Where Is the Profit in Rebates?

[fmolf]

Originally Posted by Cangamble

No it isn't.
Lets say that a pool has a takeout of 20%, and it has 10,000 in it. It is a ten horse race and every horse has 1000 bet on it.
Every horse will have odds of 7-1. The winner will pay $16.00. A whale who has $200 on the horse will make a profit of $1400 plus his 10% rebate of $20. And if the horse loses the whale will receive $20 no matter who wins.

If the the track takeout is 10%, every horse in the above race will be 8-1. The winning horse will pay $18.00. The whale with $200 to win will get a $1600 profit and no rebate. Also, he will get no rebate no matter who wins.

In the long run, if he is good handicapper, he is much better off getting no rebate because his 8-1 shot will win more often than the other 8-1 shots in the field.

i get it now

[Imriledup]

Originally Posted by Cangamble

No it isn't.
Lets say that a pool has a takeout of 20%, and it has 10,000 in it. It is a ten horse race and every horse has 1000 bet on it.
Every horse will have odds of 7-1. The winner will pay $16.00. A whale who has $200 on the horse will make a profit of $1400 plus his 10% rebate of $20. And if the horse loses the whale will receive $20 no matter who wins.

If the the track takeout is 10%, every horse in the above race will be 8-1. The winning horse will pay $18.00. The whale with $200 to win will get a $1600 profit and no rebate. Also, he will get no rebate no matter who wins.

In the long run, if he is good handicapper, he is much better off getting no rebate because his 8-1 shot will win more often than the other 8-1 shots in the field.

I think a rebate is better than the takeout being lowered because the rebate player gets 10% on every bet........with a lower takeout, he only can reap a reward if his bet wins.

[trigger]

Originally Posted by startngate

Good luck ... here's why:

Assuming all money bet on track, with 20% takeout and 10% rebate to one player:

Total Bet by all 10 players - $16,827.00
Takeout - $3,365.40
Rebated Amount - $516.30
Net revenue to the track - $2,849.10

Assuming all money bet on track, with 10% takeout, no rebates:

Total Bet by all 10 players - $18,002.00
Takeout - $1,800.20
Rebated Amount - $0.00
Net revenue to the track - $1,800.20

Assuming the model above where 30% of the total handle ended up being rebated handle, to break even on the revenue side, betting would have to increase to $28,491.00 (+40%) if you got rid of rebates and lowered takeout to 10%.

In the scenario posed by trigger, it obviously didn't come close to happening. Is that what would happen in real life? Don't know, but racetrack managers will all fall back on this argument as to why lowering takeout is a bad idea.

Yea, that's what the model shows (thanks, startingate). So assuming there is no fatal flaw in the model's assumptions, the only way i see a 10% takeout down the road is with a major reduction in overhead expense. And, the only way to reduce overhead is to eliminate a substantial number of tracks so the existing handle is concentrated on a much fewer number of tracks therefore making a 10% takeout viable (with maybe a much more reasonable 2 or 3% rebate to the whales). Long term, this scenario might even attract a larger number of new horseplayers with a corresponding increase in handle. IMHO, there is no way a "global" 10% takeout ( or any substantial permanent reduction in takeout) is going to happen with the current number of tracks. Again, IMHO, the survival of the racing game will depend on consolidation.