How low could takeout actually go while still having enough left to run the show?

[MadWorld]

Originally Posted by EMD4ME

This is why the old farts that run this game should not be in charge.

Why can't horse racing receive monster advertising rights from sponsors?

Why can't the 1/16 pole/gate/jockey silks be decorated in advertisements/sponsorships?

Why can't horse racing be a sport where merchandise is sold in the millions of units?

Why can't a team of female riders race against a team of male riders & the series be shown on NBC live (with wagering encouraged)?

Why can't a team of horses be grouped together, be branded with a flashy name (attached to a city) and be pitted against other regional groups of horses in stakes that have team standings and generate regional loyalty (like sports teams do)?

With new and consistent revenues coming in, takeout can be reduced significantly, which would drive up handle etc.

Why not?

Because these fossils that could care less about proper marketing, are in charge. All they care about is sucking every dollar out of the ever shrinking golden goose.

At least this gave me a chuckle.

[cutchemist42]

Sorry for bumping an old topic, but it came up in my head again. Lets create a reallybasic example, where it costs $X amount of money to run the show every season.

Right now, the track is currently charging say 16% for takeout to acheive that $X amount of money. Is their main worry for not decreasing the takeout is that there is no guarantee that a lower takeout still ensures them of $X? Is it wrong of them to have this thought, or valid?

[Stillriledup]

Originally Posted by cutchemist42

Sorry for bumping an old topic, but it came up in my head again. Lets create a reallybasic example, where it costs $X amount of money to run the show every season.

Right now, the track is currently charging say 16% for takeout to acheive that $X amount of money. Is their main worry for not decreasing the takeout is that there is no guarantee that a lower takeout still ensures them of $X? Is it wrong of them to have this thought, or valid?

Here's why tracks don't cut takeout. Ill give you an example. Lets say santa Anita cut WPS to 5 pct. because of that cut they need their pools to triple to make it worthwhile, but joe blow who's at simulcasting somewhere in Idaho cashes his 2 dollar win ticket on seabisquick in the first race but instead of taking the extra money that he made by the low takeout, he plunges it into the first race at a track with a 20 pct takeout. Santa Anita needs him to plunge that money back with them. If you are SA and you lower take and give players more profits you don't want those profits going to a track who didnt lower their take.

[dilanesp]

Originally Posted by Stillriledup

Here's why tracks don't cut takeout. Ill give you an example. Lets say santa Anita cut WPS to 5 pct. because of that cut they need their pools to triple to make it worthwhile, but joe blow who's at simulcasting somewhere in Idaho cashes his 2 dollar win ticket on seabisquick in the first race but instead of taking the extra money that he made by the low takeout, he plunges it into the first race at a track with a 20 pct takeout. Santa Anita needs him to plunge that money back with them. If you are SA and you lower take and give players more profits you don't want those profits going to a track who didnt lower their take.

Actually one big fear with takeout cuts is a race to the bottom.

I know a couple of people who have done work for state lotteries. And, unsurprisingly, there's a huge realization that if a state lottery introduces a big-prize game with a takeout of 5 percent, rather than 50 percent, that would attract a huge amount of lottery players. People would even cross borders or get friends to buy them tickets when the jackpots were big, because you'd have a much higher chance of winning big money.

But what would actually play out is that if one state did that, other states would start losing business and would follow, and you would end up at a new equilibrium where everyone sold a few more lottery tickets but generated grossly less revenue.

The point is, when you cut takeout, there's two sources of revenue-- (1) your own players, playing more because it is cheaper to play or the payouts are bigger, and (2) an influx of people who come over because you offer an advantageous takeout.

And the problem with studies that show that lowering takeout increases revenue is that they don't account for (2). To the extent that the takeout reductions are generating (2)'s rather than (1)'s, those will disappear if other tracks are forced to lower their takeout too.

Obviously a race to the bottom would be very good for players. But it could turn out to be devastating for racetracks. Accordingly, tracks are very careful about takeout reductions.

[AndyC]

Originally Posted by dilanesp

Actually one big fear with takeout cuts is a race to the bottom.

I know a couple of people who have done work for state lotteries. And, unsurprisingly, there's a huge realization that if a state lottery introduces a big-prize game with a takeout of 5 percent, rather than 50 percent, that would attract a huge amount of lottery players. People would even cross borders or get friends to buy them tickets when the jackpots were big, because you'd have a much higher chance of winning big money.

But what would actually play out is that if one state did that, other states would start losing business and would follow, and you would end up at a new equilibrium where everyone sold a few more lottery tickets but generated grossly less revenue.

The point is, when you cut takeout, there's two sources of revenue-- (1) your own players, playing more because it is cheaper to play or the payouts are bigger, and (2) an influx of people who come over because you offer an advantageous takeout.

And the problem with studies that show that lowering takeout increases revenue is that they don't account for (2). To the extent that the takeout reductions are generating (2)'s rather than (1)'s, those will disappear if other tracks are forced to lower their takeout too.

Obviously a race to the bottom would be very good for players. But it could turn out to be devastating for racetracks. Accordingly, tracks are very careful about takeout reductions.

