks know this. But that doesn't prove that it's profitable to do it.

Of course lowering takeout increases handle and of course it doesn't guarantee profit. What we have learned without a doubt is that raising takeout isn't the answer either. It is a crutch that never works. The argument is always something like this...we handle 100k a day on the early double at 18% so lets raise it to 20% and we'll get an extra 2k a day on that bet alone. The people that implement takeout raises not only didn't pass Econ 101, they are too dumb to even get admitted to the class.

What would takeout be without all these subsidies we see all over the country, 95%?

[OTM Al]

Originally Posted by johnhannibalsmith

I like reading your stuff Al. Can we entertain the notion of competition within the gambling industry rather than solely within the horse racing industry? By that, I mean, I'd like to hear you expand on the effect that you describe might also have as racing competes with other forms of gambling for customers that are going to gamble and which may be/are price sensitive. Basically, do you see an upside in which the racing industry under the scenario you lay out could - while potentially creating internal problems or unexpected outcomes - also in the broader sense pull money in from the outside competition by competing on that front as well and not merely against the other tracks?

I hope that made some sense because the mind is on 23 RPMs right now.

In brief as I just gorged on the delicious bbq pulled pork I had stewing all day so my head is now about 1 1/2 rpm, you certainly can expand industry definition. It's like going from the market for just colas to that for all soft drinks. Products become less similar so there will generally be less cross price effect, i.e. Change in the price of Pepsi has less effect on orange juice than it does on Dr. Pepper. The trick becomes how do you make a Pepsi drinker want orange juice?

Racing totally missed the boat here, at least in my opinion. They went after the young demo, who never really played horses. For a hundred years there have been articles about horseplayers dying out as if no 30 year olds will ever make it to 50. Slots parlors catered to the older demographic, those that have the money and time for racing, and got them in. In this larger market setting I'd rely much more on marketing analysis than economic theory. This is where the money is that you need to have flow into racing, but may well be too late.