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I wonder how much of the decline is from the boycott versus the smaller field size.
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That's a valid question.
I think an accurate answer can be found in the industry's many paid for ecomomic studies such as those authored by Thalheimer, Ali, Cummings, and others.
Here's a link to one such study titled "AN ECONOMIC ANALYSIS OF A PARIMUTUEL RACETRACK-RACEBOOK" authored by Thalheimer and Ali for the Equine Industry Program, School Of Economics And Public Affairs, College Of Business And Public Administration, University Of Louisville:
http://www.horseplayersassociation.o...20analysis.pdf
Quote from pages 8-9:
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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.
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What does this mean in layman's terms?
The authors of the study found that on regular race days the drivers of racing handle are: takeout, number of races, field size, and purse.
The authors of the study determined how important each of the drivers of racing handle were and ranked them as follows:
2.30 TAKEOUT
0.64 NUMBER OF RACES
0.58 FIELD SIZE
0.06 PURSE
The authors of the study also examined the effect of special event days on racing handle.
Quote from page 4:
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Special stakes races, such as the Kentucky Derby, were found to be highly significant determinants of wagering for every racetrack group.
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The maximum effect was found to be as large as 1,853% which was the case for wagering on Kentucky simulcast races (from Churchill Downs) when the Kentucky Derby was offered.
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My takeaway, after reading this and other studies - and after spending considerable time examining real world handle numbers both before and after takeout increases, signal/host fee increases, etc. is that the authors of this and other studies are pretty much dead nuts on about the drivers of racing handle.
Special event days such as Kentucky Derby Day, Belmont Day, Preakness Day, Breeders Cup Days, and to a lesser extent Kentucky Oaks Day rank at the top of the list.
For the other 360 days of the year your changes in handle are driven like so:
Add up the elasticity values identified by Thalheimer and Ali:
2.30 TAKEOUT
0.64 NUMBER OF RACES
0.58 FIELD SIZE
0.06 PURSE
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3.58 TOTAL
From that you can get to:
64.25% TAKEOUT (=2.30/3.58)
17.88% NUMBER OF RACES (=0.64/3.58)
16.20% FIELD SIZE (=0.58/3.58)
02.15% PURSE (=0.06/3.58)
Based on the industry's own paid for economic studies I think the most accurate possible answer to the "How much of this is being caused by field size?" question is:
About 16 percent.
-jp
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