The race to the bottom you speak of is known as capitalism and the free market system. Right now there is price controls (high) or collusion with little or no ability to adjust.

[dilanesp]

Originally Posted by AndyC

The race to the bottom you speak of is known as capitalism and the free market system. Right now there is price controls (high) or collusion with little or no ability to adjust.

Well, there is definitely no free market in horse racing. It's a state regulated enterprise, with some explict protectionism and promotion of horsemen's interests, a limited number of suppliers, and here in California, even the takeout is set administratively.

You can argue that is good or bad, but it definitely is how the sport works.

[therussmeister]

To the best of my knowledge all agreements with the horsemen are to fund purses with a percentage of handle, not a percentage of the track's income. Under these agreements, if a track reduced takeout to 5% the horsemen would get rich, while the tracks go broke. I don't know if the horsemen are willing to take a chance on a different method of funding purses.

[AndyC]

Originally Posted by dilanesp

Well, there is definitely no free market in horse racing. It's a state regulated enterprise, with some explict protectionism and promotion of horsemen's interests, a limited number of suppliers, and here in California, even the takeout is set administratively.

You can argue that is good or bad, but it definitely is how the sport works.

My point exactly. Hence the inability to make changes to meet the needs of customers and increase profits. A very inefficient business model, to say the least.

[Seabiscuit@AR]

Some of the biggest whales support high takeouts. This is because it gives them a bigger gap between the takeout they pay after rebate and the takeout the average Joe pays which means a bigger advantage for the whale

[Track Phantom]

Originally Posted by cj

If it cost too much to put on the show, find ways to make the show cheaper. Certainly some excessive costs in racing.

How about capping MSW races to purses of 50k or less. Is it necessary to have 100k MSW races? Haven't given it much thought but it would appear tracks are catering to owners/trainers in these instances and, either directly or indirectly, the purses are paid for by the players.

I'm sure I'm missing something, right?

[cj]

Originally Posted by Valento

How about capping MSW races to purses of 50k or less. Is it necessary to have 100k MSW races? Haven't given it much thought but it would appear tracks are catering to owners/trainers in these instances and, either directly or indirectly, the purses are paid for by the players.

I'm sure I'm missing something, right?

In the old days that was true, but not really any longer. A big part of purses is paid by casino bettors.

[Track Phantom]

Originally Posted by cj

In the old days that was true, but not really any longer. I big part of purses is paid by casino bettors.

You're likely right on that. Still seems awfully high for maiden races but I'm sure they have their reasons. They are fun races to handicap.

[Robert Goren]

Originally Posted by dilanesp

Actually one big fear with takeout cuts is a race to the bottom.

I know a couple of people who have done work for state lotteries. And, unsurprisingly, there's a huge realization that if a state lottery introduces a big-prize game with a takeout of 5 percent, rather than 50 percent, that would attract a huge amount of lottery players. People would even cross borders or get friends to buy them tickets when the jackpots were big, because you'd have a much higher chance of winning big money.

But what would actually play out is that if one state did that, other states would start losing business and would follow, and you would end up at a new equilibrium where everyone sold a few more lottery tickets but generated grossly less revenue.

The point is, when you cut takeout, there's two sources of revenue-- (1) your own players, playing more because it is cheaper to play or the payouts are bigger, and (2) an influx of people who come over because you offer an advantageous takeout.

And the problem with studies that show that lowering takeout increases revenue is that they don't account for (2). To the extent that the takeout reductions are generating (2)'s rather than (1)'s, those will disappear if other tracks are forced to lower their takeout too.

Obviously a race to the bottom would be very good for players. But it could turn out to be devastating for racetracks. Accordingly, tracks are very careful about takeout reductions.

If track do not start attracting more bettors somehow, the slot subsidies will disappear soon or later. No state is going to continue force slot subsidies down the throats of casinos, if there is zero interest in the sport from potential consumers of it. The states will find a different use for those subsidies. The jobs argument will not sway them for ever. They do not use slot subsidies for buggy whip factories, do they? Why should they for race tracks?

[ronsmac]

Originally Posted by Robert Goren

If track do not start attracting more bettors somehow, the slot subsidies will disappear soon or later. No state is going to continue force slot subsidies down the throats of casinos, if there is zero interest in the sport from potential consumers of it. The states will find a different use for those subsidies. The jobs argument will not sway them for ever. They do not use slot subsidies for buggy whip factories, do they? Why should they for race tracks?

By the time all the tracks lose their casino subsidies, the racetrack owners will be so rich they probably won't mind. They'll have enough money to send their grand children's grand children to Harvard.

[ronsmac]

Originally Posted by Seabiscuit@AR

Some of the biggest whales support high takeouts. This is because it gives them a bigger gap between the takeout they pay after rebate and the takeout the average Joe pays which means a bigger advantage for the whale

Lower takeout lower rebate would be slightly more beneficial to the whale than higher takeout higher rebaten, assuming the whale is good enough to beat the takeout pre rebate. The closer you are to breaking even the better lower takout is, if you lose more than the takeout the more important higher rebate becomes.